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Exhibit 10.3
 
EXECUTIVE EMPLOYMENT AGREEMENT
 
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is entered as of May 8th,
2013 (“Effective Date”) by and between MagicJack VocalTec Ltd. (the “Company”)
and Jose Gordo (the “Executive” and, together with the Company, the “Parties”).
 
WHEREAS, the Company desires for the Executive to be employed as Chief Financial
Officer (“CFO”) of the Company as of May 10th, 2013, and Executive desires to
accept employment, subject to and on the terms and conditions set forth in this
Agreement; and
 
WHEREAS, both the Company and the Executive have read and understood the terms
and provisions set forth in this Agreement and have been afforded a reasonable
opportunity to review this Agreement with their respective legal counsel; and
 
WHEREAS, the terms of this Agreement have been reviewed and approved by the
members of the Compensation Committee of the Board of Directors of the Company
(the “Board”), approved by the Board, and determined by the Compensation
Committee and the Board to be consistent with the principles of Amendment 20 to
the Israeli Companies Law.
 
NOW THEREFORE, in consideration of the mutual covenants and agreements contained
herein, and for other valuable consideration the receipt and adequacy of which
is hereby acknowledged, the Parties hereby agree as follows:
 
1.
POSITION AND DUTIES.  The Company hereby agrees to employ the Executive in the
positions and titles of CFO of the Company effective as of May 10th, 2013, and
the Executive hereby agrees to be employed in such capacity. The Executive will
perform all duties and responsibilities inherent in the positions of CFO. The
Executive shall report directly to the Company’s Chief Executive Officer. He
shall have all authority and responsibility commensurate with the CFO title.

 
2.
TERM OF AGREEMENT AND EMPLOYMENT.  The term of the Executive’s employment under
this Agreement will begin on the date hereof and terminate on December 31, 2015.

 
3.
DEFINITIONS.

 
 
A.
CAUSE.  For purposes of this Agreement, “Cause” for the termination of the
Executive’s employment hereunder shall be deemed to exist if, in the reasonable
judgment of the Company’s Board: (i) the Executive commits fraud, theft or
embezzlement against the Company or any subsidiary or affiliate thereof; (ii)
the Executive commits a felony or a crime involving moral turpitude; (iii) the
Executive breaches any non-competition, confidentiality or non-solicitation
agreement with the Company or any subsidiary or affiliate thereof; (iv) the
Executive’s material breach of the Company’s Insider Trading Policy, FD/Media
Policy or Investment Policy, (v) the Executive breaches any of the terms of this
Agreement and fails to cure such breach within thirty (30) days after the
receipt of written notice of such breach from the Company; or (vi) the Executive
engages in gross negligence or willful misconduct that causes harm to the
business and operations of the Company or a subsidiary or affiliate thereof.

 
 
 

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B.
GOOD REASON.  Termination by the Executive of his employment for “Good Reason”
shall mean a termination by the Executive of his employment upon the occurrence
of one of the following events or conditions without the consent of the
Executive:

 
(i)             A material reduction in the authority, duties or
responsibilities of the Executive;
 
(ii)            Any material reduction in the Executive’s Annual Base Salary or
Target Annual Bonus (as defined below); or
 
(iii)           Any material breach of this Agreement by the Company.
 
Notwithstanding the foregoing, the Executive shall not be deemed to have
terminated his employment for Good Reason unless: (i) the Executive terminates
his employment no later than ninety (90) days following his initial discovery of
the above referenced event or condition which is the basis for such termination;
and (ii) the Executive provides to the Company a written notice of the existence
of the above referenced event or condition which is the basis for the
termination within forty-five (45) days following his initial discovery of such
event or condition, and the Company fails to remedy such event or condition
within thirty (30) days following the receipt of such notice.
 
