As filed with the Securities and Exchange Commission on March 13, 2019
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Ability Inc.
(Exact name of registrant as specified in its charter)
| Cayman Islands | Not Applicable | |
| (state or other jurisdiction of | (IRS employer | |
| incorporation or organization) | Identification No.) |
Ability Inc.
Yad Harutzim 14
Tel Aviv, Israel, 6770007
(Address of Principal Executive Offices) (Zip Code)
Ability Inc. 2015 Long-Term Equity Incentive Plan (including Israeli Sub-Plan)
(Full title of the plan)
Puglisi & Associates
850 Library Avenue, Suite 204
Newark, DE 19715
(302) 738-6680
(Name and address of agent for service)
Copies to:
|
Mark Selinger, Esq.
Gary Emmanuel, Esq. McDermott Will & Emery LLP 340 Madison Ave. New York, NY 10173 Telephone: (212 547-5400 |
Zvi Gabbay Barnea & Co. Electra City Tower 58 HaRakevet St. Tel Aviv 6777016, Israel Tel: +972-3-640-0600 |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☐ |
| Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Exchange Act. ☒
CALCULATION OF REGISTRATION FEE
| Title of Securities to be Registered |
Amount
to
be Registered (1) |
Proposed Maximum Offering Price Per Security | Proposed Maximum Aggregate Offering Price | Amount of Registration Fee (2) | ||||||||||||
| Ordinary shares, par value $0.001 per share | 1,668,887 | (3) | $ | 1.835 | (2) | $ | 3,062,407.65 | $ | 371.16 | |||||||
| Total | 1,668,887 | N/A | $ | 3,062,407.65 | $ | 371.16 | ||||||||||
| (1) | Pursuant to Rule 416 under the Securities Act of 1933, as amended (the “Securities Act”), this Registration Statement also covers an indeterminate number of additional securities which may be offered and issued to prevent dilution resulting from stock splits, stock dividends, recapitalizations or similar transactions. |
| (2) | Estimated solely for purposes of calculating the filing fee pursuant to Rule 457 (c) and (h), the aggregate offering price and the fee have been computed upon the basis of the average of the high and low prices per share of the registrant’s ordinary shares as reported on the Nasdaq Capital Market on March 11, 2019. |
| (3) |
Represents the additional ordinary shares, par value $0.001 per share (the “Ordinary Shares”) subject to future grants under the Registrant’s Ability Inc. 2015 Long-Term Equity Incentive Plan, as amended (the “Plan”). |
EXPLANATORY NOTE
The purpose of this Registration Statement on Form S-8 (this “Registration Statement”) is for Ability Inc. (the “Registrant”) to register an additional 1,668,887 Ordinary Shares for issuance under the Plan. The Plan was amended by the Board on February 17, 2019 to increase the number of Ordinary Shares authorized for issuance under the Plan by 1,668,887 shares, and was renamed the Ability Inc. 2015 Long-Term Equity Incentive Plan.
In accordance with General Instruction E of Form S-8, the contents of the Registrant’s Registration Statement on Form S-8 (File No. 333-228465), filed with the Securities and Exchange Commission (the “SEC”) on November 19, 2018, are incorporated herein by reference and the information required by Part II is omitted, except as supplemented by the information set forth below.
PART I
The documents containing the information required in Part I of this Registration Statement have been or will be sent or given to participating employees as specified in Rule 428(b)(1) under the Securities Act, in accordance with the rules and regulations of the SEC. Such documents are not being filed with the SEC either as part of this Registration Statement or as prospectuses or prospectus supplements pursuant to Rule 424 of the Securities Act. These documents and the documents incorporated by reference into this Registration Statement pursuant to Item 3 of Part II of this Registration Statement, taken together, constitute a prospectus that meets the requirements of Section 10(a) of the Securities Act.
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents, which have been filed with or furnished to the SEC by the registrant, are incorporated herein by reference into this Registration Statement:
| (a) | The Registrant’s Annual Report on Form 20-F for the year ended December 31, 2017, filed with the SEC on April 30, 2018; |
| (b) | the description of the Registrant’s Ordinary Shares contained in the Registrant’s Registration Statement on Form F-3 (File No. 333-226288) under the heading “Description of Ordinary Shares”, filed with the SEC on July 23, 2018, including any amendment or report filed for the purpose of updating such description; and |
| (c) | The Registrant’s reports of foreign private issuer on Form 6-K furnished with the SEC on January 17, 2018, February 27, 2018, March 21, 2018, April 30, 2018, July 6, 2018, July 11, 2018, July 13, 2018, August 7, 2018, August 14, 2018, August 16, 2018, August 16, 2018, September 18, 2018, September 25, 2018, November 19, 2018, November 21, 2018, November 23, 2018, November 28, 2018, December 12, 2018, December 21, 2018, December 26, 2018, December 26, 2018, December 28, 2018, January 10, 2019 and January 15, 2019. |
In addition, all reports and other documents filed by the registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this Registration Statement, but prior to the filing of a post-effective amendment to this Registration Statement that indicates that all securities offered have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein or in any other subsequently filed document that also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement.
Item 6. Indemnification of Directors and Officers.
Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent that a provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. The Registrant’s amended and restated memorandum and articles of association provide for indemnification of officers and directors for any liability, action, proceeding, claim, demand, costs, damages or expenses, including legal expenses, whatsoever which they or any of them may incur as a result of any act or failure to act in carrying out their functions other than such liability (if any) that they may incur by reason of their own actual fraud or willful default. No indemnified person is liable to the Registrant for any loss or damage incurred by us as a result (whether direct or indirect) of the carrying out of their functions unless that liability arises through the actual fraud or willful default of such indemnified person. No person is found to have committed actual fraud or willful default unless or until a court of competent jurisdiction has made a finding to that effect. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to the Registrant’s directors, officers or persons controlling it pursuant to these provisions, the Registrant has been been informed that, in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and therefore is unenforceable.
Under the Registrant’s amended and restated memorandum and articles of association, its directors, on behalf of the Registrant, may purchase and maintain insurance for the benefit of any director or other officer against any liability which, by virtue of any rule of law, would otherwise attach to such person in respect of any negligence, default, breach of duty or breach of trust of which such person may be guilty in relation to us.
The Registrant has procured a directors’ and officers’ liability & company reimbursement insurance policy for its officers and directors and our subsidiaries, with an aggregate limit of liability for all losses of $20.0 million.
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Item 8. Exhibits.
* Filed herewith.
Item 9. Undertakings
| (a) | The undersigned Registrant hereby undertakes: |
| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
| (i) | To include any prospectus required by Section 10(a)(3) of the Securities Act; |
| (ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement; and |
| (iii) | To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement; |
provided, however, that subparagraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in the periodic reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this registration statement.
| (2) | That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| (3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
| (4) | To file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A. of Form 20-F at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Act need not be furnished, provided that the registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (a)(4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. |
| (b) | The undersigned Registrant hereby further undertakes that, for the purposes of determining any liability under the Securities Act, each filing of the Company’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| (c) | Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. |
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Pursuant to the requirements of the Securities Act, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Tel Aviv, Israel on the 13 th day of March, 2019.
