EXHIBIT 10.1

ORAMED PHARMACEUTICALS INC.

2006 STOCK OPTION PLAN

This 2006 Stock Option Plan (the “Plan”) provides for the grant of options to
acquire common shares (the “Common Shares”) in the capital of Oramed
Pharmaceuticals Inc., a corporation formed under the laws of the State of Nevada
(the “Corporation”). Stock options granted under this Plan will include:

 

(a)

stock options that qualify under Section 422 of the Internal Revenue Code of
1986, as amended (the “Code”), which will be referred to in this Plan as
“Incentive Stock Options”

 

(b)

stock options that qualify under Section 102 of the Israeli Tax Ordinance (New
Version) 1961, as amended and the rules and regulations promulgated thereunder
(the “Ordinance”), which will be referred to in this Plan as “Section 102
Options”

 

(c)

stock options that do not qualify under Section 422 of the Code , which will be
referred to in this Plan as “Non-Qualified Stock Options” and

 

(d)

Section 3(i) Options, being options under Section 3(i) of the Ordinance to
consultants and Controlling Shareholders that are excluded from the term
“Israeli Employee” as defined in Section 3.1 herein.

Incentive Stock Options, Section 102 Options, Non-Qualified Stock Options and
Section 3(i) Options granted under this Plan are collectively referred to as
“Options”.

1.

PURPOSE

1.1                        The purpose of this Plan is to retain the services of
valued key employees and consultants of the Corporation and such other persons
as the Plan Administrator (as hereinafter defined) shall select in accordance
with Section 3 below, and to encourage such persons to acquire a greater
proprietary interest in the Corporation, thereby strengthening their incentive
to achieve the objectives of the shareholders of the Corporation, and to serve
as an aid and inducement in the hiring of new employees and to provide an equity
incentive to consultants and other persons selected by the Plan Administrator.

1.2                        This Plan shall at all times be subject to all legal
requirements relating to the administration of stock option plans, if any, under
applicable corporate laws, applicable United States federal and state securities
laws, the Code, applicable Israeli tax laws, Israeli securities laws, Israeli
corporate laws, Israeli foreign exchange control laws the rules of any
applicable stock exchange or stock quotation system, and the rules of any other
foreign jurisdiction applicable to Options granted to residents therein
(collectively, the “Applicable Laws”).

 

 

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2.

ADMINISTRATION

2.1                        This Plan shall be administered initially by the
board of directors of the Corporation (the “Board”), except that the Board may,
in its discretion, establish a committee composed of two (2) or more members of
the Board or two (2) or more other persons to administer the Plan, which
committee (the “Committee”) may be an executive, compensation or other
committee, including a separate committee especially created for this purpose.
The Board or, if applicable, the Committee is referred to herein as the “Plan
Administrator”.

2.2                        If and so long as the Common Shares is registered
under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”) and the Corporation wishes to grant Incentive Stock
Options, then the Board shall consider in selecting the Plan Administrator and
the membership of any Committee, with respect to any persons subject or likely
to become subject to Section 16 of the Exchange Act, the provisions regarding
(a) “outside directors” as contemplated by Section 162(m) of the Code, and (b)
“Non-Employee Directors” as contemplated by Rule 16b-3 under the Exchange Act.

2.3                        The Committee shall have the powers and authority
vested in the Board hereunder (including the power and authority to interpret
any provision of the Plan or of any Option). The members of any such Committee
shall serve at the pleasure of the Board. A majority of the members of the
Committee shall constitute a quorum, and all actions of the Committee shall be
taken by a majority of the members present. Any action may be taken by a written
instrument signed by all of the members of the Committee and any action so taken
shall be fully effective as if it had been taken at a meeting.

2.4                        Subject to the provisions of this Plan and any
Applicable Laws, and with a view to accomplishing the purpose of the Plan, the
Plan Administrator shall have sole authority, in its absolute discretion, to:

 

(a)

construe and interpret the terms of the Plan and any Option granted pursuant to
this Plan;

 

(b)

define the terms used in the Plan;

 

(c)

prescribe, amend and rescind the rules and regulations relating to this Plan;

 

(d)

correct any defect, supply any omission or reconcile any inconsistency in this
Plan;

 

(e)

grant Options under this Plan, except grants to directors, the CEO, the CFO and
the CTO of the Corporation, which will be granted by the Board as a whole;

 

(f)

determine the individuals to whom Options shall be granted under this Plan and
whether the Option is granted as an Incentive Stock Option, Section 102 Option,
a Non-Qualified Stock Option or Section 3(i) Option;

 

(g)

make an election under Section 102(b)(1) or (2) of the Ordinance;

 

 

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(h)

determine the time or times at which Options shall be granted under this Plan;

 

(i)

determine the number of Common Shares subject to each Option, the exercise price
of each Option, the duration of each Option and the times at which each Option
shall become exercisable;

 

(j)

determine all other terms and conditions of the Options; and

 

(k)

make all other determinations and interpretations necessary and advisable for
the administration of the Plan.

