ex10-1.htm


    Exhibit
10.1

     

    DELTATHREE,
INC.

    


    AMENDED
AND RESTATED 2004 STOCK INCENTIVE PLAN

     (as
amended and restated November 27, 2008)

    


    


    This
plan, as amended from time to time, shall be known as the deltathree, Inc.
Amended and Restated 2004 Stock Incentive Plan (the "Plan"). This Plan replaces the
previous 1999 Stock Incentive Plan (the “1999 Plan”).

    


    
      	
              1.  

            	
              Purpose

            


    

    


    The
purpose of the Plan is to foster and promote the long-term financial success of
the Company and its Subsidiaries and materially increase shareholder value
by:

    


    
      	
               
      

            	
              (a)

            	
              motivating
      superior performance by means of performance-related
      incentives;

            


    

    


    
      	
               
      

            	
              (b)

            	
              encouraging
      and providing for the acquisition of an ownership interest in the Company
      by Eligible Employees; and

            


    

    


    
      	
               
      

            	
              (c)

            	
              enabling
      the Company to attract and retain the services of outstanding management
      team and other qualified and dedicated employees upon whose judgment,
      interest and special effort the successful conduct of its operations is
      largely dependent.

            


    

    


    
      	
              2.  

            	
              Definitions

            


    

    


    For
purposes of interpreting the Plan and related documents (including the Award
Agreement and its appendices), the following definitions shall
apply:

    


    
      	
              (a)  

            	
              "Administrator" - means the Board or
      the Compensation Committee as shall be administering the Plan, in
      accordance with Section 3 hereof.

            


    

     

    
      	
              (b)  

            	
              "Affiliate" - means a corporation
      which is a Parent or Subsidiary of the Company, direct or
      indirect.

            


    

     

    
      	
              (c)  

            	
              "Applicable
      Laws" -
      means the requirements relating to the administration of employee stock
      option plans under the law of the United States of America, any stock
      exchange or quotation system on which the shares shall be listed or quoted
      and the applicable laws of any country or jurisdiction where Awards are
      granted under the Plan.

            


    

     

    
      	
              (d)  

            	
              "Award" - shall mean any grant
      or award under the Plan, as evidenced in a written document delivered to a
      Participant as provided in Section
13(b).

            


    

     

    
      	
              (e)  

            	
              "Board" - means the Board of
      Directors of the Company.

            


    

     

    
      	
              (f)  

            	
              "Cause" - shall mean (i) the
      willful failure by the Participant to perform substantially the
      Participant's duties (other than due to physical or mental illness) after
      reasonable notice to the Participant of such failure, (ii) the
      Participant's engaging in serious misconduct that is injurious to the
      Company or any Subsidiary, (iii) the Participant's having been convicted
      of, or entered a plea of nolo contendere to, a crime that constitutes a
      felony, or (iv) the breach by the Participant of any written covenant or
      agreement not to compete, in each case with respect to the Company or any
      Subsidiary, regarding confidentiality of information of the Company or any
      Subsidiary or nonsolicitation or hiring of employees of the Company or any
      Subsidiary.

            


    

     

    
      	
              (g)  

            	
              "Code" - means the United
      States Internal Revenue Code of 1986, as amended from time to time, and
      the rules and regulations
thereunder.

            


    

     

    
      	
              (h)  

            	
              "Committee" - shall mean the
      Compensation Committee of the Board, or such other Board committee as may
      be designated by the Board to administer the
  Plan.

            


    

     

    
      	
              (i)  

            	
              "Company" - shall mean
      deltathree, Inc., a Delaware corporation, and any successor
      thereto.

            


    

     

    
      	
              (j)  

            	
              "Common
      Stock"  - shall
      mean the Class A common stock, par value $0.001 per share, of the Company,
      as may be adjusted pursuant to Section 4(c)
  hereof.

            


    

     

    
      	
              (k)  

            	
              "Deferred
      Annual Amount" - shall mean, with
      respect to any year, the amount of compensation that a Participant elects
      to defer in exchange for an award of Elective Units as determined pursuant
      to Section 9 hereof.

            


    

     

    
      	
              (l)  

            	
              "Consultant" - means any person who
      is engaged by the Company to render consulting or advisory services to any
      of the Company entities.

            


    

     

    
      	
              (m)  

            	
              "Disability" - " shall mean
      long-term disability as defined under the terms of the Company's
      applicable long-term disability plans or
  policies.