| Ability Inc. | ||
| By: | /s/ Anatoly Hurgin | |
| Name: | Anatoly Hurgin | |
| Title: |
Chief Executive Officer and
Chairman of the Board of Directors |
|
POWER OF ATTORNEY
We, the undersigned officers and directors of Ability Inc., hereby severally constitute and appoint Anatoly Hurgin and Avi Levin and each of them, as our true and lawful attorney to sign for us and in our names in the capacities indicated below any and all amendments or supplements, including any post-effective amendments, to this registration statement on Form S-8 and to file the same, with exhibits thereto and other documents in connection therewith, with the SEC, granting unto said attorney full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming our signatures to said amendments to this registration statement signed by our said attorney and all else that said attorney may lawfully do and cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration statement on Form S-8 has been signed below by the following persons in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Anatoly Hurgin | Chief Executive Officer and Chairman of the Board of Directors | March 13, 2019 | ||
| Anatoly Hurgin | (Principal Executive Officer) | |||
| /s/ Avi Levin | Chief Financial Officer | March 13, 2019 | ||
| Avi Levin | (Principal Financial Officer & Principal Accounting Officer) | |||
| /s/ Alexander Aurovsky | Chief Technology Officer and Director | March 13, 2019 | ||
| Alexander Aurovsky | ||||
| /s/ Avraham Dan | Director | March 13, 2019 | ||
| Avraham Dan | ||||
| /s/ Naftali Granot | Director | March 13, 2019 | ||
| Naftali Granot | ||||
| /s/ Limor Beladev | Director | March 13, 2019 | ||
| Limor Beladev | ||||
| /s/ Yair Cohen | Director | March 13, 2019 | ||
| Yair Cohen | ||||
| /s/ Joseph Tenne | Director | March 13, 2019 | ||
| Joseph Tenne |
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SIGNATURE OF AUTHORIZED REPRESENTATIVE OF THE REGISTRANT
Pursuant to the requirements of the Securities Act of 1933, as amended, the undersigned, the duly authorized representative in the United States of Ability Inc. has signed this Registration Statement on this March 13, 2019.
| PUGLISI & ASSOCIATES | ||
| By: | /s/ Donald J. Puglisi | |
| Donald J. Puglisi | ||
| Authorized Representative | ||
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Exhibit 5.1
|
Ability Inc. PO Box 309, Ugland House Grand Cayman KY1-1104 Cayman Islands |
March 13, 2019
Dear Sirs
Ability Inc.
We have acted as Cayman Islands counsel to Ability Inc. (the “ Company ”) to provide this legal opinion in connection with the Company’s registration statement on Form S-8, including all amendments or supplements thereto (the “ Registration Statement ”) filed with the United States Securities and Exchange Commission (the “ Commission ”) under the United States Securities Act of 1933, as amended (the “ Act ”) relating to the reservation for issuance of 1,668,887 ordinary shares of a par value of US$0.001 each (the “ Shares ”) upon the granting of certain awards under the 2015 Long-Term Equity Incentive Plan (the “ Plan ”).
| 1 | Documents Reviewed |
We have reviewed originals, copies, drafts or conformed copies of the following documents, and such other documents as we deem necessary:
| 1.1 | The certificate of incorporation dated 1 September 2015, the certificate of incorporation on change of name dated 23 December 2015 and the amended and restated memorandum and articles of association of the Company as registered or adopted on 23 December 2015 (the “ Memorandum and Articles ”). |
| 1.2 | The minutes (the “ Minutes ”) of the meeting of the board of directors of the Company held on 25 April 2016 (the “ Meeting ”) and the corporate records of the Company maintained at its registered office in the Cayman Islands. |
| 1.3 | A certificate of good standing with respect to the Company issued by the Registrar of Companies (the “ Certificate of Good Standing ”). |
| 1.4 | A certificate from a director of the Company a copy of which is attached to this opinion letter (the “ Director’s Certificate ”). |
| 1.5 | The Plan. |
| 1.6 | The Registration Statement. |
| 2 | Assumptions |
The following opinions are given only as to, and based on, circumstances and matters of fact existing and known to us on the date of this opinion letter. These opinions only relate to the laws of the Cayman Islands which are in force on the date of this opinion letter. In giving the following opinions, we have relied (without further verification) upon the completeness and accuracy of the Director’s Certificate and the Certificate of Good Standing. We have also relied upon the following assumptions, which we have not independently verified:
| 2.1 | The Plan has been or will be authorised and duly executed and unconditionally delivered by or on behalf of all relevant parties in accordance with all relevant laws (other than, with respect to the Company, the laws of the Cayman Islands). |
| 2.2 | The Plan is, or will be, legal, valid, binding and enforceable against all relevant parties in accordance with its terms under the laws of the State of Delaware (the “ Relevant Law ”) and all other relevant laws (other than, with respect to the Company, the laws of the Cayman Islands). |
| 2.3 | The choice of the Relevant Law as the governing law of the Plan has been made in good faith and would be regarded as a valid and binding selection which will be upheld by the courts of the State of California and any other relevant jurisdiction (other than the Cayman Islands) as a matter of the Relevant Law and all other relevant laws (other than the laws of the Cayman Islands). |
| 2.4 | Copies of documents, conformed copies or drafts of documents provided to us are true and complete copies of, or in the final forms of, the originals. |
| 2.5 | All signatures, initials and seals are genuine. |
| 2.6 | The capacity, power, authority and legal right of all parties under all relevant laws and regulations (other than, with respect to the Company, the laws and regulations of the Cayman Islands) to enter into, execute, unconditionally deliver and perform their respective obligations under the Plan. |
| 2.7 | No monies paid to or for the account of any party under the Plan or the Registration Statement or any property received or disposed of by any party to the Plan or the Registration Statement in each case in connection with the Plan or the Registration Statement or the consummation of the transactions contemplated thereby represent or will represent proceeds of criminal conduct or criminal property or terrorist property (as defined in the Proceeds of Crime Law (2019 Revision) and the Terrorism Law (2018 Revision), respectively). |
| 2.8 | There is nothing under any law (other than the laws of the Cayman Islands) which would or might affect the opinions set out below. Specifically, we have made no independent investigation of the Relevant Law. |
| 2.9 | No invitation has been or will be made by or on behalf of the Company to the public in the Cayman Islands to subscribe for any of the Ordinary Shares. |
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| 2.10 | The Company will receive money or money’s worth in consideration (the “ Consideration ”) for the issue of the Ordinary Shares and none of the Ordinary Shares were or will be issued for less than par value. |
Save as aforesaid we have not been instructed to undertake and have not undertaken any further enquiry or due diligence in relation to the transaction the subject of this opinion.
| 3 | Opinions |
Based upon, and subject to, the foregoing assumptions and the qualification set out below, and having regard to such legal considerations as we deem relevant, we are of the opinion that the Shares to be offered and issued by the Company pursuant to the provisions of the Plan, have been duly authorised for issue, and when issued by the Company pursuant to the provisions of the Plan for the consideration fixed thereto and duly registered in the Company’s register of members (shareholders), will be validly issued and (assuming that all of the Consideration is received by the Company) will be fully paid and non-assessable.
| 4 | Qualifications |
The opinions expressed above are subject to the following qualifications:
| 4.1 | Under the Companies Law (2018 Revision) of the Cayman Islands, the register of members of a Cayman Islands company is by statute regarded as prima facie evidence of any matters which the Companies Law (2018 Revision) of the Cayman Islands directs or authorises to be inserted therein. A third party interest in the shares in question would not appear. An entry in the register of members may yield to a court order for rectification (for example, in the event of fraud or manifest error). |
| 4.2 | In this opinion letter, the phrase “non-assessable” means, with respect to the issuance of shares, that a shareholder shall not, in respect of the relevant shares and in the absence of a contractual arrangement, or an obligation pursuant to the memorandum and articles of association, to the contrary, have any obligation to make further contributions to the Company’s assets (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or improper purpose or other circumstances in which a court may be prepared to pierce or lift the corporate veil). |
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In providing our consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the Rules and Regulations of the Commission thereunder.
This opinion is addressed to you and may be relied upon by you and your counsel. This opinion is limited to the matters detailed herein and is not to be read as an opinion with respect to any other matter.
Yours faithfully
| /s/ Maples and Calder | |
| Maples and Calder |
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Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
Ability Inc.
We hereby consent to the incorporation by reference in this Registration Statement of our report dated April 30, 2018, relating to the consolidated financial statements of Ability Inc., appearing in the Company’s Annual Report on Form 20-F for the year ended December 31, 2017. Our report contains an explanatory paragraph regarding the Company’s ability to continue as a going concern.
We also consent to the reference to us under the caption “Experts” in the Prospectus.
/s/ Ziv Haft
Ziv Haft
A BDO member firm
March 13, 2019
Exhibit 99.1
Ability Inc. (formerly Cambridge Holdco Corp.)