2.5                        All decisions, determinations and interpretations
made by the Plan Administrator shall be binding and conclusive on all
participants in the Plan and on their legal representatives, heirs and
beneficiaries.

3.

ELIGIBILITY

3.1

Definitions. In this agreement:

“Affiliate” means any “employing company” within the meaning of Section 102(a)
of the Ordinance.

“Controlling Shareholder” shall have the meaning ascribed to it in Section 32(9)
of the Ordinance.”

“Israeli Employee” means a person who is employed by the Corporation or its
Affiliates in Israel, including an individual who is serving as a director or an
office holder, but excluding a Controlling Shareholder.

“Related Corporation” means any corporation (other than the Corporation) that is
a “Parent Corporation” of the Corporation or “Subsidiary Corporation” of the
Corporation, as those terms are defined in Sections 424(e) and 424(f),
respectively, of the Code (or any successor provisions) and the regulations
thereunder (as amended from time to time).

3.2                        Incentive Stock Options may be granted to any
individual who, at the time such Option is granted, is an employee of the
Corporation or any Related Corporation (as hereinafter defined) (an “Employee”).

3.3                        Non-Qualified Stock Options may be granted to
Employees, and to such other persons who are not Employees as the Plan
Administrator shall select, subject to any Applicable Laws.

3.4                        Section 102 Options may be granted to Israeli
Employees in accordance with Section 4 herein.

3.5                        Section 3(i) Options may be granted to consultants
and Controlling Shareholders that do not qualify as Israeli Employees.

 

 

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3.6                        Options may be granted in substitution for
outstanding Options of another corporation in connection with the merger,
consolidation, acquisition of property or stock or other reorganization between
such other corporation and the Corporation or any subsidiary of the Corporation.
Options also may be granted in exchange for outstanding Options.

3.7                        Any person to whom an Option is granted under this
Plan is referred to as an “Optionee”. Any person who is the owner of an Option
is referred to as a “Holder”.

4.

DESIGNATION OF OPTIONS PURSUANT TO SECTION 102 (RELEVANT ONLY TO ISRAELI
EMPLOYEES)

4.1                        The Corporation may designate Section 102 Options
granted to Israeli Employees pursuant to Section 102 of the Ordinance as
Unapproved 102 Options (means an Option granted pursuant to Section 102(c) of
the Ordinance and not held in trust by a Trustee) or Approved 102 Options (means
an Option granted pursuant to Section 102(b) of the Ordinance and held in trust
by a Trustee for the benefit of the Optionee).

4.2                        The grant of Approved 102 Options shall be made under
this Plan adopted by the Board, and shall be conditioned upon the approval of
this Plan by the Israeli Tax Authorities (the “ITA”).

4.3                        Approved 102 Option may either be classified as
Capital Gain Option (“CGO”) or Ordinary Income Option (“OIO”).

4.4                        Approved 102 Option elected and designated by the
Corporation to qualify under the capital gain tax treatment in accordance with
the provisions of Section 102(b)(2) shall be referred to herein as CGO.

4.5                        Approved 102 Option elected and designated by the
Corporation to qualify under the ordinary income tax treatment in accordance
with the provisions of Section 102(b)(1) shall be referred to herein as OIO.

4.6                        The Corporation’s election of the type of Approved
102 Options as CGO or OIO granted to Employees (the “Election”), shall be
appropriately filed with the ITA before the Date of Grant of an Approved 102
Option. Such Election shall become effective beginning the first Date of Grant
of an Approved 102 Option under this Plan and shall remain in effect at least
until the end of the year following the year during which the Corporation first
granted Approved 102 Options. The Election shall obligate the Corporation to
grant only the type of Approved 102 Option it has elected, and shall apply to
all Optionees who were granted Approved 102 Options during the period indicated
herein, all in accordance with the provisions of Section 102(g) of the
Ordinance. For the avoidance of doubt, such Election shall not prevent the
Corporation from granting Unapproved 102 Options simultaneously.

4.7                        All Approved 102 Options must be held in trust by a
Trustee (means any entity appointed by the Corporation to serve as a trustee and
approved by the ITA, all in accordance with the provisions of Section 102(a) of
the Ordinance, as described in Section 5 below (the “Trustee”).

 

 

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4.8                        For the avoidance of doubt, the designation of
Unapproved 102 Options and Approved 102 Options shall be subject to the terms
and conditions set forth in Section 102 of the Ordinance and the regulations
promulgated thereunder.