 
C.
CHANGE OF CONTROL.  For purposes of this Agreement, a “Change of Control” of the
Company shall be deemed to occur if (i) a Person acquires ownership of stock
that, together with stock held by such Person, constitutes more than fifty
percent (50%) of the total fair market value or total voting power of the stock
of the Company; (ii) a majority of the members of the Board are replaced during
any twelve (12) month period by directors whose appointment or election is not
endorsed by a majority of the members of such Board before the date of such
appointment or election; or (iii) a Person (other than a Person controlled,
directly or indirectly, by shareholders of the Company) acquires fifty percent
(50%) or more of the gross fair market value of the assets of the Company over a
twelve (12) week period.

 
For purposes of the above, the terms “Person” shall have the meaning ascribed to
such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and
14(d) thereof, and shall include a “group” as defined in Section 13(d)
thereof.  It is intended that the definition of Change of Control complies with
Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and
all questions or determinations in connection with any such Change of Control
shall be construed and interpreted in accordance with the provisions of such
Regulations.  Notwithstanding the above, a Change of Control shall occur only if
it constitutes a “change of control” within the meaning of Section 409A of the
Code and the regulations promulgated thereunder.
 
 
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4.
COMPENSATION.

 
 
A.
ANNUAL BASE SALARY.  Executive shall be paid an annual base salary of $325,000,
subject to review each calendar year and possible increase in the sole
discretion of the Board, payable in equal twice monthly installments (the
“Annual Base Salary”).

 
 
B.
ANNUAL BONUS.  For each fiscal year of employment during which the Company
employs the Executive, Executive shall be eligible to receive a bonus (the
“Annual Bonus”) based on the Company meeting certain performance
criteria.  Executive’s target annual bonus will be $150,000, subject to review
each calendar year and possible increase in the sole discretion of the Board
(the “Target Annual Bonus”).  The Annual Bonus will range from thirty-five
percent (35%) to two hundred percent (200%) of the Target Annual Bonus.  The
Annual Bonus formula and performance criteria for each fiscal year will be
based: (i) fifty percent (50%) on the Company meeting at least eighty percent
(80%) and up to one hundred and twenty percent (120%) of its target revenue for
the fiscal year; and (ii) fifty percent (50%) on the Company meeting at least
eighty percent (80%) and up to one hundred and twenty percent (120%) of its
target EBITDA for the fiscal year.  A table showing the Target Annual Bonus
payable at various increments is attached hereto as Attachment A.  The Company’s
target revenue and target EBITDA shall be set by the Compensation Committee and
communicated to Executive no later than ninety (90) days after the start of each
fiscal year.  For purposes of this Agreement, “EBITDA” shall mean earnings
before interest, taxes, depreciation and amortization calculated in accordance
with generally accepted accounting principles consistent with the application of
such concepts in developing the Company’s annual budget, subject to adjustments
for one-time occurrences outside the ordinary course of business as deemed
appropriate by the Company’s Compensation Committee.

 
Executive’s Annual Bonus for calendar year 2013 shall be calculated and paid as
though Executive commenced employment as of January 1st, 2013, and each Annual
Bonus thereafter shall be paid on the basis of the Company’s fiscal year, which
is the calendar year.
 
The Annual Bonus payable to Executive shall be paid no later than 2-1/2 months
following the end of the calendar year with respect to which the Annual Bonus
was earned.
 
Except as otherwise provided in Section 7, below, Executive shall only be
entitled to receive an Annual Bonus if Executive is employed by the Company
pursuant to this Agreement at the close of business on the last day of the
applicable fiscal year with respect to the Annual Bonus.
 
 
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If the Company’s financial statements are restated for a period for which an
Annual Bonus has been paid under the terms of this Agreement, the Annual Bonus
amount for such period will be re-calculated by the Company (the “Recalculated
Bonus Amount”).  In any such event, the difference between the Annual Bonus in
question and the Recalculated Bonus Amount shall be paid to or refunded by the
Executive, as applicable, not later than sixty (60) days after the restatement,
provided that no such adjustments will be made at any time after the 2nd
anniversary of the Annual Bonus payment in question.
 