2015 Long-Term Equity Incentive Plan
Section 1. Purposes; Definitions.
The purpose of the Ability Inc. 2015 Long-Term Equity Incentive Plan is to enable Ability Inc. to offer to those of its employees and to the employees of its Subsidiaries and other persons who are expected to contribute to the success of the Company, long term performance-based share and/or other equity interests in the Company, thereby enhancing their ability to attract, retain and reward such key employees or other persons, and to increase the mutuality of interests between those employees or other persons and the shareholders of Ability Inc.
The Plan was originally adopted by the Board on November 18, 2015. The Plan was approved by the Company’s shareholders on December 23, 2015. The Plan was amended and retitled the Ability Inc. 2015 Long-Term Equity Incentive Plan by the Board on February 17, 2019.
For purposes of the Plan, the following terms shall be defined as set forth below:
| (a) | “Board” means the Board of Directors of Ability Inc. |
| (b) | “Cause” shall have the meaning ascribed thereto in Section 5(b)(ix) below. |
| (c) | “Change of Control” shall have the meaning ascribed thereto in Section 10 below. |
| (d) | “Code” means the Internal Revenue Code of 1986, as amended from time to time and any successor thereto. |
| (e) | “Committee” means any committee of the Board, which the Board may designate. |
| (f) | “Company” means Ability Inc. , a Cayman Islands exempted company. |
| (g) | “Covered Employee” shall mean any employee of the Company or any of its Subsidiaries who is deemed to be a “covered employee” within the meaning of Section 162(m) of the Code. |
| (h) | “Deferred Shares” means Shares to be received, under an award made pursuant to Section 7 below, at the end of a specified deferral period. |
| (i) | “Disability” means disability as determined under procedures established by the Board or the Committee for purposes of the Plan. |
| (j) | “Early Retirement” means retirement, with the approval of the Board or the Committee, for purposes of one or more award(s) hereunder, from active employment with the Company or any Parent or Subsidiary prior to age 65. |
| (k) | “Exchange Act” means the Securities Exchange Act of 1934, as amended, as in effect from time to time. |
| (l) | “Fair Market Value”, unless otherwise required by any applicable provision of the Code or any regulations issued thereunder, means, as of any given date: (i) if the principal market for the Shares is a national securities exchange or the Over The Counter Bulletin Board, the closing sale price of the Shares on such day as reported by such exchange or market system or quotation medium, or on a consolidated tape reflecting transactions on such exchange or market system or quotation medium, or (ii) if the principal market for the Shares is not a national securities exchange and the Shares are not quoted on the Over The Counter Bulletin Board, the mean between the closing bid sale price for the Shares on such day as reported by the National Quotation Bureau, Inc.; provided that if clauses (i) and (ii) of this paragraph are both inapplicable, or if no trades have been made or no quotes are available for such day, the Fair Market Value of the Shares shall be determined by the Board of Directors or the Committee, as the case may be, which determination shall be conclusive as to the Fair Market Value of the Shares. |
| (m) | “409A Change” shall mean (i) the acquisition by any one person, or more than one person acting as a group, of Shares that, together with Shares held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the Shares; (ii) (a) the acquisition by any one person, or more than one person acting as a group (or the acquisition during the 12-month period ending on the date of the most recent acquisition by such person or persons) of ownership of Shares possessing fifty percent (50%) or more of the total voting power of the Shares; or (b) a majority of members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election; or (iii) the acquisition by any one person or more than one person acting as a group (or the acquisition during the 12-month period ending on the date of the most recent acquisition by such person or persons) of assets from the Company resulting in a Change of Control and, in any event, that have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; provided, however, that in no event shall a “409A Change” occur unless it is also a “change in the ownership” of the Company, a “change in the effective control” of the Company, or a “change in the ownership a substantial portion of the Company’s assets” under Code Section 409A and the Treasury regulations issued thereunder. |
| (n) | “409A Deferred Share Award” shall mean a Deferred Share Award that is or has become subject to Section 409A of the Code. |
| (o) | “Identification Date” shall mean each December 31. |
| (p) | “Incentive Share Option” means any Share Option which is intended to be and is designated as an “Incentive Share option” within the meaning of Section 422 of the Code, or any successor thereto. |
| (q) | “Non-Qualified Share Option” means any Share Option that is not an Incentive Share Option. |
| (r) | “Normal Retirement” means retirement from active employment with the Company or any Subsidiary on or after age 65. |
| (s) | “Other Share-Based Award” means an award under Section 8 below that is valued in whole or in part by reference to, or is otherwise based upon, Stock. |
| (t) | “Participant” shall mean any person who has received an award of an Option, Deferred Shares, Restricted Shares or an Other-Stock Based-Award under the Plan. |
| (u) | “Parent” means any present or future parent of the Company, as such term is defined in Section 424(e) of the Code, or any successor thereto. |
| (v) | “Plan” means this Ability Inc. 2015 Long-Term Equity Incentive Plan, as hereinafter amended from time to time. |
| (w) | “Restricted Shares” means Shares, received under an award made pursuant to Section 6 below, that is subject to restrictions imposed pursuant to said Section 6. |
| (x) | “Register of Members” means the register of members of the Company maintained in accordance with the Companies Law (2013 Revision) of the Cayman Islands. “Retirement” means Normal Retirement or Early Retirement. |
| (y) | “Rule 16b-3” means Rule 16b-3 of the General Rules and Regulations under the Exchange Act, as in effect from time to time, and any successor thereto. |
| (z) | “Securities Act” means the Securities Act of 1933, as amended, as in effect from time to time. |
| (aa) | “Specified Employee” means any Participant (As hereinafter defined) who is (i) an officer of the Company and (ii) receives annual compensation from the Company in excess of $130,000 (or such other amount as determined pursuant to Code Section 416(i)(1)(A)(i)). The term Specified Employee shall also include any other individual who satisfies the definition of specified employee under Code Section 409A. A Participant is a Specified Employee if he/she meets the foregoing requirements at any time during the 12-month period ending on an Identification Date. If a Participant is a Specified Employee as of an Identification Date, such Participant is treated as a Specified Employee for the 12-month period beginning on the first day of the fourth month following the Identification Date. |
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| (bb) | “Shares” means the Ordinary Shares of the Company, $0.001 par value per share. |
| (cc) | “Share Option” or “Option” means any option to purchase Shares which is granted pursuant to the Plan. |
| (dd) | “Subsidiary” means any present or future (A) subsidiary corporation of the Company, as such term is defined in Section 424(f) of the Code, or any successor thereto, or (B) unincorporated business entity in which the Company owns, directly or indirectly, 50% or more of the voting rights, capital or profits. |
| (ee) | “Unforeseen Emergency means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse or a dependent (as defined in Section 152(a) of the Code) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. |
Section 2. Administration.
The Plan shall be administered by the Board, or at its discretion, the Committee, the membership of which shall consist solely of two or more members of the Board, each of whom shall serve at the pleasure of the Board and to the extent practicable, shall be a “Non-Employee Director,” as defined in Rule 16b-3 and shall be at all times constituted so as not to adversely affect the compliance of the Plan with the requirements of Rule 16b-3 or with the requirements of any other applicable law, rule or regulation. To extent practicable, the members of the Committee shall each be an “outside director” within the meaning of Section 162(m) of the Code and the regulations thereunder.
The Board or the Committee, as the case may be, shall have the authority to grant, pursuant to the terms of the Plan, to officers and other employees or other persons eligible under Section 4 below: (i) Share Options, (ii) Restricted Shares, (iii) Deferred Shares, and/or (iv) Other Share-Based Awards.