4.9                        With regards to Approved 102 Options, the provisions
of the Plan and/or the Option Agreement shall be subject to the provisions of
Section 102 and the Tax Assessing Officer’s permit, and the said provisions and
permit shall be deemed an integral part of the Plan and of the Option Agreement.
Any provision of Section 102 and/or the said permit which is necessary in order
to receive and/or to keep any tax benefit pursuant to Section 102, which is not
expressly specified in the Plan or the Option Agreement, shall be considered
binding upon the Corporation and the Optionees.

5.

TRUSTEE

5.1                        Approved 102 Options which shall be granted under the
Plan and/or any Shares allocated or issued upon exercise of such Approved 102
Options and/or other shares received subsequently following any realization of
rights, including, without limitation, bonus shares, shall be allocated or
issued to the Trustee and held for the benefit of the Optionees for such period
of time as required by Section 102 or any regulations, rules or orders or
procedures promulgated thereunder (the “Holding Period”). In the case the
requirements for Approved 102 Options are not met, then the Approved 102 Options
may be treated as Unapproved 102 Options, all in accordance with the provisions
of Section 102 and regulations promulgated thereunder.

5.2                        Notwithstanding anything to the contrary, the Trustee
shall not release any Shares allocated or issued upon exercise of Approved 102
Options prior to the full payment of the Optionee’s tax liabilities arising from
Approved 102 Options which were granted to him and/or any Shares allocated or
issued upon exercise of such Options.

5.3                        Upon receipt of Approved 102 Option, the Optionee
will sign an undertaking to release the Trustee from any liability in respect of
any action or decision duly taken and bona fide executed in relation with the
Plan, or any Approved 102 Option or Share granted to him thereunder.

5.4                        With respect to any Approved 102 Option, subject to
the provisions of Section 102 and any rules or regulation or orders or
procedures promulgated thereunder, an Optionee shall not sell or release from
trust any Share received upon the exercise of an Approved 102 Option and/or any
share received subsequently following any realization of rights, including
without limitation, bonus shares, until the lapse of the Holding Period required
under Section 102 of the Ordinance. Notwithstanding the above, if any such sale
or release occurs during the Holding Period, the sanctions under Section 102 of
the Ordinance and under any rules or regulation or orders or procedures
promulgated thereunder shall apply to and shall be borne by such Optionee

5.5                        With respect to all Shares (but excluding, for
avoidance of any doubt, any unexercised Options) allocated or issued upon the
exercise of Options purchased by the Optionee and held by the Optionee or by the
Trustee, as the case may be, the Optionee shall be entitled to receive dividends
in accordance with the quantity of such Shares, subject to the provisions of the

 

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Corporation’s incorporation documents (and all amendments thereto) and subject
to any applicable taxation on distribution of dividends, and when applicable
subject to the provisions of Section 102.

6.

STOCK

6.1                        The Plan Administrator is authorized to grant Options
to acquire up to a total of 3,000,000 Common Shares. The number of Common Shares
with respect to which Options may be granted hereunder is subject to adjustment
as set forth in Section 7.1(m) hereof. In the event that any outstanding Option
expires or is terminated for any reason, the Common Shares allocable to the
unexercised portion of such Option may again be subject to an Option granted to
the same Optionee or to a different person eligible under Section 3 of this
Plan; provided however, that any cancelled Options will be counted against the
maximum number of Common Shares with respect to which Options may be granted to
any particular person as set forth in Section 3 hereof.

7.

TERMS AND CONDITIONS OF OPTIONS

7.1                        Each Option granted under this Plan shall be
evidenced by a written agreement approved by the Plan Administrator (each, an
“Agreement”). Agreements may contain such provisions, not inconsistent with this
Plan or any Applicable Laws, as the Plan Administrator in its discretion may
deem advisable. All Options also shall comply with the following requirements:

 

(a)

Number of Shares and Type of Option

Each Agreement shall state the number of Common Shares to which it pertains and
whether the Option is intended to be an Incentive Stock Option, Section 102
Option (CGO or OIO) or a Non-Qualified Stock Option; provided that:

 

(i)

the number of Common Shares that may be reserved pursuant to the exercise of
Options granted to any person shall not exceed 5% of the issued and outstanding
Common Shares of the Corporation;

 

(ii)

in the absence of action to the contrary by the Plan Administrator in connection
with the grant of an Option, all Options shall be Non-Qualified Stock Options,
Unapproved 102 Options or Section 3(i) Options, as the case maybe;

 

(iii)

the aggregate fair market value (determined at the Date of Grant, as defined
below) of the Common Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (granted
under this Plan and all other Incentive Stock Option plans of the Corporation, a
Related Corporation or a predecessor corporation) shall not exceed U.S.$100,000,
or such other limit as may be prescribed by the Code as it may be amended from
time to time (the “Annual Limit”); and

 

 

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(iv)

any portion of an Option which exceeds the Annual Limit shall not be void but
rather shall be a Non-Qualified Stock Option.