 
C.
SIGNING BONUS.  Executive shall receive a signing bonus in the amount of
$325,000 within three (3) days after full execution of this Agreement.

 
5.
EXECUTIVE BENEFITS AND REIMBURSEMENTS.  Executive will be entitled to twenty
(20) paid-time-off (PTO) days of vacation per fiscal year. The Executive will be
eligible to participate in, without action by the Board or any committee
thereof, any benefits and perquisites available to executive officers of the
Company, including any group health, dental, life insurance, disability, or
other form of executive benefit plan or program of the Company now existing or
that may be later adopted by the Company (collectively, the “Executive
Benefits”). The Company shall reimburse Executive for all ordinary and necessary
business expenditures made by Executive in connection with, or in furtherance
of, his employment upon presentation by Executive of expense statements,
receipts, vouchers or such other supporting information as may from time to time
be reasonably requested by the Board.

 
6.
EQUITY GRANT. Executive shall be granted stock options to purchase 256,151
shares of the Company’s ordinary shares at an exercise price equal to the fair
market value of the Company’s ordinary shares on the date of grant, which will
be the date of this Agreement (the “Options”).   In addition, Executive shall be
granted 27,634 shares of restricted ordinary shares (the “Restricted Stock”)
effective as of the date of this Agreement upon approval of the magicJack
Vocaltec 2013 Long-Term Incentive Plan by the Company’s stockholders. The
Options and Restricted Stock will vest as set forth in the Option Agreement and
Restricted Stock Agreement granting the Options and the Restricted Stock.

 
7.
TERMINATION.  Either the Executive or the Company may terminate the Executive’s
employment under this Agreement for any reason upon not less than thirty (30)
days prior written notice.

 
 
A.
TERMINATION OF EMPLOYMENT BY THE EXECUTIVE FOR GOOD REASON OR BY THE COMPANY
WITHOUT CAUSE.  Upon the termination of the Executive’s employment prior to a
Change of Control under this Agreement by the Executive for Good Reason or by
the Company without Cause, the Executive shall be entitled to be paid a
termination payment (the “Termination Payment”) equal to one (1) times the sum
of (a) Executive’s Annual Base Salary at the time of such termination and (b)
the Executive’s Target Annual Bonus for the fiscal year in which his employment
is terminated (as if the applicable performance criteria have been met at the
level that would result in payment of the Target Annual Bonus at the 100% level
irrespective of whether or not that is the case). The Termination Payment shall
be paid in lump sum within fifteen (15) days after the Company’s receipt of a
general release that has become irrevocable as specified in Section 7(F)
following any termination pursuant to this Section 7(A).

 
 
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B.
TERMINATION OF EMPLOYMENT BY RESIGNATION OF EXECUTIVE WITHOUT GOOD REASON, BY
THE COMPANY WITH CAUSE, DEATH OR DISABILITY.  Upon the termination of the
Executive’s employment by the resignation of  Executive without Good Reason, by
the Company with Cause, death, disability or for any other reason other than a
reason described in Sections 7(A) or 7(C), the Executive shall be due no further
compensation other than what is due and owing through the effective date of such
Executive’s resignation or termination (including any Annual Bonus that may be
due and payable to the Executive), which amounts shall be paid to the Executive
within fifteen (15) days after the Company’s receipt of a general release that
has become  irrevocable as specified in Section 7(F) following any
termination  pursuant to this Section 7(B).

 
 
C.
TERMINATION OF EMPLOYMENT BY THE EXECUTIVE FOR GOOD REASON OR BY THE COMPANY
WITHOUT CAUSE FOLLOWING A CHANGE OF CONTROL.  If upon or within 6 months
subsequent to a Change of Control, the Executive’s employment under this
Agreement is terminated by the Executive for Good Reason or by the Company
without Cause (“Change of Control Termination”), the Executive shall be entitled
to and paid a termination payment (the “Change of Control Termination Payment”)
equal to three (3) times the sum of (a) Executive’s Annual Base Salary at the
time of such termination and (b) the Executive’s Target Annual Bonus for the
fiscal year in which his employment is terminated (as if the applicable
performance criteria have been met at the level that would result in payment of
the Target Annual Bonus at the 100% level irrespective of whether or not that is
the case). The Change of Control Termination Payment shall be made within five
(5) days after a Change of Control Termination.