For purposes of illustration and not of limitation, the Board or the Committee, as the case may be, shall have the authority (subject to the express provisions of the Plan):
| (i) | to select the officers, other employees of the Company or any Parent or Subsidiary and other persons to whom Share Options, Restricted Shares, Deferred Shares and/or Other Share-Based Awards may be from time to time granted hereunder; |
| (ii) | to determine the Incentive Share Options, Non-Qualified Share Options, Restricted Shares, Deferred Shares and/or Other Share-Based Awards, or any combination thereof, if any, to be granted hereunder to one or more eligible persons; |
| (iii) | to determine the number of Shares to be covered by each award granted hereunder; |
| (iv) | to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder (including, but not limited to, share price, any restrictions or limitations, and any vesting acceleration, exercisability and/or forfeiture provisions); |
| (v) | to determine the terms and conditions under which awards granted hereunder are to operate on a tandem basis and/or in conjunction with or apart from other awards made by the Company or any Parent or Subsidiary outside of the Plan; |
| (vi) | to substitute (A) new Share Options for previously granted Share Options, including previously granted Share Options having higher option exercise or purchase prices and/or containing other less favorable terms, and (B) new awards of any other type for previously granted awards of the same type, including previously granted awards which contain less favorable terms. |
Subject to Section 11 hereof, the Board or the Committee, as the case may be, shall have the authority to (i) adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable, (ii) interpret the terms and provisions of the Plan and any award issued under the Plan (and to determine the form and substance of all agreements relating thereto), and (iii) to otherwise supervise the administration of the Plan.
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Subject to the provisions of the Plan and notwithstanding anything to the contrary above, the Board or the Committee, as the case may be, may, in its sole discretion, from time to time delegate to the Chief Executive Officer of the Company (the “CEO”), President (the “President”) or the Chief Financial Officer of the Company (the “CFO”) the authority, subject to such terms as the Board or the Committee, as the case may be, shall determine, to determine and designate from time to time the employees or other persons to whom awards under the Plan may be granted and to perform other specified functions under the Plan; provided, however, that the CEO, President or CFO, as the case may be, may not grant any award to, or perform any function related to an award to, himself or herself, as the case may be, or any individual (i) who is an officer of the Company or (ii) then subject to Section 16 of the Exchange Act or (iii) who is or, in the determination of the Board or the Committee, as the case may be, may become a Covered Employee, and any such grant or function relating to such individuals shall be performed solely by the Board or the Committee, as the case may be, to ensure compliance with the applicable requirements of the Exchange Act and the Code or (iv) where the grant or performance of such function by the CEO, President or CFO will cause the Plan not to comply with any applicable regulation of any securities exchange or automated quotation system where the Shares are listed for trading.
Any such delegation of authority by the Board or the Committee, as the case may be, shall be by a resolution adopted by the Board or the Committee, as the case may be, and shall specify all of the terms and conditions of the delegation. The resolution of the Board or the Committee, as the case may be, granting such authority may authorize the CEO, President or CFO to grant awards pursuant to the Plan and may set forth the types of awards that may be granted; provided, however, that the resolution shall (i) specify the maximum number of Shares that may be awarded to any individual Plan participant and to all participants during a specified period of time and (ii) specify the exercise price (or the method for determining the exercise price) of an award, the vesting schedule, and any other terms, conditions, or restrictions that may be imposed by the Board or the Committee, as the case may be, in its sole discretion. The resolution of the Board or the Committee, as the case may be, shall also require the CEO, President or CFO, as the case may be, to provide the Board or the Committee, as the case may be, on at least a monthly basis, a report that identifies the awards granted pursuant to the delegated authority and, with respect to each award: the name of the participant, the date of grant of the award, the number of Shares subject to the award, the exercise period and exercise price, if any and vesting provisions of such award. All awards granted pursuant to delegated authority are subject to the resolutions of the Board or the Committee, as the case may be, granting such authority.
The Board or the Committee, as the case may be, may also delegate to other officers of the Company, pursuant to a written delegation, the authority to perform specified functions under the Plan that are not inconsistent with Rule 16b-3 or other rules or regulations applicable to the Plan. Any actions taken by any officers of the Company pursuant to such written delegation of authority shall be deemed to have been taken by the Board or Committee, as the case may be.
Subject to the express provisions of the Plan, all decisions made by the Board or the Committee, as the case may be, pursuant to the provisions of the Plan shall be made in the Board or the Committee’s sole and absolute discretion and shall be final and binding upon all persons, including the Company, its Parent and Subsidiaries and the Plan Participants.
Section 3. Shares Subject to Plan.
The total number of Shares reserved and available for distribution under the Plan shall be 1,875,000 shares. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares.
If any Shares that have been optioned cease to be subject to a Share Option award for any reason (other than by issuance of such shares upon exercise of a Share Option), or if any Shares that are subject to any Restricted Share Award, Deferred Share Award or Other Share-Based award are forfeited or any such award otherwise terminates without the issuance of such shares such shares shall again be available for distribution under the Plan. Without limiting the foregoing, (i) any Shares subject to an award that remain unissued upon the cancellation, surrender, exchange or termination of such award without having been exercised or settled, (ii) any Shares subject to an award that are retained by the Company as payment of the exercise price or tax withholding obligations with respect to an award and (iii) any Shares equal to the number of previously owned Shares surrendered to the Company as payment of the exercise price of a Share Option or to satisfy tax withholding obligations with respect to an award, shall again be available for distribution under the Plan.
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In the event of any merger, reorganization, consolidation, recapitalization, share dividend, share split, extraordinary distribution with respect to the Shares or other change in corporate structure affecting the Shares, such substitution or adjustments shall be made in the (A) aggregate number of Shares reserved for issuance under the Plan, (B) number, kind and exercise price of Shares subject to outstanding Options granted under the Plan, and (C) number, kind, purchase price and/or appreciation base of Shares subject to other outstanding awards granted under the Plan, as may be determined to be appropriate by the Board or the Committee, as the case may be, in order to prevent dilution or enlargement of rights; provided, however, that the number of Shares subject to any award shall always be a whole number. Such adjusted exercise price shall also be used to determine the amount which is payable to the optionee upon the exercise by the Board or the Committee, as the case may be, of the alternative settlement right which is set forth in Section 5(b)(xi) below.
Subject to the provisions of the immediately preceding paragraph, the maximum number of Shares with respect to which Options, Deferred Shares, Restricted Shares or Other Share-Based Awards may be granted or measured to any Participant under the Plan during any calendar year or part thereof shall not exceed the total shares reserved and available under the Plan.
Section 4. Eligibility.
Officers and other employees of the Company or any Parent or Subsidiary (but excluding any person whose eligibility would adversely affect the compliance of the Plan with the requirements of Rule 16b-3) who are at the time of the grant of an award under the Plan employed by the Company or any Parent or Subsidiary and who are responsible for or contribute to the management, growth and/or profitability of the business of the Company are eligible to be granted Options and awards under the Plan. In addition, Non-Qualified Share Options and other awards may be granted under the Plan to any person, including, but not limited to, directors, independent agents, consultants and attorneys who the Board or the Committee, as the case may be, believes has contributed or will contribute to the success of the Company. Eligibility under the Plan shall be determined by the Board or the Committee, as the case may be.
The Board or the Committee, as the case may be, may, in its sole discretion, include additional conditions and restrictions in the agreement entered into in connection with such awards under the Plan. The grant of an Option or other award under the Plan, and any determination made in connection therewith, shall be made on a case by case basis and can differ among optionees and grantees. The grant of an Option or other award under the Plan is a privilege and not a right and the determination of the Board or the Committee, as the case may be, can be applied on a non-uniform (discretionary) basis.
Section 5. Share Options.
| (a) |
Grant and Exercise . Share Options granted under the Plan may be of two types:
(i) Incentive Share Options and
(ii) Non-Qualified Share Options.
