Incredimail 2012 Annual Report Download - page 62

Employee Benefit Plans
The 2003 Israeli Share Option Plan, as amended, (the "2003 Plan"), our current equity incentive plan, was adopted in 2003, providing
certain tax benefits in connection with share-
based compensation. The term of the 2003 Plan will expire on December 9, 2022. Please also see
Note 11 to our consolidated financial statements included in this annual report for information on the options issued under the 2003 Plan.
Under the 2003 Plan, we may grant to our directors, officers, employees, consultants, advisers, service providers and controlling
shareholders options to purchase our ordinary shares. As of December 31, 2012 a total of 4,368,000 ordinary shares are subject to the 2003 Plan.
As of April 24, 2013, options to purchase a total of 2,341,594 ordinary shares were outstanding under our 2003 Plan, of which options to
purchase a total of 1,414,127 ordinary shares were held by our directors and officers (14 persons) as a group. The outstanding options are
exercisable at purchase prices which range from $2.30 to $9.98 per share. Any expired or cancelled options are available for reissuance under the
2003 Plan.
Our Israeli employees, officers and directors may only be granted options under Section 102 (" Section 102
") of the Israeli Income Tax
Ordinance (the " Tax Ordinance "), which provides for a beneficial tax treatment, and our non-
employees (such as service providers,
consultants and advisers) and controlling shareholders may only be granted options under another section of the Tax Ordinance, which does not
provide for similar tax benefits. To be eligible for tax benefits under Section 102, options or ordinary shares must be issued through a trustee,
and if held by the trustee for the minimum required period, the employees and directors are entitled to defer any taxable event with respect to the
options until the earlier of (i) the transfer of the options or underlying shares from the trustee to the employee or director or (ii) the sale of the
options or underlying shares to any other third party. Our board of directors has resolved to elect the “Capital Gains Route” (
under Section 102)
for the grant of options to Israeli grantees. Based on such election, and subject to the fulfillment of the provisions of Section 102, under the
Capital Gains Route, gains realized from the sale of shares issued upon exercise of options will mostly be taxed at a rate of only 25% and
partially at the marginal income tax rate applicable to the employee or director (up to 48% in 2012), provided the trustee holds their options or
the underlying shares for 24 months following the date of grant of such options. In the event the requirements of Section 102 for the allocation of
options according to the Capital Gains Route are not met, the applicable marginal income tax rates will apply.
The tax treatment with respect to options granted to employees and directors under the 2003 Plan is the result of our election of the
Capital Gains Route under Section 102. Section 102 also provides for an income tax track, under which, among other things, the benefit to the
employees will be taxed as income, the issuer will be allowed to recognize expenses for tax purposes, and the minimum holding period for the
trustee will be 12 months from the date upon which such options are granted.
Our board of directors has determined that it is in our best interests to allow our employees in the United States to participate in our
stock option plans for employees. According to the laws in the United States (particularly the U.S. Internal Revenue Code of 1986, as amended
(the "Code")) in order for a grant of options to qualify as an “incentive stock option”
it must, amongst other requirements, be granted pursuant to
a plan which is approved by the stockholders of the granting corporation within 12 months before or after the date such plan is adopted.
Therefore, the board of directors has resolved to seek shareholder approval for the adoption of an amendment for U.S. taxpayers to the 2003 Plan
(the "U.S. Appendix"), for the award of options to purchase our ordinary shares under the 2003 Plan, all of which may be issued under the U.S.
Appendix pursuant to "incentive stock options" within the meaning of the Code. In our annual shareholders meeting, held on October 27, 2011,
the 2003 Plan was amended to adopt the U.S. Appendix for U.S taxpayers.
Our board of directors has the authority to administer, and to grant options, under the 2003 Plan. However, the compensation committee
appointed by the board provides recommendations to the board with respect to the administration of the plan and also has full power to alter any
restrictions and conditions of the options, accelerate the rights of an optionee to exercise options and determine the exercise price of the options.
Generally, options granted under the 2003 Plan vest in three equal portions on each anniversary of the date of grant.
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