 
 
D.
TERMINATION OF EMPLOYMENT BY THE EXECUTIVE FOR GOOD REASON OR BY THE COMPANY
WITHOUT CAUSE WITHIN 180 DAYS PRIOR TO  A CHANGE OF CONTROL.  If the Executive’s
employment under this Agreement is terminated by the Executive for Good Reason
or by the Company without Cause 180 days prior to the Company's execution of an
agreement which, if consummated, would constitute a Change of Control, then upon
consummation of such Change of Control, Executive shall receive an additional
payment equal to the difference between (i) the Change of Control Termination
Payment described in Section 7(C) and (ii) any Termination Payment previously
provided to Executive under Section 7(A).  Any additional payment pursuant to
this Section 7(D) shall be made within five (5) days after a Change of Control.

 
 
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E.
PAYMENT REDUCTION UNDER SECTION 280G. Notwithstanding any other provision of
this Agreement, in the event that the Change of Control Termination Payment or
any payment or benefit received or to be received by Executive (whether pursuant
to the terms of this Agreement or any other plan, arrangement or agreement)
(collectively, the "Total Benefits") would be subject to the excise tax imposed
under Section 4999 of the Code (the “Excise Tax”), the Total Benefits shall be
reduced to the extent necessary so that no portion of the Total Benefits is
subject to the Excise Tax; provided, however, that no such reduction in the
Total Benefits shall be made if by not making such reduction, Executive’s
Retained Amount (as hereinafter defined) would be greater than Executive’s
Retained Amount if the Total Benefits are not so reduced.  In the event any such
reduction is required, the Total Benefits shall be reduced in the following
order: (i) the Change of Control Termination Payment, the Termination Payment,
and the payment provided for by Section 7.D (pro rata to the extent more than
one is payable), (ii) any other portion of the Total Benefits that are not
subject to Section 409A of the Code (other than Total Benefits resulting from
any accelerated vesting of equity-based awards), (iv) Total Benefits that are
subject to Section 409A of the Code in reverse order of payment, and (v) Total
Benefits that are not subject to Section 409A and arise from any accelerated
vesting of any equity-based awards.  All determinations with respect to this
Section 7(D) and the assumptions to be utilized in arriving at such
determination shall be made by an independent public accounting firm with a
national reputation in the United States that is reasonably agreed to by the
Executive and the Company (the “Accounting Firm”) which shall provide detailed
support and calculations both to the Company and to Executive. The parties
hereto hereby elect to use the applicable Federal rate that is in effect on the
date this Agreement is entered into for purposes of determining the present
value of any payments provided for hereunder for purposes of Section 280G of the
Code.  “Retained Amount” shall mean the present value (as determined in
accordance with sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) of the
Total Benefits net of all federal, state and local taxes imposed on Executive
with respect thereto.

 
 
F.
GENERAL RELEASE OF CLAIMS.  Executive shall not be entitled to any Termination
Payment, Change of Control Termination Payment, or the payment provided for by
Section 7.D (each, a “Severance Payment”) unless (i) Executive has executed and
delivered to the Company a general release of claims (in such form as the
Executive and the Company shall reasonably agree) (the “Release”) and such
Release has become irrevocable under the Age Discrimination in Employment Act
(ADEA) and its terms not later than fifty-six (56) days after the date of
Executive’s termination of employment hereunder.  The Company shall deliver to
Executive a copy of the Release not later than three (3) days after the
Company’s termination of Executive’s employment without Cause or Executive’s
termination of Employment for Good Reason.