Any Share Option granted under the Plan shall contain such terms as the Board or the Committee, as the case may be, may from time to time approve. The Board or the Committee, as the case may be, shall have the authority to grant to any optionee Incentive Share Options, Non-Qualified Share Options, or both types of Share Options, and they may be granted alone or in addition to other awards granted under the Plan. To the extent that any Share Option is not designated as an Incentive Share Option or does not qualify as an Incentive Share Option, it shall constitute a Non-Qualified Share Option. The grant of an Option shall be deemed to have occurred on the date on which the Board or the Committee, as the case may be, by resolution, designates an individual as a grantee thereof, and determines the number of Shares subject to, and the terms and conditions of, said Option.
|
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Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to Incentive Share Options or any agreement providing for Incentive Share Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be exercised, so as to disqualify the Plan under Section 422 of the Code, or, without the consent of the optionee(s) affected, to disqualify any Incentive Share Option under said Section 422.
| (b) | Terms and Conditions . Share Options granted under the Plan shall be subject to the following terms and conditions: |
| (i) | Option Price . The option price per share of Stock purchasable under a Share Option shall be determined by the Board or the Committee, as the case may be, at the time of grant but as to Incentive Share Options and Non-Qualified Share Options shall be not less than 100% (110% in the case of an Incentive Share Option granted to an optionee (“10% Shareholder”) who, at the time of grant, owns Shares possessing more than 10% of the total combined voting power of all classes of shares of the Company or its Parent, if any, or its Subsidiaries) of the Fair Market Value of the Shares at the time of grant. |
| (ii) | Option Term . The term of each Share Option shall be fixed by the Board or the Committee, as the case may be, but no Incentive Share Option shall be exercisable more than ten years (five years, in the case of an Incentive Share Option granted to a 10% Shareholder) after the date on which the Option is granted. |
| (iii) | Exercisability . Share Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Board or the Committee, as the case may be. If the Board or the Committee, as the case may be, provides, in its discretion, that any Share Option is exercisable only in installments, the Board or the Committee, as the case may be, may waive such installment exercise provisions at any time at or after the time of grant in whole or in part, based upon such factors as the Board or the Committee, as the case may be, shall determine. |
| (iv) | Method of Exercise . Subject to whatever installment, exercise and waiting period provisions are applicable in a particular case, Share Options may be exercised in whole or in part at any time during the option period by giving written notice of exercise to the Company specifying the number of Shares to be purchased. Such notice shall be accompanied by payment in full of the exercise price for the Share Options exercised, which shall be in cash or, if provided in the Share Option agreement referred to in Section 5(b)(xii) below or otherwise provided by the Board, or Committee, as the case may be, either at or after the date of grant of the Share Option, in whole Shares which are already owned by the holder of the Option or partly in cash and partly in such Stock. Cash payments shall be made by wire transfer, certified or bank check or personal check, in each case payable to the order of the Company; provided, however, that the Company shall not be required to issue Shares with respect to which an Option is exercised until the Company has confirmed the receipt of good and available funds in payment of the purchase price thereof. If permitted, payments of the exercise price and any tax required to be withheld by the Company in the form of Shares (which shall be valued at the Fair Market Value of Shares on the date of exercise) shall be made by delivery of share transfer forms which are effective to transfer good and valid title thereto to the Company, free of any liens or encumbrances. In addition to the foregoing, payment of the exercise price may be made by delivery to the Company by the optionee of an executed exercise form, together with irrevocable instructions to a broker-dealer to sell or margin a sufficient portion of the shares covered by the option and deliver the sale or margin loan proceeds directly to the Company. Except as otherwise expressly provided in the Plan or in the Share Option agreement referred to in Section 5(b)(xii) below or otherwise provided by the Board or Committee, as the case may be, either at or after the date of grant of the Option, no Option which is granted to a person who is at the time of grant an employee of the Company or of a Subsidiary or Parent of the Company may be exercised at any time unless the holder thereof is then an employee of the Company or of a Parent or a Subsidiary. The holder of an Option shall have none of the rights of a shareholder with respect to the shares subject to the Option until the optionee has given written notice of exercise, has paid in full for those Shares, has been registered in the Register of Members and, if requested by the Board or Committee, as the case may be, has given the representation described in Section 13(a) below. |
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| (v) | Transferability; Exercisability . No Share Option shall be transferable by the optionee other than by will or by the laws of descent and distribution, except as may be otherwise provided with respect to a Non-Qualified Option pursuant to the specific provisions of the Share Option agreement pursuant to which it was issued as referred to in Section 5(b)(xii) below (which agreement may be amended, from time to time). Except as otherwise provided in the Share Option agreement relating to a Non-Qualified Share Option, all Share Options shall be exercisable, during the optionee’s lifetime, only by the optionee or his or her guardian or legal representative. |
| (vi) | Termination by Reason of Death . Subject to Section 5(b)(x) below, if an optionee’s employment by the Company or any Parent or Parent or Subsidiary terminates by reason of death, any Share Option held by such optionee may thereafter be exercised, to the extent then exercisable or on such accelerated basis as the Board or Committee, as the case may be, may determine at or after the time of grant, for a period of one year (or such other period as the Board or the Committee, as the case may be, may specify at or after the time of grant) from the date of death or until the expiration of the stated term of such Share Option, whichever period is the shorter. |
| (vii) | Termination by Reason of Disability . Subject to Section 5(b)(x) below, if an optionee’s employment by the Company or any Parent or Subsidiary terminates by reason of Disability, any Share Option held by such optionee may thereafter be exercised by the optionee, to the extent it was exercisable at the time of termination or on such accelerated basis as the Board or the Committee, as the case may be, may determine at or after the time of grant, for a period of one year (or such other period as the Board or the Committee, as the case may be, may specify at or after the time of grant) from the date of such termination of employment or until the expiration of the stated term of such Share Option, whichever period is the shorter; provided, however, that if the optionee dies within such one year period (or such other period as the Board or the Committee, as the case may be, shall specify at or after the time of grant), any unexercised Share Option held by such optionee shall thereafter be exercisable to the extent to which it was exercisable at the time of death for a period of one year from the date of death or until the expiration of the stated term of such Share Option, whichever period is the shorter. |
| (viii) | Termination by Reason of Retirement . Subject to Section 5(b)(x) below, if an optionee’s employment by the Company or any Parent or Subsidiary terminates by reason of Normal Retirement, any Share Option held by such optionee may thereafter be exercised by the optionee, to the extent it was exercisable at the time of termination or on such accelerated basis as the Board or the Committee, as the case may be, may determine at or after the time of grant, for a period of one year (or such other period as the Board or the Committee, as the case may be, may specify at or after the time of grant) from the date of such termination of employment or the expiration of the stated term of such Share Option, whichever period is the shorter; provided, however, that if the optionee dies within such one year period (or such other period as the Board or the Committee, as the case may be, shall specify at or after the date of grant), any unexercised Share Option held by such optionee shall thereafter be exercisable to the extent to which it was exercisable at the time of death for a period of one year from the date of death or until the expiration of the stated term of such Share Option, whichever period is the shorter. If an optionee’s employment with the Company or any Parent or Subsidiary terminates by reason of Early Retirement, the Share Option shall thereupon terminate; provided, however, that if the Board or the Committee, as the case may be, so approves at the time of Early Retirement, any Share Option held by the optionee may thereafter be exercised by the optionee as provided above in connection with termination of employment by reason of Normal Retirement. |
| (ix) | Other Termination . Subject to the provisions of Section 13(g) below and unless otherwise determined by the Board or Committee, as the case may be, at or after the time of grant, if an optionee’s employment by the Company or any Parent or Subsidiary terminates for any reason other than death, Disability or Retirement, the Share Option shall thereupon automatically terminate, except that if the optionee is involuntarily terminated by the Company or any Parent or a Subsidiary without Cause (as hereinafter defined), such Share Option may be exercised for a period of three months (or such other period as the Board or the Committee, as the case may be, shall specify at or after the time of grant) from the date of such termination or until the expiration of the stated term of such Share Option, whichever period is shorter. For purposes of the Plan and unless otherwise determined by the Board or the Committee, as the case may be, at the grant of the award, “Cause” shall mean (1) the conviction of the optionee of a felony under Federal law or the law of the state in which such action occurred, (2) dishonesty by the optionee in the course of fulfilling his or her employment duties, or (3) the failure on the part of the optionee to perform his or her employment duties in any material respect. In addition, with respect to an option granted to an employee of the Company, a Parent or a Subsidiary, for purposes of the Plan, “Cause” shall instead include any definition of “Cause” contained in any employment agreement between the optionee and the Company, Parent or Subsidiary, as the case may be. |
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| (x) | Additional Incentive Share Option Limitation . In the case of an Incentive Share Option, the aggregate Fair Market Value of Shares (determined at the time of grant of the Option) with respect to which Incentive Share Options are exercisable for the first time by an optionee during any calendar year (under all such plans of optionee’s employer corporation and its Parent and Subsidiaries) shall not exceed $100,000. |
| (xi) | Alternative Settlement of Option . If provided for, upon the receipt of written notice of exercise or otherwise provided for by the Board or Committee, as the case may be, either at or after the time of grant of the Share Option, the Board or the Committee, as the case may be, may elect to settle all or part of any Share Option by paying to the optionee an amount, in cash or Shares (valued at Fair Market Value on the date of exercise), equal to the product of the excess of the Fair Market Value of one Share, on the date of exercise over the Option exercise price, multiplied by the number of Shares with respect to which the optionee proposes to exercise the Option. Any such settlements which relate to Options which are held by optionees who are subject to Section 16(b) of the Exchange Act shall comply with any “window period” provisions of Rule 16b-3, to the extent applicable, and with such other conditions as the Board or Committee, as the case may be, may impose. |
| (xii) | Share Option Agreement . Each grant of a Share Option shall be confirmed by, and shall be subject to the terms of, an agreement executed by the Company and the Participant. |
Section 6. Restricted Shares.