 

(b)

Date of Grant

Each Agreement shall state the date the Plan Administrator has deemed to be the
effective date of the Option for purposes of this Plan (the “Date of Grant”).
Option Price

 

(c)

Exercise Price

Each Agreement shall state the price per Common Share at which it is
exercisable. The Plan Administrator shall act in good faith to establish the
exercise price in accordance with Applicable Laws; provided that:

 

(i)

the per share exercise price for an Incentive Stock Option or any Option granted
to a “covered employee” as such term is defined for purposes of Section 162(m)
of the Code shall not be less than the fair market value per Common Share at the
Date of Grant as determined by the Plan Administrator in good faith;

 

(ii)

with respect to Incentive Stock Options granted to greater-than-ten percent
(>10%) shareholders of the Corporation (as determined with reference to
Section 424(d) of the Code), the exercise price per share shall not be less than
one hundred ten percent (110%) of the fair market value per Common Share at the
Date of Grant as determined by the Plan Administrator in good faith; and

 

(iii)

Options granted in substitution for outstanding options of another corporation
in connection with the merger, consolidation, acquisition of property or stock
or other reorganization involving such other corporation and the Corporation or
any subsidiary of the Corporation may be granted with an exercise price equal to
the exercise price for the substituted option of the other corporation, subject
to any adjustment consistent with the terms of the transaction pursuant to which
the substitution is to occur.

 

(iv)

solely for the purpose of determining the tax liability pursuant to Section
102(b)(3) of the Ordinance, if at the date of grant the Corporation’s shares are
listed on any established stock exchange or a national market system or if the
Corporation’s shares will be registered for trading within ninety (90) days
following the date of grant of the CGOs, the fair market value of the Shares at
the date of grant shall be determined in accordance with the average value of
the Corporation’s shares on the thirty (30) trading days preceding the date of
grant or on the thirty (30) trading days following the date of registration for
trading, as the case may be.

 

 

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(d)

Duration of Options

At the time of the grant of the Option, the Plan Administrator shall designate,
subject to Section 7.1(g) below, the expiration date of the Option, which date
shall not be later than 10 years from the Date of Grant; provided, that the Plan
Administrator decided otherwise in specific option agreements or, that the
expiration date of any Incentive Stock Option granted to a greater-than-ten
percent (>10%) shareholder of the Corporation (as determined with reference to
Section 424(d) of the Code) shall not be later than five (5) years from the Date
of Grant. In the absence of action to the contrary by the Plan Administrator in
connection with the grant of a particular Option, and except in the case of
Incentive Stock Options as described above, all Options granted under this
Section 7 shall expire 10 years from the Date of Grant.

 

(e)

Vesting Schedule

No Option shall be exercisable until it has vested. The vesting schedule for
each Option shall be specified by the Plan Administrator at the time of grant of
the Option prior to the provision of services with respect to which such Option
is granted.; provided that if no vesting schedule is specified at the time of
grant, the Option shall vest as follows:

 

(i)

on the six month anniversary of the Date of Grant, the Option shall vest and
shall become exercisable with respect to 25% of the Common Stock to which it
pertains;

 

(ii)

on the seven month and each successive month anniversary to and including the
twenty three month anniversary, the Option shall vest and become exercisable
with respect to an additional four (4%) percent of the Common Stock to which it
pertains ; and

 

(iii)

on the twenty-four month anniversary of the Date of Grant, the Option shall vest
and shall become exercisable with respect to balance of the Common Stock to
which it pertains.

The Plan Administrator may specify a vesting schedule for all or any portion of
an Option based on the achievement of performance objectives established in
advance of the commencement by the Optionee of services related to the
achievement of the performance objectives. Performance objectives shall be
expressed in terms of objective criteria, including but not limited to, one or
more of the following: return on equity, return on assets, share price, market
share, sales, earnings per share, costs, net earnings, net worth, inventories,
cash and cash equivalents, gross margin or the Corporation’s performance
relative to its internal business plan. Performance objectives may be in respect
of the performance of the Corporation as a whole (whether on a consolidated or
unconsolidated basis), a Related Corporation, or a subdivision, operating unit,
product or product line of either of the foregoing. Performance objectives may
be absolute or relative and may be expressed in terms of a progression or a
range. An Option that is exercisable (in full or in part) upon the

 

 

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achievement of one or more performance objectives may be exercised only
following written notice to the Optionee and the Corporation by the Plan
Administrator that the performance objective has been achieved.

 

(f)

Acceleration of Vesting

The vesting of one or more outstanding Options may be accelerated by the Plan
Administrator at such times and in such amounts as it shall determine in its
sole discretion.

