Incredimail 2013 Annual Report Download - page 61

Under the Incentive Plan, we may grant to our directors, officers, employees, consultants, advisers, service providers and controlling
shareholders options to purchase our ordinary shares, restricted shares and restricted share units ("RSUs"). As of December 31, 2013, a total of
12,000,000 ordinary shares were subject to the Incentive Plan. As of April 3, 2014, RSUs and options to purchase a total of 6,882,301 ordinary
shares were outstanding under our Incentive Plan, of which RSUs and options to purchase a total of 3,540,687 ordinary shares were held by our
directors and officers (16 persons) as a group. The outstanding RSUs have a purchase price of NIS 0.01 per share, and outstanding options are
exercisable at purchase prices which range from $0.03 to $13.54 per share. Any expired or cancelled options are available for reissuance under
the Incentive Plan.
Our Israeli employees and directors may be granted awards under Section 102 (" Section 102
") of the Israeli Income Tax Ordinance
(the " Tax Ordinance "), which provides them with beneficial tax treatment, and non-
employees (such as service providers, consultants and
advisers) and controlling shareholders may only be granted awards under another section of the Tax Ordinance, which does not provide for
similar tax benefits. To be eligible for tax benefits under Section 102, the securities 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 award until the earlier of
(i) the transfer of securities from the trustee to the employee or director or (ii) the sale of securities to a third party. Our board of directors has
resolved to elect the "Capital Gains Route" (under Section 102) for the grant of awards to Israeli grantees under the Incentive Plan. Based on
such election, and subject to the fulfillment of the conditions of Section 102, under the Capital Gains Route, gains realized from the sale of
shares issued pursuant to the Incentive Plan will generally be taxed at the capital gain rate of 25%, provided the trustee holds the securities for 24
months following the date of grant of the award. To the extent that the market price of the ordinary shares at the time of grant exceeds the
exercise price of the award or if the conditions of Section 102 are not met, tax will be payable at the time of sale at the marginal income tax rate
applicable to the employee or director (up to 50% in 2013). We are not entitled to recognize a deduction for Israeli tax purposes on the capital
gain recognized by the award holder upon the sale of shares pursuant to Section 102. The voting rights of any shares held by the trustee under
Section 102 remain with the trustee.
The Incentive Plan contains a U.S. addendum that provides for the grant of awards to U.S. citizens and resident aliens of the United
States for U.S. tax purposes. Pursuant to the approval of our board of directors and shareholders, stock options granted to U.S. citizens and
resident aliens may be either incentive stock options under the U.S. Internal Revenue Code of 1986, as amended (the "Code") or options that do
not qualify as incentive stock options. Subject to the fulfillment of the conditions of the Code, an incentive stock option may provide tax benefits
to the holder in that it converts ordinary income into income taxed at long-
term capital gain rates and defers the tax until the sale of the
underlying share. In that event, we would not recognize a tax deduction with respect to such capital gain.
Our board of directors has the authority to administer, and to grant awards, under the Incentive Plan. However, the compensation
committee appointed by the board provides recommendations to the board with respect to the administration of the plan. Generally, RSUs and
options granted under the Incentive Plan vest in two or three installments on each anniversary of the date of grant.
See "Item 6.B Compensation" for a description of awards granted under the Incentive Plan to our directors and officers in 2013.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. MAJOR SHAREHOLDERS
The following table sets forth information regarding the beneficial ownership of our ordinary shares as of April 3, 2014 by each person
or group of affiliated persons that we know beneficially owns more than 5% of our outstanding ordinary shares. Other than with respect to our
directors and officers, we have relied on public filings with the SEC.
Beneficial ownership of shares is determined in accordance with the Exchange Act and the rules promulgated thereunder, and generally
includes any shares over which a person exercises sole or shared voting or investment power. Ordinary shares that are issuable upon the exercise
of warrants or stock options that are presently exercisable or exercisable within 60 days of a specified date are deemed to be outstanding and
beneficially owned by the person holding the stock options or warrants for the purpose of computing the percentage ownership of that person,
but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
Except as indicated in the footnotes to this table, to our knowledge, each shareholder in the table has sole voting and investment power
for the shares shown as beneficially owned by such shareholder. Our major shareholders do not have different voting rights than our other
shareholders.
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