            


    

     

    
      	
              (n)  

            	
              "Date
      of Grant" -
      shall have the meaning set forth in Section 14
    below.

            


    

     

    
      	
              (o)  

            	
              "Director" - means a member of
      the Board.

            


    

     

    
      	
              (p)  

            	
              "Disinterested
      Director"  - shall
      mean a director of the Company who is both a "Non-Employee Director"
      within the meaning of Rule 16b-3 under the Exchange Act and an "outside
      director" within the meaning of Section 162(m) of the
  Code.

            


    

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    
      	
              (q)  

            	
              "Dividend
      Equivalent"
      shall mean a right granted to a Participant to receive cash or Common
      Stock equal in value to dividends paid with respect to Common
      Stock.

            


    

     

    
      	
              (r)  

            	
              "Early
      Retirement"  - shall
      mean retirement at or after the earliest age at which the Participant may
      retire and receive an immediate, but actuarially reduced, retirement
      benefit under any defined benefit pension plan maintained by the Company
      or any of its Subsidiaries in which such Participant participates, or, in
      the absence of any such applicable plan, as determined by the
      Committee.

            


    

     

    
      	
              (s)  

            	
              "Effective
      Date" -
      shall mean the date on which the Plan is approved by the shareholders of
      the Company.

            


    

     

    
      	
              (t)  

            	
              "Elective
      Units" -
      shall mean a contractual right to receive a share of Common Stock at the
      time and subject to the conditions set forth in Section 9 hereof, in
      respect of a Participant's Deferred Annual
  Amount.

            


    

     

    
      	
              (u)  

            	
              "Eligible
      Employee" -
      shall mean each Executive Officer and each other employee or consultant of
      the Company or its Subsidiaries, but shall not include Directors who are
      not employees of any such entity.

            


    

     

    
      	
              (v)  

            	
              "Employment" - shall mean, for
      purposes of Sections 5(g), 7(b) and 8(b), continuous and regular salaried
      employment with the Company or a Subsidiary, which shall include (unless
      the Committee shall otherwise determine) any period of vacation, any
      approved leave of absence or any salary continuation or severance pay
      period and, at the discretion of the Committee, may include service with
      any former Subsidiary of the
Company

            


    

     

    
      	
              (w)  

            	
              "Exchange
      Act" -
      means the Securities Exchange Act of 1934, as now in effect or
      as  hereafter amended.

            


    

     

    
      	
              (x)  

            	
              "Exercise
      Price" - means the price for each Share of Common Stock subject to
      an Option.

            


    

     

    
      	
              (y)  

            	
              "Executive
      Officer" -
      shall mean those persons who are officers of the Company within the
      meaning of Rule16a-1(f) of the Exchange
Act.

            


    

     

    
      	
              (z)  

            	
                  "Fair
      Market Value" of a Share of Common Stock
  means:

            


    

    


    
      	
              (1)

            	
              If
      the Common Stock is listed on a national securities exchange or traded in
      the over-the-counter market and sales prices are regularly reported for
      the Common Stock, the closing or last price of the Common Stock on the
      Composite Tape or other comparable reporting system for the trading day
      immediately preceding the applicable
date;

            


    

    


    
      	
              (2)

            	
              If
      the Common Stock is not traded on a national securities exchange but is
      traded on the over-the-counter market, if sales prices are not regularly
      reported for the Common Stock for the trading day referred to in
      clause (1), and if bid and asked prices for the Common Stock are
      regularly reported, the mean between the bid and the asked price for the
      Common Stock at the close of trading in the over-the-counter market for
      the trading day on which Common Stock was traded immediately preceding the
      applicable date; and

            


    

    


    
      	
              (3)

            	
              If
      the Common Stock is neither listed on a national securities exchange nor
      traded in the over-the-counter market, such value as the Administrator, in
      good faith, shall determine.

            


    

     

    
      	
              (aa)  

            	
              "Incentive
      Stock" -
      shall mean any Award of Common Stock granted under Section 8 which becomes
      vested and nonforfeitable upon the attainment, in whole or in part, of
      performance objectives determined by the
  Committee.

            


    

     

    
      	
              (bb)  

            	
              "Incentive
      Stock Option" or "ISO"
      - shall mean an Option which is intended to meet the requirements of
      Section 422 of the Code.