 

(g)

Term of Option

 

(i)

Vested Options shall terminate, to the extent not previously exercised, upon the
occurrence of the first of the following events:

 

A.

the expiration of the Option, as designated by the Plan Administrator in
accordance with Section 7.1(d) above;

 

B.

the date an Optionee receives a notice of his or her termination of employment
or contractual relationship with the Corporation or any Related Corporation for
Cause (as hereinafter defined); or

 

C.

the expiration of five (5) years, unless otherwise determined in specific
agreements by the Plan Administrator, from the date of an Optionee’s termination
of employment or contractual relationship with the Corporation or any Related
Corporation for any reason whatsoever other than Cause, but including death or
disability, unless, in the case of a Non-Qualified Stock Option, Section 102
Option or Section 3(i) Option, the exercise period is extended by the Plan
Administrator until a date not later than the expiration date of the Option;

 

(ii)

Notwithstanding Section 7.1(g)(i) above, any vested Options which have been
granted to an Optionee in the Optionee’s capacity as a director of the
Corporation or any Related Corporation shall terminate upon the occurrence of
the first of the following events:

 

A.

the event specified in Section 7.1(g)(i)A above;

 

B.

the expiration of five (5) years, unless otherwise determined in specific
agreements by the Plan Administrator, from the date the Optionee ceases to serve
as a director of the Corporation or Related Corporation, as the case may be,
unless, in the case of a Non-Qualified Stock Option or Section 102 Option, the
exercise period is extended by the Plan Administrator until a date not later
than the expiration date of the Option.

 

 

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(iii)

Upon the death of an Optionee, any vested option still in force and unexpired
may be exercised by the person or persons to whom such Optionee’s rights under
such Option shall pass by the Optionee’s will or by the laws of descent and
distribution of the Optionee’s domicile at the time of death, within a period of
twelve (12) months after the date of such termination.

 

(iv)

For purposes of the Plan, unless otherwise defined in the Agreement, termination
for “Cause” shall mean such termination is for ‘cause’ as such term is expressly
defined in a then-effective written agreement between the Optionee and the
Corporation or any Related Corporation, or in the absence of such then-effective
written agreement and in the case of an Employee or an Israeli Employee,
termination for the following reasons (i) conviction of any felony involving
moral turpitude or affecting the Corporation; (ii) any refusal to carry out a
reasonable directive of the chief executive officer, the Board or the Optionee’s
direct supervisor, which involves the business of the Corporation or its Related
Corporation and was capable of being lawfully performed; (iii) embezzlement of
funds of the Corporation or its Related Corporation; (iv) any breach of the
Optionee’s fiduciary duties or duties of care of the Corporation; including
without limitation disclosure of confidential information of the Corporation;
and (v) any conduct (other than conduct in good faith) reasonably determined by
the Board to be materially detrimental to the Corporation. Unless accelerated in
accordance with Section 7.1(f) above, unvested Options shall terminate
immediately upon termination of employment or contractual relationship of an
Optionee with the Corporation or a Related Corporation, or termination of an
Optionee’s services as a director of the Corporation or a Related Corporation,
for any reason whatsoever, including death or disability.

 

(v)

For purposes of this Plan, transfer of employment between or among the
Corporation and/or any Related Corporation shall not be deemed to constitute a
termination of employment with the Corporation or any Related Corporation.
Employment shall be deemed to continue while the Optionee is on military leave,
sick leave or other bona fide leave of absence (as determined by the Plan
Administrator). The foregoing notwithstanding, employment shall not be deemed to
continue beyond the first ninety (90) days of such leave, unless otherwise
determined in specific agreements by the Plan Administrator and unless the
Optionee’s re-employment rights are guaranteed by statute or by contract.

 

(h)

Exercise of Options

 

(i)

Options shall be exercisable, in full or in part, at any time after vesting,
until termination. If less than all of the Common Shares included in the vested
portion of any Option are purchased, the remainder may be purchased at any
subsequent time prior to the expiration of the Option

 

 

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term. Only whole Common Shares may be issued pursuant to an Option, and to the
extent that an Option covers less than one (1) Common Share, it is
unexercisable.

 

(ii)

Options or portions thereof may be exercised by giving written notice to the
Corporation, in such form and method as may be determined by the Corporation and
when applicable, by the Trustee in accordance with the requirements of Section
102 of the Ordinance, which notice shall specify the number of Common Shares to
be purchased, and be accompanied by payment in the amount of the aggregate
exercise price for the Common Shares so purchased, which payment shall be in the
form specified in Section 7.1(i) below. The Corporation shall not be obligated
to issue, transfer or deliver a certificate representing Common Shares to the
Holder of any Option, until provision has been made by the Holder, to the
satisfaction of the Corporation, for the payment of the aggregate exercise price
for all Common Shares for which the Option shall have been exercised and for
satisfaction of any tax withholding obligations associated with such exercise.
During the lifetime of an Optionee, Options are exercisable only by the
Optionee.