| (a) | Grant and Exercise . Shares of Restricted Shares may be issued either alone or in addition to or in tandem with other awards granted under the Plan. The Board or the Committee, as the case may be, shall determine the eligible persons to whom, and the time or times at which, grants of Restricted Shares will be made, the number of shares to be awarded, the price (if any) to be paid by the recipient, the time or times within which such awards may be subject to forfeiture (the “Restriction Period”), the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the awards. The Board or the Committee, as the case may be, may condition the grant of Restricted Shares upon the attainment of such factors as the Board or the Committee, as the case may be, may determine. |
| (b) | Terms and Conditions . Each Restricted Share award shall be subject to the following terms and conditions: |
| (i) | Restricted Shares, when issued, shall be issued by registration in the Register of Members and may be represented by a share certificate or certificates registered in the name of the holder to whom such Restricted Shares shall have been awarded. During the Restriction Period, any certificates representing the Restricted Shares and any securities constituting Retained Distributions (as defined below) shall bear a restrictive legend to the effect that ownership of the Restricted Shares (and such Retained Distributions), and the enjoyment of all rights related thereto, are subject to the restrictions, terms and conditions provided in the Plan and the Restricted Shares agreement referred to in Section 6(b)(iv) below. Any such certificates shall be deposited by the holder with the Company, together with share transfer forms, endorsed in blank, which will permit transfer to the Company of all or any portion of the Restricted Shares and any securities constituting Retained Distributions that shall be forfeited or that shall not become vested in accordance with the Plan and the applicable Restricted Shares agreement. Such a transfer to the Company would take effect as a repurchase as a matter of Cayman Islands law. |
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| (ii) | Restricted Shares shall constitute issued and outstanding Shares for all corporate purposes, and the issuance thereof shall be made for at least the minimum consideration (if any) necessary to permit the shares of Restricted Shares to be deemed to be fully paid and nonassessable. Unless the Board or Committee determines otherwise, the holder will have the right to vote such Restricted Shares, to receive and retain all regular cash dividends and other cash equivalent distributions as the Board may in its sole discretion designate, pay or distribute on such Restricted Shares and to exercise all other rights, powers and privileges of a shareholder with respect to such Restricted Shares, with the exceptions that (A) the holder will not be entitled to delivery of the share certificate or certificates, if any, representing such Restricted Shares until the Restriction Period shall have expired and unless all other vesting requirements with respect thereto shall have been fulfilled; (B) the Company will retain custody of the share certificate or certificates, if any, representing the Restricted Shares during the Restriction Period; (C) other than regular cash dividends and other cash equivalent distributions as the Board may in its sole discretion designate, pay or distribute, the Company will retain custody of all distributions (“Retained Distributions”) made or declared with respect to the Restricted Shares (and such Retained Distributions will be subject to the same restrictions, terms and conditions as are applicable to the Restricted Shares) until such time, if ever, as the Restricted Shares with respect to which such Retained Distributions shall have been made, paid or declared shall have become vested and with respect to which the Restriction Period shall have expired; (D) the holder may not sell, assign, transfer, pledge, exchange, encumber or dispose of the Restricted Shares or any Retained Distributions during the Restriction Period; and (E) a breach of any of the restrictions, terms or conditions contained in the Plan or the Restricted Shares agreement referred to in Section 6(b)(iv) below, or otherwise established by the Board or Committee, as the case may be, with respect to any Restricted Shares or Retained Distributions will cause a forfeiture of such Restricted Shares and any Retained Distributions with respect thereto. |
| (iii) | Upon the expiration of the Restriction Period with respect to each award of Restricted Shares and the satisfaction of any other applicable restrictions, terms and conditions (A) all or part of such Restricted Shares shall become vested in accordance with the terms of the Restricted Shares agreement referred to in Section 6(b)(iv) below, and (B) any Retained Distributions with respect to such Restricted Shares shall become vested to the extent that the Restricted Shares related thereto shall have become vested. Any such Restricted Shares and Retained Distributions that do not vest shall be forfeited to the Company and the holder shall not thereafter have any rights with respect to such Restricted Shares and Retained Distributions that shall have been so forfeited. All references to “forfeiture” under this Plan shall take effect as surrenders for no consideration as a matter of Cayman Islands law. |
| (iv) | Each Restricted Share award shall be confirmed by, and shall be subject to the terms of, an agreement executed by the Company and the Participant. |
Section 7. Deferred Shares.
| (a) | Grant and Exercise . Deferred Shares may be awarded either alone or in addition to or in tandem with other awards granted under the Plan. The Board or the Committee, as the case may be, shall determine the eligible persons to whom and the time or times at which Deferred Shares shall be awarded, the number of shares of Deferred Shares to be awarded to any person, the duration of the period (the “Deferral Period”) during which, and the conditions under which, receipt of the Deferred Shares will be deferred, and all the other terms and conditions of the awards. The Board or the Committee, as the case may be, may condition the grant of the Deferred Shares upon the attainment of such factors or criteria as the Board or the Committee, as the case may be, shall determine. |
| (b) | Terms and Conditions . Each Deferred Share Award shall be subject to the following terms and conditions: |
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| (i) | Subject to the provisions of the Plan and Deferred Shares agreement referred to in Section 7(b)(viii) below, Deferred Share Awards may not be sold, assigned, transferred, pledged or otherwise encumbered during the Deferral Period. At the expiration of the Deferral Period (or the Additional Deferral Period referred to in Section 7(b)(vii) below, where applicable), the Shares covered by the Deferred Share Award shall be issued to the Participant on the Register of Members. |
| (ii) | As determined by the Board or the Committee, as the case may be, at the time of award, amounts equal to any dividends declared during the Deferral Period (or the Additional Deferral Period referred to in Section 7(b)(vi) below, where applicable) with respect to the number of shares covered by a Deferred Share Award may be paid to the Participant currently or deferred and deemed to be reinvested in additional Deferred Shares. |
| (iii) | Subject to the provisions of the Deferred Shares agreement referred to in Section 7(b)(viii) below and this Section 7 and Section 13(g) below, upon termination of a Participant’s employment with the Company or any Parent or Subsidiary for any reason during the Deferral Period (or the Additional Deferral Period referred to in Section 7(b)(vii) below, where applicable) for a given award, the Deferred Shares in question will vest or be forfeited in accordance with the terms and conditions established by the Board or the Committee, as the case may be, at the time of grant. |
| (iv) | The Board or the Committee, as the case may be, may, after grant, accelerate the vesting of all or any part of any Deferred Share Award. |
| (v) | In the event of an Unforeseen Emergency of a Participant whose employment with the Company or any Parent or Subsidiary is involuntarily terminated (other than for Cause), the Board or the Committee, as the case may be, may, at the request of the Participant, waive in whole or in part any or all of the remaining deferral limitations imposed hereunder or pursuant to the Deferred Shares agreement referred to in Section 7(b)(viii) below with respect to any or all of the Participant’s Deferred Shares. |
| (vi) | In the event of the Participant’s Retirement, Disability or death, or in cases of an Unforeseen Emergency, the Board or the Committee, as the case may be, may waive in whole or in part any or all of the limitations imposed hereunder (if any) with respect to any or all of a Deferred Share Award. |
| (vii) | In the event of the Participant’s Retirement, Disability, death, or a 409A Change, or in cases of an Unforeseen Emergency, the Board or the Committee, as the case may be, may waive the limitations imposed hereunder (if any) with respect to a 409A Deferred Share Award. |
| (viii) | A Participant may elect to defer the receipt of an award (or an installment of an award) for an additional specified period or until a specified period or until a specified event (the “Additional Deferral Period”); provided however, that (i) such subsequent election may not take effect until at least twelve (12) months after the date on which it is made, (ii) if such subsequent election relates to a payment not made on account of the Participant’s death, disability or Unforeseen Emergency, the payment with respect to which such election is made must be deferred for a period of not less than five (5) years from the date such payment would otherwise have been made, and (iii) any subsequent election related to a payment described in Code Section 409A(2)(A)(iv) may not be made less than twelve (12) months prior to the date of the first scheduled payment. |
| (ix) | Each Deferred Share Award shall be confirmed by, and shall be subject to the terms of, an agreement executed by the Company and the Participant. |
Section 8. Other Share-Based Awards.