 
 
G.
NO OFFSET AND NO MITIGATION.  Executive shall not be required to mitigate any
damages resulting from a breach by the Company of this Agreement by seeking
other comparable employment. The amount of any payment or benefit provided for
in this Agreement shall not be reduced by any compensation or benefits earned by
or provided to Executive as a result of his employment by another employer.

 
 
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8.
RESTRICTIVE COVENANTS.

 
 
A.
GENERAL.  The Company and the Executive hereby acknowledge and agree that (i)
the Executive is in possession of trade secrets of the Company (the “Trade
Secrets”), (ii) the restrictive covenants contained in this Section 8 are
justified by legitimate business interests of the Company, including, but not
limited to, the protection of the Trade Secrets, and (iii) the restrictive
covenants contained in this Section 8 are reasonably necessary to protect such
legitimate business interests of the Company.

 
 
B.
NON-COMPETITION.  In consideration for the termination payments and benefits
that the Executive may receive in accordance with Section 7 of this Agreement,
the Executive agrees that during the period of the Executive’s employment with
the Company and until two (2) years after the termination of the Executive’s
employment with the Company, the Executive will not, directly or indirectly,
either (i) on the Executive’s own behalf or as a partner, officer, director,
trustee, executive, agent, consultant or member of any person, firm or
corporation, or otherwise, enter into the employ of, render any service to, or
engage in any business or activity which is the same as or competitive with any
business or activity conducted by the Company or any of its majority-owned
subsidiaries, or (ii) become an officer, employee or consultant of, or otherwise
assume a substantial role or relationship with, any governmental entity, agency
or political subdivision that is a client or customer of the Company or any
subsidiary or affiliate of the Company; provided, however, that the foregoing
shall not be deemed to prevent the Executive from investing in securities of any
company having a class of securities which is publicly traded, so long as
through such investment holdings in the aggregate, the Executive is not deemed
to be the beneficial owner of more than five percent (5%) of the class of
securities that is so publicly traded.  During the period of the Executive’s
employment and until three years after the termination of the Executive’s
employment, the Executive will not, without the Company’s prior written consent,
directly or indirectly, on the Executive’s own behalf or as a partner,
shareholder, officer, executive, director, trustee, agent, consultant or member
of any person, firm or corporation or otherwise, seek to employ or otherwise
seek the services of any employee or consultant of the Company or any of its
majority-owned subsidiaries.

 
 
C.
CONFIDENTIALITY.  During and following the period of the Executive’s employment
with the Company, the Executive will not use for the Executive’s own benefit or
for the benefit of others, or divulge to others, any information, Trade Secrets,
knowledge or data of a secret or confidential nature and otherwise not available
to members of the general public that concerns the business or affairs of the
Company or its subsidiaries or affiliates and which was acquired by the
Executive at any time prior to or during the term of the Executive’s employment
with the Company (collectively the “Data”), except with the specific prior
written consent of the Company.

 
 
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D.
WORK PRODUCT.  The Executive agrees that all programs, inventions, innovations,
improvements, developments, methods, designs, analyses, reports and all similar
or related information which relate to the business of the Company and its
subsidiaries or affiliates, actual or anticipated, or to any actual or
anticipated research and development conducted in connection with the business
of the Company and its subsidiaries or affiliates, and all existing or future
products or services, which are conceived, developed or made by the Executive
(alone or with others) during the term of this Agreement (“Work Product”) belong
to the Company.  The Executive will cooperate fully in the establishment and
maintenance of all rights of the Company and its subsidiaries or affiliates in
such Work Product. The provisions of this Section 8(D) will survive termination
of this Agreement indefinitely to the extent necessary to require actions to be
taken by the Executive after the termination of the Agreement with respect to
Work Product created during the term of this Agreement.