 

(iii)

For Israeli Employees the above mentioned in section h(ii) is subject to section
102 and the trust mechanism as defined in section 5 of this Plan.

With respect to Unapproved 102 Option, if the Optionee ceases to be employed by
the Corporation or any Afffiliate, the Optionee shall extend to the Corporation
and/or its Affiliate a security or guarantee for the payment of tax due at the
time of sale of Shares, all in accordance with the provisions of Section 102 and
the rules, regulation or orders promulgated thereunder.

 

(i)

Payment upon Exercise of Option

Upon the exercise of any Option, the aggregate exercise price shall be paid to
the Corporation in cash or by certified or cashier’s check. In addition, if
pre-approved in writing by the Plan Administrator who may arbitrarily withhold
consent, the Holder may pay for all or any portion of the aggregate exercise
price by complying with one or more of the following alternatives:

 

(i)

by delivering to the Corporation Common Shares previously held by such Holder,
or by the Corporation withholding Common Shares otherwise deliverable pursuant
to exercise of the Option, which Common Shares received or withheld shall have a
fair market value at the date of exercise (as determined by the Plan
Administrator) equal to the aggregate exercise price to be paid by the Optionee
upon such exercise;

 

(ii)

by delivering a properly executed exercise notice together with irrevocable
instructions to a broker promptly to sell or margin a sufficient portion of

 

 

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the Common Shares and deliver directly to the Corporation the amount of sale or
margin loan proceeds to pay the exercise price; or

 

(iii)

by complying with any other payment mechanism approved by the Plan Administrator
at the time of exercise.

 

(j)

No Rights as a Shareholder

A Holder shall have no rights as a shareholder of the Corporation with respect
to any Common Shares covered by an Option until such Holder becomes a record
holder of such Common Shares, irrespective of whether such Holder has given
notice of exercise. Subject to the provisions of Section 7.1(m) hereof, no
rights shall accrue to a Holder and no adjustments shall be made on account of
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights declared on, or created in, the
Common Shares for which the record date is prior to the date the Holder becomes
a record holder of the Common Shares covered by the Option, irrespective of
whether such Holder has given notice of exercise. In case of Options and Common
Shares held by the Trustee, subject to the provisions of Section 5 of the Plan.

 

(k)

Non-transferability of Options

Options granted under this Plan and the rights and privileges conferred by this
Plan may not be transferred, assigned, pledged or hypothecated in any manner
(whether by operation of law or otherwise) other than by will, by applicable
laws of descent and distribution, and shall not be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of any Option or of any right or privilege
conferred by this Plan contrary to the provisions hereof, or upon the sale, levy
or any attachment or similar process upon the rights and privileges conferred by
this Plan, such Option shall thereupon terminate and become null and void.

As long as Options and/or Common Shares are held by the Trustee on behalf of the
Optionee, all rights of the Optionee over the Common Shares are personal, can
not be transferred, assigned, pledged or mortgaged, other than by will or
pursuant to the laws of descent and distribution.

 

(l)

Securities Regulation and Tax Withholding

 

(i)

Common Shares shall not be issued with respect to an Option unless the exercise
of such Option and the issuance and delivery of such Common Shares shall comply
with all Applicable Laws, and such issuance shall be further subject to the
approval of counsel for the Corporation with respect to such compliance,
including the availability of an exemption from prospectus and registration
requirements for the issuance and sale of such Common Shares. The inability of
the Corporation to obtain from any regulatory body the authority deemed by the
Corporation to be necessary for the lawful issuance and sale of any Common
Shares under this Plan, or

 

 

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the unavailability of an exemption from prospectus and registration requirements
for the issuance and sale of any Common Shares under this Plan, shall relieve
the Corporation of any liability with respect to the non-issuance or sale of
such Common Shares.

 

(ii)

As a condition to the exercise of an Option, the Plan Administrator may require
the Holder to represent and warrant in writing at the time of such exercise that
the Common Shares are being purchased only for investment and without any
then-present intention to sell or distribute such Common Shares. If necessary
under Applicable Laws, the Plan Administrator may cause a stop-transfer order
against such Common Shares to be placed on the stock books and records of the
Corporation, and a legend indicating that the Common Shares may not be pledged,
sold or otherwise transferred unless an opinion of counsel is provided stating
that such transfer is not in violation of any Applicable Laws, may be stamped on
the certificates representing such Common Shares in order to assure an exemption
from registration. The Plan Administrator also may require such other
documentation as may from time to time be necessary to comply with applicable
securities laws. THE CORPORATION HAS NO OBLIGATION TO UNDERTAKE REGISTRATION OF
OPTIONS OR THE COMMON SHARES ISSUABLE UPON THE EXERCISE OF OPTIONS.