| (a) | Grant and Exercise . Other Share-Based Awards, which may include performance shares and shares valued by reference to the performance of the Company or any Parent or Subsidiary, may be granted either alone or in addition to or in tandem with Share Options, Restricted Shares or Deferred Shares. The Board or the Committee, as the case may be, shall determine the eligible persons to whom, and the time or times at which, such awards shall be made, the number of Shares to be awarded pursuant to such awards, and all other terms and conditions of the awards. The Board or the Committee, as the case may be, may also provide for the grant of Shares under such awards upon the completion of a specified performance period. |
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| (b) | Terms and Conditions . Each Other Share-Based Award shall be subject to the following terms and conditions: |
| (i) | Shares subject to an Other Share-Based Award may not be sold, assigned, transferred, pledged or otherwise encumbered prior to the date on which the shares are issued, or, if later, the date on which any applicable restriction or period of deferral lapses. |
| (ii) | The recipient of an Other Share-Based Award shall be entitled to receive, currently or on a deferred basis, dividends or dividend equivalents with respect to the number of shares covered by the award, as determined by the Board or the Committee, as the case may be, at the time of the award. The Board or the Committee, as the case may be, may provide that such amounts (if any) shall be deemed to have been reinvested in additional Shares. |
| (iii) | Any Other Share-Based Award and any Shares covered by any Other Share-Based Award shall vest or be forfeited to the extent so provided in the award agreement referred to in Section 8(b)(v) below, as determined by the Board or the Committee, as the case may be. |
| (iv) | In the event of the Participant’s Retirement, Disability or death, or in cases of an Unforeseen Emergency, the Board or the Committee, as the case may be, may waive in whole or in part any or all of the limitations imposed hereunder (if any) with respect to any or all of an Other Share-Based Award. |
| (v) | Each Other Share-Based Award shall be confirmed by, and shall be subject to the terms of, an agreement executed by the Company and by the Participant. |
Section 9. Performance-Based Awards
| (a) | In General. All Options and certain Restricted Share Awards, Deferred Share Awards, and Other Share-Based Awards granted under the Plan, and the compensation attributable to such awards, are intended to (i) qualify as Performance-Based Awards (as defined in the next sentence) or (ii) be otherwise exempt from the deduction limitation imposed by Section 162(m) of the Code. Certain Awards granted under the Plan may be granted in a manner such that Awards qualify as “performance-based compensation” (as such term is used in Section 162(m) of the Code and the regulations thereunder) and thus be exempt from the deduction limitation imposed by Section 162(m) of the Code (“Performance-Based Awards”). Awards may only qualify as Performance-Based Awards if they are granted by the Committee at a time when the Committee is comprised solely of two or more “outside directors” (as such term is used in Section 162(m) of the Code and the regulations thereunder) (“Qualifying Committee”). |
| (b) | Options. Share Options granted under the Plan with an exercise price at or above the Fair Market Value of Shares on the date of grant should qualify as Performance-Based Awards. |
| (c) | Other Performance-Based Awards. Restricted Share Awards, Deferred Share Awards, and Other Share-Based Awards granted under the Plan should qualify as Performance-Based Awards if, as determined by a Qualifying Committee, in its discretion, either the granting of such award is subject to the achievement of a performance target or targets based on one or more of the performance measures specified in Section 9(d) below. With respect to such awards intended to qualify as Performance-Based Awards: |
| (1) | the Qualifying Committee shall establish in writing (x) the objective performance-based goals applicable to a given period and (y) the individual employees or class of employees to which such performance-based goals apply no later than 90 days after the commencement of such period (but in no event after 25 percent of such period has elapsed); |
| (2) | no Performance-Based Awards shall be payable to or vest with respect to, as the case may be, any Participant for a given period until the Qualifying Committee certifies in writing that the objective performance goals (and any other material terms) applicable to such period have been satisfied; and |
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| (3) | after the establishment of a performance goal, the Qualifying Committee shall not revise such performance goal or increase the amount of compensation payable thereunder (as determined in accordance with Section 162(m) of the Code) upon the attainment of such performance goal. |
| (d) | Performance Measures. The Qualifying Committee may use the following performance measures (either individually or in any combination) to set performance targets with respect to awards intended to qualify as Performance-Based Awards: net sales; pretax income before allocation of corporate overhead and bonus; pre-tax income before FAS 123R expense, budget; earnings per share; net income; division, group or corporate financial goals; return on shareholders’ equity; return on assets; return on net assets; return on investment capital; gross margin return on investment; gross margin dollars or percent; payroll as a percentage of sales; inventory shrink; employee turnover; sales, general and administrative expense; attainment of strategic and operational initiatives; appreciation in and/or maintenance of the price of Shares or any other publicly-traded securities of the Company, if any; market share; gross profits; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; economic value-added models; comparisons with various stock market indices; and/or reductions in costs. The foregoing criteria shall have any reasonable definitions that the Qualifying Committee may specify, which may include or exclude any or all of the following items as the Qualifying Committee may specify: extraordinary, unusual or non-recurring items; effects of accounting changes; effects of financing activities; expenses for restructuring or productivity initiatives; other non-operating items; spending for acquisitions; effects of divestitures; and effects of litigation activities and settlements. Any such performance criterion or combination of such criteria may apply to the Participant’s award opportunity in its entirety or to any designated portion or portions of the award opportunity, as the Qualifying Committee may specify. |
Section 10. Change of Control Provisions.