 
 
E.
ENFORCEMENT.  The Parties agree and acknowledge that the restrictions contained
in this Section 8 are reasonable in scope and duration and are necessary to
protect the Company or any of its subsidiaries or affiliates. If any covenant or
agreement contained in this Section 8 is found by a court having jurisdiction to
be unreasonable in duration, geographical scope or character of restriction, the
covenant or agreement will not be rendered unenforceable thereby but rather the
duration, geographical scope or character of restriction of such covenant or
agreement will be reduced or modified with retroactive effect to make such
covenant or agreement reasonable, and such covenant or agreement will be
enforced as so modified.  The Executive agrees and acknowledges that the breach
of this Section 8 will cause irreparable injury to the Company or any of its
subsidiaries or affiliates and upon the breach of any provision of this Section
8, the Company or any of its subsidiaries or affiliates shall be entitled to
injunctive relief, specific performance or other equitable relief, without being
required to post a bond; PROVIDED, HOWEVER, that, this shall in no way limit any
other remedies which the Company or any of its subsidiaries or affiliates may
have (including, without limitation, the right to seek monetary damages).  In
the event of any conflict between the provisions of this Section 8 and Section 7
of the Agreement, the provisions of this Section 8 shall prevail.

 
9.
REPRESENTATIONS.  The Executive hereby represents and warrants to the Company
that (i) the execution, delivery and full performance of this Agreement by the
Executive does not and will not conflict with, breach, violate or cause a
default under any agreement, contract or instrument to which the Executive is a
party or any judgment, order or decree to which the Executive is subject; and
(ii) upon the execution and delivery of this Agreement by the Executive and the
Company, this Agreement will be the Executive’s valid and binding obligation,
enforceable in accordance with its terms.

 
 
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10.
INTENTIONALLY OMITTED.

 
11.
ASSIGNMENT.  The Executive may not assign, transfer, convey, mortgage,
hypothecate, pledge or in any way encumber the compensation or other benefits
payable to the Executive or any rights which the Executive may have under this
Agreement. Neither the Executive nor the Executive’s beneficiary or
beneficiaries will have any right to receive any compensation or other benefits
under this Agreement, except at the time, in the amounts and in the manner
provided in this Agreement. This Agreement will inure to the benefit of and will
be binding upon any successor to the Company, and any successor to the Company
shall be authorized to enforce the terms and conditions of this Agreement,
including the terms and conditions of the restrictive covenants contained in
Section 8 hereof. As used in this Agreement, the term “successor” means any
person, firm, corporation or other business entity which at any time, whether by
merger, purchase or otherwise, acquires all or substantially all of the capital
stock or assets of the Company. This Agreement may not otherwise be assigned by
the Company.

 
12.
GOVERNING LAW.  This Agreement shall be governed by the laws of the State of
Florida without regard to the application of conflicts of laws.

 
13.
ENTIRE AGREEMENT.  This Agreement constitutes the only agreements between
Company and the Executive regarding the Executive’s employment by the Company.
This Agreement supersedes any and all other agreements and understandings,
written or oral, between the Company and the Executive regarding the subject
matter hereof and thereof. A waiver by either party of any provision of this
Agreement or any breach of such provision in an instance will not be deemed or
construed to be a waiver of such provision for the future, or of any subsequent
breach of such provision. This Agreement may be amended, modified or changed
only by further written agreement between the Company and the Executive, duly
executed by both Parties.

 
14.
SEVERABILITY; SURVIVAL.  In the event that any provision of this Agreement is
found to be void and unenforceable by a court of competent jurisdiction, then
such unenforceable provision shall be deemed modified so as to be enforceable
(or if not subject to modification then eliminated herefrom) to the extent
necessary to permit the remaining provisions to be enforced in accordance with
the Parties’ intention. The provisions of Section 8 (and the restrictive
covenants contained therein) shall survive the termination for any reason of
this Agreement and/or the Executive’s relationship with the Company.