 

(iii)

The Holder shall pay to the Corporation by certified or cashier’s check,
promptly upon exercise of an Option or, if sooner or later, the date that the
amount of such obligations becomes determinable, all applicable federal, state,
local and foreign withholding taxes that the Plan Administrator or the Trustee,
in their discretion, subject to section 102 in case of Israeli Employees,
determines to result upon exercise of an Option or from a transfer or other
disposition of Common Shares acquired upon exercise of an Option or otherwise
related to an Option or Common Shares acquired in connection with an Option.
Furthermore, the Holder shall agree to indemnify the Corporation and/or its
Affiliates and/or the Trustee and hold them harmless against and from any and
all liability for any such tax or interest or penalty thereon, including without
limitation, liabilities relating to the necessity to withhold, or to have
withheld, any such tax from any payment made to the Holder. Upon approval of the
Plan Administrator, a Holder may satisfy such obligation by complying with one
or more of the following alternatives selected by the Plan Administrator:

 

A.

by delivering to the Corporation Common Shares previously held by such Holder or
by the Corporation withholding Common Shares otherwise deliverable pursuant to
the exercise of the Option, which Common Shares received or withheld shall have
a fair market value (as determined by the Plan Administrator) equal to the
minimum mandatory withholding tax obligations arising as a result of such
exercise, transfer or other disposition; or

 

 

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B.

by complying with any other payment mechanism approved by the Plan Administrator
from time to time.

 

(iv)

The issuance, transfer or delivery of certificates representing Common Shares
pursuant to the exercise of Options may be delayed, at the discretion of the
Plan Administrator, until the Plan Administrator is satisfied that the
applicable requirements of all Applicable Laws and the withholding provisions of
the Code and/or the Ordinance have been met and that the Holder has paid or
otherwise satisfied any withholding tax obligation as described in Section
7.1(l)(iii) above.

 

(m)

Adjustments Upon Changes In Capitalization

 

(i)

The aggregate number and class of shares for which Options may be granted under
this Plan, the number and class of shares covered by each outstanding Option,
and the exercise price per share thereof (but not the total price), and each
such Option, shall all be proportionately adjusted for any increase or decrease
in the number of issued Common Shares of the Corporation resulting from:

 

A.

a subdivision or consolidation of Common Shares or any like capital adjustment,
or

 

B.

the issuance of any Common Shares, or securities exchangeable for or convertible
into Common Shares, to the holders of all or substantially all of the
outstanding Common Shares by way of a stock dividend (other than the issue of
Common Shares, or securities exchangeable for or convertible into Common Shares,
to holders of Common Shares pursuant to their exercise of options to receive
dividends in the form of Common Shares, or securities convertible into Common
Shares, in lieu of dividends paid in the ordinary course on the Common Shares).

 

(ii)

Except as provided in Section 7.1(m)(iii) hereof, upon a merger (other than a
merger of the Corporation in which the holders of Common Shares immediately
prior to the merger have the same proportionate ownership of common shares in
the surviving corporation immediately after the merger), consolidation,
acquisition of property or stock, separation, reorganization (other than a mere
re-incorporation or the creation of a holding Corporation) or liquidation of the
Corporation, as a result of which the shareholders of the Corporation, receive
cash, shares or other property in exchange for or in connection with their
Common Shares, any Option granted hereunder shall terminate, but the Holder
shall have the right to exercise such Holder’s Option immediately prior to any
such merger, consolidation, acquisition of property or shares, separation,
reorganization or liquidation, and to be treated as a shareholder of record

 

 

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for the purposes thereof, to the extent the vesting requirements set forth in
the Option agreement have been satisfied.

 

(iii)

If the shareholders of the Corporation receive shares in the capital of another
corporation (“Exchange Shares”) in exchange for their Common Shares in any
transaction involving a merger (other than a merger of the Corporation in which
the holders of Common Shares immediately prior to the merger have the same
proportionate ownership of Common Shares in the surviving corporation
immediately after the merger), consolidation, acquisition of property or shares,
separation or reorganization (other than a mere re-incorporation or the creation
of a holding Corporation), all Options granted hereunder shall be converted into
options to purchase Exchange Shares unless the Corporation and the corporation
issuing the Exchange Shares, in their sole discretion, determine that any or all
such Options granted hereunder shall not be converted into options to purchase
Exchange Shares but instead shall terminate in accordance with, and subject to
the Holder’s right to exercise the Holder’s Options pursuant to, the provisions
of Section 7.1(m)(ii). The amount and price of converted options shall be
determined by adjusting the amount and price of the Options granted hereunder in
the same proportion as used for determining the number of Exchange Shares the
holders of the Common Shares receive in such merger, consolidation, acquisition
or property or stock, separation or reorganization. Unless accelerated by the
Board, the vesting schedule set forth in the option agreement shall continue to
apply to the options granted for the Exchange Shares.