| (a) | A “Change of Control” shall be deemed to have occurred on the tenth day after: |
| (i) | any individual, corporation or other entity or group (as defined in Section 13(d)(3) of the Exchange Act), becomes, directly or indirectly, the beneficial owner (as defined in the General Rules and Regulations of the Securities and Exchange Commission with respect to Sections 13(d) and 13(g) of the Exchange Act) of more than 50% of the then outstanding shares of the Company’s authorized share capital entitled to vote generally in the election of directors of the Company; or |
| (ii) | the commencement of, or the first public announcement of the intention of any individual, firm, corporation or other entity or of any group (as defined in Section 13(d)(3) of the Exchange Act) to commence, a tender or exchange offer subject to Section 14(d)(1) of the Exchange Act for any class of the Company’s share capital; or |
| (iii) | the shareholders of the Company approve (A) a definitive agreement for the merger or other business combination of the Company with or into another corporation pursuant to which the shareholders of the Company do not own, immediately after the transaction, more than 50% of the voting power of the corporation that survives, or (B) a definitive agreement for the sale, exchange or other disposition of all or substantially all of the assets of the Company, or (C) any plan or proposal for the liquidation or dissolution of the Company; provided, however, that a “Change of Control” shall not be deemed to have taken place if beneficial ownership is acquired (A) directly from the Company, other than an acquisition by virtue of the exercise or conversion of another security unless the security so converted or exercised was itself acquired directly from the Company, or (B) by, or a tender or exchange offer is commenced or announced by, the Company, any profit-sharing, employee ownership or other employee benefit plan of the Company; or any trustee of or fiduciary with respect to any such plan when acting in such capacity. |
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| (b) | In the event of a “Change of Control” as defined in Section 10(a) above, awards granted under the Plan will be subject to the following provisions, unless otherwise determined by the Board or the Committee, as the case may be, at the grant of the award, or unless the provisions of this Section 10 are suspended or terminated by an affirmative vote of a majority of the Board prior to the occurrence of such a “Change of Control”: |
| (i) | all outstanding Share Options shall become exercisable in full, whether or not otherwise exercisable at such time, and any such Share Option shall remain exercisable in full thereafter until it expires pursuant to its terms; and |
| (ii) | all restrictions and deferral limitations contained in Restricted Share Awards, Deferred Share Awards and Other Share-Based Awards granted under the Plan shall lapse and the Shares subject to such awards shall be distributed to the Participant. Notwithstanding the foregoing to the contrary, all restrictions and deferral limitations with respect to a 409A Deferred Share Award or with respect to a Participant’s Deferred Restricted Shares Account shall not lapse under this Section 10(b) unless the “Change of Control” qualifies as a 409A Change. |
Section 11. Amendments and Termination.
The Board may at any time, and from time to time, amend any of the provisions of the Plan, and may at any time suspend or terminate the Plan; provided, however, that no such amendment shall be effective unless and until it has been duly approved by the holders of the outstanding Shares if the failure to obtain such approval would adversely affect the compliance of the Plan with the requirements of Rule 16b-3 or any other applicable law, rule or regulation. The Board or the Committee, as the case may be, may amend the terms of any Share Option or other award theretofore granted under the Plan; provided, however, that subject to Section 3 above, no such amendment may be made by the Board or the Committee, as the case may be, which in any material respect impairs the rights of the optionee or Participant without the optionee’s or Participant’s consent, except for such amendments which are made to cause the Plan to qualify for the exemption provided by Rule 16b-3. Moreover, no Share Option previously granted under the Plan may be amended to reduce the exercise price of the Share Option.
Section 12. Unfunded Status of Plan.
The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant or optionee by the Company, nothing contained herein shall give any such Participant or optionee any rights that are greater than those of a creditor of the Company.
Section 13. General Provisions.
| (a) | The Board or the Committee, as the case may be, may require each person acquiring Shares pursuant to an Option or other award under the Plan to represent to and agree with the Company in writing, among other things, that the optionee or Participant is acquiring the shares for investment without a view to distribution thereof. Nothing contained in the Plan shall prevent the Board from adopting such other or additional incentive arrangements as it may deem desirable, including, but not limited to, the granting of Share Options and the awarding of shares and cash otherwise than under the Plan; and such arrangements may be either generally applicable or applicable only in specific cases. |
| (b) | Nothing contained in the Plan shall prevent the Board from adopting such other or additional incentive arrangements as it may deem desirable, including, but not limited to, the granting of Share Options and the awarding of shares and cash otherwise than under the Plan; and such arrangements may be either generally applicable or applicable only in specific cases. |
| (c) | Nothing contained in the Plan or in any award hereunder shall be deemed to confer upon any employee of the Company or any Parent or Subsidiary any right to continued employment with the Company or any Parent or Subsidiary, nor shall it interfere in any way with the right of the Company or any Parent or Subsidiary to terminate the employment of any of its employees at any time. |
| (d) | No later than the date as of which an amount first becomes includable in the gross income of the Participant for Federal income tax purposes with respect to any Option or other award under the Plan, the Participant shall pay to the Company, or make arrangements satisfactory to the Board or the Committee, as the case may be, regarding the payment of, any Federal, state and local taxes of any kind required by law to be withheld or paid with respect to such amount. If permitted by the Board or the Committee, as the case may be, tax withholding or payment obligations may be settled with Shares, including Shares that are part of the award that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditional upon such payment or arrangements, and the Company or the Participant’s employer (if not the Company) shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant from the Company or any Parent or Subsidiary. |
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| (e) | The Plan and all awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Delaware (without regard to choice of law provisions). |
| (f) |
Any Share Option granted or other award made under the Plan shall not be deemed compensation for purposes of computing benefits under any retirement plan of the Company or any Parent or Subsidiary and shall not affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the level of compensation (unless required by specific reference in any such other plan to awards under the Plan).
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| (g) | A leave of absence, unless otherwise determined by the Board or Committee prior to the commencement thereof, shall not be considered a termination of employment. Any Share Option granted or awards made under the Plan shall not be affected by any change of employment, so long as the holder continues to be an employee of the Company or any Parent or Subsidiary. |
| (h) | Except as otherwise expressly provided in the Plan or in any Share Option agreement, Restricted Shares agreement, Deferred Shares agreement or any Other Share-Based Award agreement, no right or benefit under the Plan may be alienated, sold, assigned, hypothecated, pledged, exchanged, transferred, encumbranced or charged, and any attempt to alienate, sell, assign, hypothecate, pledge, exchange, transfer, encumber or charge the same shall be void. No right or benefit hereunder shall in any manner be subject to the debts, contracts or liabilities of the person entitled to such benefit. |
| (i) | The obligations of the Company with respect to all Share Options and awards under the Plan shall be subject to (A) all applicable laws, rules and regulations, and such approvals by any governmental agencies as may be required, including, without limitation, the effectiveness of a registration statement under the Securities Act, and (B) the rules and regulations of any securities exchange or association on which the Shares may be listed or traded. |
| (j) | If any of the terms or provisions of the Plan conflicts with the requirements of Rule 16b-3 as in effect from time to time, or with the requirements of any other applicable law, rule or regulation, and with respect to Incentive Share Options, Section 422 of the Code, then such terms or provisions shall be deemed inoperative to the extent they so conflict with the requirements of said Rule 16b-3, and with respect to Incentive Share Options, Section 422 of the Code. With respect to Incentive Share Options, if the Plan does not contain any provision required to be included herein under Section 422 of the Code, such provision shall be deemed to be incorporated herein with the same force and effect as if such provision had been set out at length herein. |
| (k) | The Board or the Committee, as the case may be, may terminate any Share Option or other award made under the Plan if a written agreement relating thereto is not executed and returned to the Company within 30 days after such agreement has been delivered to the optionee or Participant for his or her execution. |
| (l) | The grant of awards pursuant to the Plan shall not in any way effect the right or power of the Company to make reclassifications, reorganizations or other changes of or to its capital or business structure or to merge, consolidate, liquidate, sell or otherwise dispose of all or any part of its business or assets. |
| (m) | Notwithstanding anything in this Plan to the contrary, if the Participant is a Specified Employee and payment of his/her Deferred Restricted Shares Account or Deferred Shares is being made on account of his/her separation from service, such payment shall be made no earlier than the sixth month anniversary of such Specified Employee’s separation from service. |
Section 14. Effective Date of Plan.
The Plan shall be effective as of the approval and adoption by the shareholders of the Company.
Section 15. Term of Plan.
No Share Option, Restricted Share Award, Deferred Share Award or Other Share-Based Award shall be granted pursuant to the Plan after the tenth anniversary of the effective date of the Plan, but awards granted on or prior to such tenth anniversary may extend beyond that date.
Section 16. Governing Law.
The Plan shall be governed by and construed and enforced in accordance with the laws of the State of Israel.
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