 
15.
NOTICES.  Any and all notices required or permitted to be given hereunder will
be in writing and will be deemed to have been given when deposited in United
States mail, certified or registered mail, postage prepaid. Any notice to be
given by the Executive hereunder will be addressed to the Company to the
attention of Chairman of the Board of Directors at 5701 Georgia Avenue, West
Palm Beach, Florida 33405. Any notice to be given to the Executive will be
addressed to the Executive at the Executive’s residence address last provided by
the Executive to the Company. Either party may change the address to which
notices are to be addressed by notice in writing to the other party given in
accordance with the terms of this Section.

 
 
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16.
HEADINGS.  Section headings are for convenience of reference only and shall not
limit or otherwise affect the meaning or interpretation of this Agreement or any
of its terms and conditions.

 
17.
SECTION 409A COMPLIANCE.

 
 
A.
GENERAL.  It is the intention of both the Company and the Executive that the
benefits and rights to which the Executive is entitled pursuant to this
Agreement comply with Code Section 409A or exceptions thereto and the provisions
of this Agreement shall be construed in a manner consistent with that intention.
If the Executive or the Company believes, at any time, that any such benefit or
right that is subject to Code Section 409A does not so comply, it shall promptly
advise the other and shall negotiate reasonably and in good faith to amend the
terms of such benefits and rights such that they comply with Code Section 409A
(with the most limited possible economic effect on the Executive and on the
Company).

 
 
B.
DISTRIBUTIONS ON ACCOUNT OF SEPARATION FROM SERVICE.  To the extent required to
comply with Code Section 409A, any payment or benefit required to be paid under
this Agreement on account of termination of the Executive’s service (or any
other similar term) shall be made only in connection with a “separation from
service” with respect to the Executive within the meaning of Code Section 409A.

 
 
C.
NO ACCELERATION OF PAYMENTS.  Neither the Company nor the Executive,
individually or in combination, may accelerate any payment or benefit that is
subject to Code Section 409A, except in compliance with Code Section 409A and
the provisions of this Agreement, and no amount that is subject to Code Section
409A shall be paid prior to the earliest date on which it may be paid without
violating Code Section 409A.

 
 
D.
SIX MONTH DELAY FOR SPECIFIED EMPLOYEES. In the event that the Executive is a
“specified employee” (as described in Code Section 409A), and any payment or
benefit payable pursuant to this Agreement constitutes deferred compensation
under Code Section 409A, then, to the extent required to comply with Section
409A of the Code, no such payment or benefit shall be made before the date that
is six months after the Executive’s “separation from service” (as described in
Code Section 409A) (or, if earlier, the date of the Executive’s death). Any
payment or benefit delayed by reason of the prior sentence shall be paid out or
provided in a single lump sum at the end of such required delay period in order
to catch up to the original payment schedule.

 
 
E.
TREATMENT OF EACH INSTALLMENT AS A SEPARATE PAYMENT.  For purposes of applying
the provisions of Code Section 409A to this Agreement, each separately
identified amount to which the Executive is entitled under this Agreement shall
be treated as a separate payment. In addition, to the extent permissible under
Code Section 409A, any series of installment payments under this Agreement shall
be treated as a right to a series of separate payments.

 
 
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F.
REIMBURSEMENTS AND IN-KIND BENEFITS.  With respect to reimbursements and in-kind
benefits that may be provided under the Agreement (the “Reimbursement Plans”),
to the extent any benefits provided under the Reimbursement Plans are subject to
Section 409A, the Reimbursement Plans shall meet the following requirements:

 
(i)            Reimbursement Plans shall use an objectively determinable,
nondiscretionary definition of the expenses eligible for reimbursement or of the
in-kind benefits to be provided;
 
(ii)           Reimbursement Plans shall provide that the amount of expenses
eligible for reimbursement, or in-kind benefits provided, during the Executive’s
taxable year may not affect the expenses eligible for reimbursement, or in-kind
benefits to be provided, in any other taxable year, provided, however, that
Reimbursement Plans providing for reimbursement of expenses referred to in Code
Section 105(b) shall not fail to meet the requirement of this Section 17(F)(ii)
solely because such Reimbursement Plans provide for a limit on the amount of
expenses that may be reimbursed under such arrangements over some or all of the
period in which Reimbursement Plans remain in effect;
 
(iii)          The reimbursement of an eligible expense is made on or before the
last day of Executive’s taxable year following the taxable year in which the
expense was incurred; and
 
(iv)          The right to reimbursement or in-kind benefits under the
Reimbursement Plans shall not be subject to liquidation or exchange for another
benefit.
 