            


    

     

    
      	
              (cc)  

            	
              "Incentive
      Unit" -
      shall mean any Award of a contractual right granted under Section 8 to
      receive Common Stock (or, at the discretion of the Committee, cash based
      on the Fair Market Value of the Common Stock) which becomes vested and
      nonforfeitable upon the attainment, in whole or in part, of performance
      objectives determined by the
Committee

            


    

     

    
      	
              (dd)  

            	
              "Nonstatutory
      Stock Option" or "NSO" - shall mean an Option
      which is not intended to be an Incentive Stock
  Option.

            


    

     

    
      	
              (ee)  

            	
              "Normal
      Retirement"
      - shall mean retirement at or after the earliest age at which the
      Participant may retire and receive a retirement benefit without an
      actuarial reduction for early commencement of benefits under any defined
      benefit pension plan maintained by the Company or any of its Subsidiaries
      in which such Participant participates, or, in the absence of any such
      applicable plan, as determined by the
Committee

            


    

     

    
      	
              (ff)  

            	
              "102
      Award" –
      means an Award that the Board intends to be a “102 Award” which
      shall only be granted to employees of the Company who are not Ten Percent
      Shareholders, and shall be subject to and shall be construed consistently
      with the requirements of Section 102 of the Tax Ordinance. The Company
      shall have no liability to an Eligible Person, or to any other party, if
      an Option (or any part thereof) which is intended to be a 102 Option is
      not a 102 Option.

            


    

     

    Approved
102 Awards may either be classified as Capital Gain Awards (“CGA”) or Ordinary Income
Awards (“OIA”).

     

    Approved
102 Awards elected and designated by the Company to qualify under the capital
gain tax treatment in accordance with the provisions of Section 102(b)(2) of the
Tax Ordinance shall be referred to herein as CGA.

     

    Approved
102 Awards elected and designated by the Company to qualify under the ordinary
income tax treatment in accordance with the provisions of Section 102(b)(1) of
the Tax Ordinance shall be referred to herein as OIA.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    The
Company’s election of the type of Approved 102 Awards as CGA or OIA granted to
Employees (the “Election”), shall be
appropriately filed with the Israeli Tax Authorities before the Date of Grant of
any Approved 102 Option.

     

    Such
Election shall become effective beginning the first Date of Grant of an Approved
102 Award under the Plan and shall remain in effect until at least the end of
the year following the year during which the Company first granted Approved 102
Awards. The Election shall obligate the Company  to grant only the type of Approved 102
Award it has elected, and shall apply to all Approved 102 Awards granted during
the period indicated herein, all in accordance with the provisions of Section
102(g) of the Tax Ordinance. For the avoidance of doubt, such Election shall not
prevent the Company from granting Unapproved 102 Awards
simultaneously.

     

    All
Approved 102 Awards must be held in trust by a Trustee, as described in Section
11.

     

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

     

    With
regards to Approved 102 Awards, 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 Company and the Participants.

     

    
      	
              (gg)  

            	
              "3(i)
      Options" -
      means Options that do not contain such terms as will qualify under
      Section 102 of the Tax Ordinance.

            


    

     

    
      	
              (hh)  

            	
              "Option" - shall mean the right
      to purchase the number of shares of Common Stock specified by the
      Committee, at a price and for the term fixed by the Committee in
      accordance with the Plan and subject to any other limitations and
      restrictions as this Plan and the Committee shall
  impose.

            


    

    


    
      	
              (ii)  

            	
              "Option
      Agreement"
      - means a written or electronic agreement between the Company and an
      Participant evidencing the terms and conditions of an individual Option
      grant. The Option Agreement shall state, inter alia, the number
      of Shares covered thereby, the dates when it may be exercised (subject to
      Section 5), the Exercise Price per Share subject to the Option and such
      other terms as the Administrator in its discretion may prescribe. The
      Option Agreement is subject to the terms and conditions of the
      Plan.

            


    

     

    
      	
              (jj)  

            	
              "Participant" - shall mean an
      Eligible Employee who is selected by the Committee to receive an Award
      under the Plan.

            


    

     

    
      	
              (kk)  

            	
              "Parent" - means any
      corporation (other than the Company) in an unbroken chain of corporations
      ending with the Company if, at the time of granting an Option, each of the
      corporations (other than the Company), owns stock possessing fifty percent
      (50%) or more of total combined voting power of all classes of stock in
      one of the other corporations in such
chain.

            


    

     

    
      	
              (ll)  

            	
              "Reload
      Option" -
      shall have the meaning ascribed thereto in Section
  5(h).