 

(iv)

In the event of any adjustment in the number of Common Shares covered by any
Option, any fractional shares resulting from such adjustment shall be
disregarded and each such Option shall cover only the number of full shares
resulting from such adjustment.

 

(v)

All adjustments pursuant to Section 7.1(m) shall be made by the Plan
Administrator, and its determination as to what adjustments shall be made, and
the extent thereof, shall be final, binding and conclusive.

 

(vi)

The grant of an Option shall not affect in any way the right or power of the
Corporation to make adjustments, reclassifications, reorganizations or changes
of its capital or business structure, to merge, consolidate or dissolve, to
liquidate or to sell or transfer all or any part of its business or assets.

8.

EFFECTIVE DATE; AMENDMENT; SHAREHOLDER APPROVAL

8.1                        Options may be granted by the Plan Administrator from
time to time on or after the date on which this Plan is adopted by the Board
(the “Effective Date”). In case of the Israeli Optionees, Approved 102 Options
will be granted only after the lapse of at least 30 days

 

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following the date in which the Plan and the relevant forms will be submitted to
the tax authorities as detailed in Section 4.6 above.

8.2                        Unless sooner terminated by the Board, this Plan
shall terminate on the tenth anniversary of the Effective Date. No Option may be
granted after such termination or during any suspension of this Plan.

8.3                        Any Incentive Stock Options granted by the Plan
Administrator prior to the ratification of this Plan by the shareholders of the
Corporation shall be granted subject to approval of this Plan by the holders of
a majority of the Corporation’s outstanding voting shares, voting either in
person or by proxy at a duly held shareholders’ meeting within twelve (12)
months before or after the Effective Date. If such shareholder approval is
sought and not obtained, all Incentive Stock Options granted prior thereto and
thereafter shall be considered Non-Qualified Stock Options and any Options
granted to Covered Employees will not be eligible for the exclusion set forth in
Section 162(m) of the Code with respect to the deductibility by the Corporation
of certain compensation.

9.

NO OBLIGATIONS TO EXERCISE OPTION

The grant of an Option shall impose no obligation upon the Optionee to exercise
such Option.

10.

NO RIGHT TO OPTIONS OR TO EMPLOYMENT

Whether or not any Options are to be granted under this Plan shall be
exclusively within the discretion of the Plan Administrator, and nothing
contained in this Plan shall be construed as giving any person any right to
participate under this Plan. The grant of an Option shall in no way constitute
any form of agreement or understanding binding on the Corporation or any Related
Corporation, express or implied, that the Corporation or any Related Corporation
will employ or contract with an Optionee for any length of time, nor shall it
interfere in any way with the Corporation’s or, where applicable, a Related
Corporation’s right to terminate Optionee’s employment at any time, which right
is hereby reserved.

11.

APPLICATION OF FUNDS

The proceeds received by the Corporation from the sale of Common Shares issued
upon the exercise of Options shall be used for general corporate purposes,
unless otherwise directed by the Board.

12.

INDEMNIFICATION OF PLAN ADMINISTRATOR

In addition to all other rights of indemnification they may have as members of
the Board, members of the Plan Administrator shall be indemnified by the
Corporation for all reasonable expenses and liabilities of any type or nature,
including attorneys’ fees, incurred in connection with any action, suit or
proceeding to which they or any of them are a party by reason of, or in
connection with, this Plan or any Option granted under this Plan, and against
all amounts paid by them in settlement thereof (provided that such settlement is
approved by independent legal counsel selected by the Corporation), except to
the extent that such expenses relate to matters for which it is adjudged that
such Plan Administrator member is liable for wilful misconduct;

 

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provided, that within fifteen (15) days after the institution of any such
action, suit or proceeding, the Plan Administrator member involved therein
shall, in writing, notify the Corporation of such action, suit or proceeding, so
that the Corporation may have the opportunity to make appropriate arrangements
to prosecute or defend the same.

13.

AMENDMENT OF PLAN

The Plan Administrator may, at any time, modify, amend or terminate this Plan or
modify or amend Options granted under this Plan, including, without limitation,
such modifications or amendments as are necessary to maintain compliance with
the Applicable Laws. The Plan Administrator may condition the effectiveness of
any such amendment on the receipt of shareholder approval at such time and in
such manner as the Plan Administrator may consider necessary for the Corporation
to comply with or to avail the Corporation and/or the Optionees of the benefits
of any securities, tax, market listing or other administrative or regulatory
requirements.

Effective Date: September 26, 2006