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
 
 
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IN WITNESS WHEREOF, the Parties hereto have executed and delivered this
Agreement under seal as of the date first above written.
 
MAGICJACK VOCALTEC LTD.
 
Signature:      /s/ Gerald T. Vento
 
Name:             Gerald T. Vento
 
Title:               President and Chief Executive Officer
 
EXECUTIVE
 
Signature:       /s/ Jose Gordo
 
Name:              Jose Gordo
 
 
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ATTACHMENT A
 
% of Revenue Target
 Annual Target Bonus*
% of EBITDA Target
 Annual Target Bonus*
       
<80%
 $                                              -
<80%
 $                                              -
80%
 $                               26,250.00
80%
 $                               26,250.00
81%
 $                               28,687.50
81%
 $                               28,687.50
82%
 $                               31,125.00
82%
 $                               31,125.00
83%
 $                               33,562.50
83%
 $                               33,562.50
84%
 $                               36,000.00
84%
 $                               36,000.00
85%
 $                               38,437.50
85%
 $                               38,437.50
86%
 $                               40,875.00
86%
 $                               40,875.00
87%
 $                               43,312.50
87%
 $                               43,312.50
88%
 $                               45,750.00
88%
 $                               45,750.00
89%
 $                               48,187.50
89%
 $                               48,187.50
90%
 $                               50,625.00
90%
 $                               50,625.00
91%
 $                               53,062.50
91%
 $                               53,062.50
92%
 $                               55,500.00
92%
 $                               55,500.00
93%
 $                               57,937.50
93%
 $                               57,937.50
94%
 $                               60,375.00
94%
 $                               60,375.00
95%
 $                               62,812.50
95%
 $                               62,812.50
96%
 $                               65,250.00
96%
 $                               65,250.00
97%
 $                               67,687.50
97%
 $                               67,687.50
98%
 $                               70,125.00
98%
 $                               70,125.00
99%
 $                               72,562.50
99%
 $                               72,562.50
100%
 $                               75,000.00
100%
 $                               75,000.00
101%
 $                               78,750.00
101%
 $                               78,750.00
102%
 $                               82,500.00
102%
 $                               82,500.00
103%
 $                               86,250.00
103%
 $                               86,250.00
104%
 $                               90,000.00
104%
 $                               90,000.00
105%
 $                               93,750.00
105%
 $                               93,750.00
106%
 $                               97,500.00
106%
 $                               97,500.00
107%
 $                             101,250.00
107%
 $                             101,250.00
108%
 $                             105,000.00
108%
 $                             105,000.00
109%
 $                             108,750.00
109%
 $                             108,750.00
110%
 $                             112,500.00
110%
 $                             112,500.00
111%
 $                             116,250.00
111%
 $                             116,250.00
112%
 $                             120,000.00
112%
 $                             120,000.00
113%
 $                             123,750.00
113%
 $                             123,750.00
114%
 $                             127,500.00
114%
 $                             127,500.00
115%
 $                             131,250.00
115%
 $                             131,250.00
116%
 $                             135,000.00
116%
 $                             135,000.00
117%
 $                             138,750.00
117%
 $                             138,750.00
118%
 $                             142,500.00
118%
 $                             142,500.00
119%
 $                             146,250.00
119%
 $                             146,250.00
120%
 $                             150,000.00
120%
 $                             150,000.00
>120%
 $                             150,000.00
>120%
 $                             150,000.00
*Based on Target Bonus of $150,000
   

 
13

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