            


    

     

    
      	
              (mm)  

            	
              "Retirement" - shall mean
      Participant's retirement pursuant to applicable law or in accordance with
      the terms of any tax-qualified retirement plan maintained by the Company
      or any of its Parents or Subsidiaries in which the Participant
      participates within the meaning of Section 22(e)(3) of the
      Code.

            


    

     

    
      	
              (nn)  

            	
              "Restricted
      Period"  - shall
      mean the period during which a grant of Incentive Stock, Restricted Stock,
      Incentive Units or Restricted Units is subject to
    forfeiture.

            


    

     

    
      	
              (oo)  

            	
              "Restricted
      Stock" -
      shall mean any Award of Common Stock granted under Section 7 which becomes
      vested and nonforfeitable, in whole or in part, upon the completion of
      such period of service as shall be determined by the
      Committee.

            


    

     

    
      	
              (pp)  

            	
              "Restricted
      Unit" -
      shall mean any Award of a contractual right granted under Section 7 to
      receive Common Stock (or, at the discretion of the Committee, cash based
      on the Fair Market Value of the Common Stock) which becomes vested and
      nonforfeitable, in whole or in part, upon the completion of such period of
      service as shall be determined by the
Committee.

            


    

     

    
      	
              (qq)  

            	
              "Section
      409A" -
      shall mean Section 409A of the Code and rules and regulations issued
      thereunder, and any successor statute
thereto.

            


    

     

    
      	
              (rr)  

            	
              "Service
      Provider" -
      means an Employee, advisor or Consultant of the Company, provided,
      however, that a consultant or advisor must be an individual who is
      providing or will be providing bona fide services to the Company, with
      such services (1) not being in connection with the offer or sale of
      securities in a capital-raising transaction, and (2) not directly or
      indirectly promoting or maintaining a market for securities of the
      Company.

            


    

     

    
      	
              (ss)  

            	
              "Share" - shall mean a share
      of Common Stock.

            


    

     

    
      	
              (tt)  

            	
              "Stock
      Appreciation Right" - shall mean a
      contractual right granted under Section 6 to receive cash, Common Stock or
      a combination thereof.

            


    

     

    
      	
              (uu)  

            	
              "Subsidiary" - shall mean any
      corporation of which the Company possesses directly or indirectly fifty
      percent (50%) or more of the total combined voting power of all classes of
      stock of such corporation and any other business organization, regardless
      of form, in which the Company possesses directly or indirectly fifty
      percent (50%) or more of the total combined equity interests in such
      organization.

            


    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    
      	
              (vv)  

            	
              "Supplemental
      Units" -
      shall mean an award made pursuant to Section 9 with respect to a number of
      shares of Common Stock in excess of the number of shares of Common Stock
      corresponding to the Participant's Elective
  Units.

            


    

     

    
      	
              (ww)  

            	
              "Tax
      Ordinance" -
      means the Israeli Income Tax Ordinance [New Version]-1961 and the
      rules and regulations promulgated thereunder as now in effect or as
      hereafter amended.

            


    

     

    
      	
              (xx)  

            	
              "Ten
      Percent Shareholder" -  means a
      person who owns shares possessing more than ten percent (10%) of the total
      combined voting power of all classes of shares of the Company or of any of
      its Affiliates immediately before such Option is
  granted.

            


    

     

    
      	
              (yy)  

            	
              "Trustee" - means any individual
      appointed by the Company to serve as a trustee and approved by the
      aplicable law.

            


    

     

    
      	
              3.  

            	
              Administration
      of the Plan

            


    

    


    The Plan
shall be administered by the Committee, which shall consist of at least two
Directors of the Company chosen by the Board each of whom is a Disinterested
Director. The Committee shall have the responsibility of construing and
interpreting the Plan and of establishing and amending such rules and
regulations as it deems necessary or desirable for the proper administration of
the Plan. Any decision or action taken or to be taken by the Committee, arising
out of or in connection with the construction, administration, interpretation
and effect of the Plan and of its rules and regulations, shall, to the maximum
extent permitted by applicable law, be within its absolute discretion (except as
otherwise specifically provided herein) and shall be conclusive and binding upon
all Participants and any person claiming under or through any Participant. No
member of the Board or the Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Award granted
hereunder.

    


    
      	
              4.  

            	
              Maximum
      Amount of Shares Available for
Awards

            


    

    


    
      	
               
      

            	
              (a)

            	
              Maximum Number of
      Shares. The aggregate number of Shares that may be issued under
      this Plan shall not exceed (a) 3,000,000 Shares, plus (b) 759,732 Shares
      (which represents 4,000,000 Shares reserved under the 1999 Plan less the
      amount of Shares represented by Awards previously granted under the 1999
      Plan and previously exercised and/or outstanding as of September 28,
      2004), plus (c) such additional Shares as are represented by Awards
      previously granted under the 1999 Plan which are cancelled or expire after
      the date of stockholder approval of this Plan without delivery of shares
      of stock by the Company, except as provided in this
      Sec­tion.  Shares subject to any Award granted hereunder, or
      under the 1999 Plan, which expire or are terminated or canceled prior to
      exercise will be available for future grants under the Plan.   Without
      limiting the generality of the foregoing, whenever shares are received by
      the Company in connection with the exercise of or payment for any Award
      granted under the Plan only the net number of shares actually issued shall
      be counted against the foregoing
limit.

            


    

     

    
      	
               
      

            	
              (b)

            	
              Shares Available for
      Issuance. Shares of Common Stock may be made available from the
      authorized but unissued shares of the Company or from Shares held in the
      Company's treasury and not reserved for some other purpose. In addition,
      if any Award (including awards made under the 1999 Plan) in respect of
      Shares is canceled or forfeited for any reason without delivery of shares
      of Common Stock, the shares subject to such Award shall thereafter again
      be available for award pursuant to the
Plan.

            


    

     

    
      	
                (c)  

            	
              Adjustments Upon Certain
      Events. In the event of any Share dividend or Share split,
      re-capitalization (including, without limitation, the payment of an
      extraordinary dividend), merger, consolidation, combination, spin-off,
      distribution of assets to shareholders, exchange of shares, or other
      similar corporate change, the aggregate number of Shares available for
      Awards under Section 4(a) or subject to outstanding Awards and the
      respective prices applicable to outstanding Awards shall be appropriately
      adjusted.

            


    

    


    
      	
                
      (d)  

            	
              No Adjustment If Value
      Received. Except as hereinbefore expressly provided, the issuance
      by the Company of shares of stock of any class or securities convertible
      into shares of stock of any class, for cash, property, labor or services,
      upon direct sale, upon the exercise of rights or warrants to subscribe
      therefore, or upon conversion of shares or other securities, and in any
      case whether or not for fair value, shall not affect, and no adjustment by
      reason thereof shall be made with respect to the number of Shares subject
      to Options to be awarded to an Eligible Employee pursuant to Section
      5.

            


    

     

    
      	
               
      (e)  

            	
              Neither
      this Plan nor any Agreement nor any offer of Shares or Awards to a
      Participant shall impose any obligation on the Company to continue to
      employ or engage the services of any Participant, and nothing in the Plan
      or in any Awards granted pursuant thereto shall give any Participant any
      right to continue in the employment or service of the Company or restrict
      the right of the Company to terminate such employment or services at any
      time.

            


    

    


    
      	
               
      (f)  

            	
              The
      grant of an Award to a Participant hereunder shall neither entitle such
      Participant to participate, nor disqualify him from participating, in any
      other grant of Awards pursuant to this Plan or any other share incentive
      or share option plan of the Company or any of its
    Affiliates.

            


    

    


    
      	
              5.  

            	
              Stock
      Options

            


    

    


    
      	
               
      

            	
              (a)

            	
              Grant. Subject to the
      provisions of the Plan, the Committee shall have the authority to grant
      Options to Eligible Employees and to determine (i) the number of shares to
      be covered by each Option, (ii) the exercise price therefor and (iii) the
      conditions and limitations applicable to the exercise of the Option.
      Notwithstanding the foregoing, in no event shall the Committee grant any
      Participant Options in any single calendar year with respect to more than
      500,000 shares of Common Stock authorized for issuance under the Plan, as
      such number may be adjusted pursuant to Section 4(c). The Committee shall
      have the authority to grant 102 Options, 3(i) Options, Incentive Stock
      Options or Nonstatutory Stock Options. In the case of Incentive Stock
      Options, the terms and conditions of such grants shall be subject to and
      comply with Section 422 of the Code and the regulations
      thereunder.

            


    

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (b)

            	
              All
      Service Providers of the Company shall be eligible to receive Options
      under the Plan; provided, however, that
      Options qualifying as ISOs shall be granted only to employees of the
      Company and options qualified under section 102 of the ordinance – capital
      gain track - shall be granted only to employees of the Company who are not
      Ten Percent shareholders of the
Company.

            


    

     

    
      	
               
      

            	
              (c)

            	
              Each
      Option granted pursuant to the Plan shall be evidenced by an Option
      Agreement, in such form as the Committee shall from time to time approve.
      Each Option Agreement shall state, among other matters, the number of
      Shares underlying the Option, the Exercise Price and the type of Option
      granted there under (whether a 102 Option, a 3(i) Option, an ISO or a NSO
      or any other applicable agreement).

            


    

     

    
      	
               
      

            	
              (d)

            	
              Option Price. The
      Committee shall establish the exercise price at the time each Option is
      granted. Notwithstanding the foregoing, (i) the exercise price at the time
      an Option is granted shall not be less than the Fair Market Value of the
      Common Stock at the date of grant and (ii) in the case of an Incentive
      Stock Option issued to a Participant who owns stock in the Company
      possessing more than 10% of the total combined voting power of all classes
      of stock of the Company, the exercise price at the time such Incentive
      Stock Option is granted to such individual shall equal at least 110% of
      the Fair Market Value of the Common Stock at the date of
      grant.

            


    

     

    
      	
               
      

            	
              (e)

            	
              Option Term. If not
      previously exercised each Option shall expire upon the tenth (10th)
      anniversary of the date of the grant thereof or, upon the earlier
      termination of the Participant's Employment (or, if applicable, on the day
      following the last day on which such Option is exercisable under Section
      5(g) below), provided that (i) the Committee may establish a shorter term
      for an Option at the time of the grant of such Option and (ii) in the case
      of an Incentive Stock Option issued to a Participant who owns stock in the
      Company possessing more than 10% of the total combined voting power of all
      classes of stock of the Company, such Incentive Stock Option shall expire
      on the fifth (5th) anniversary of the date of
  grant.

            


    

    


    
      	
               
      

            	
              (f)

            	
              Exercise. Each Option
      shall be exercised at such times and subject to such terms and conditions
      as the Committee may specify in the applicable Award or thereafter;
      provided, however, that if the Committee does not establish a different
      exercise schedule at or after the date of grant of an Option, such Option
      shall become exercisable on a cumulative basis in three equal annual
      installments commencing on the first anniversary of the date the Option is
      granted. The Committee may impose such conditions with respect to the
      exercise of Options as it shall deem appropriate, including without
      limitation, any conditions relating to the application of federal or state
      securities laws. No Shares shall be delivered pursuant to any exercise of
      an Option unless arrangements satisfactory to the Committee have been made
      to assure full payment of the option price therefor and of applicable
      taxes as provided in Section 13(a) below. Without limiting the generality
      of the foregoing, payment of the option price may be made in cash or its
      equivalent or, if and to the extent permitted by the Committee, by
      exchanging shares of Common Stock owned by the Participant for at least
      six (6) months (or such longer period as is required by applicable
      accounting standards to avoid a charge to earnings) and that are not the
      subject of any pledge or other security interest, or by a combination of
      the foregoing, provided that the combined value of all cash and cash
      equivalents and the Fair Market Value of any such Common Stock so tendered
      to the Company, valued as of the date of such tender, is at least equal to
      such option price

            


    

    


    
      	
               
      

            	
              (g)

            	
              Termination of
      Employment. Unless the Committee shall otherwise determine at or
      after grant, in the event of termination of Participant's employment with
      the Company other than for Cause, Disability or Death, or if applicable,
      the termination of services given by the Participant to the Group other
      than for Cause, Disability or Death, all Options granted to that
      Participant, which are vested and exercisable  at the time of
      such termination, may, unless earlier terminated in accordance with the
      provisions of the Plan or the Option Agreement, be exercised within three
      (3) months after the date of such termination. If, on the date of
      termination, the Shares subject to the Option have not vested in their
      entirety, any Shares covered by the unvested portion of the Option shall
      expire and be of no further force and effect and revert to the Plan. If
      the vested portion of the Option is not so exercised within the time
      specified herein, such vested portion of the Option shall expire and be of
      no further force and effect, and the Shares covered by such Option shall
      revert to the Plan.

            


    

    


    
      	
               
      

            	
              In
      the event of termination of Participant's employment with the Company, or
      if applicable, the termination of services given by the Participant to the
      Company by reason of death or total and permanent Disability (within the
      meaning of Section 22(e)(3) of the Code), or Retirement, the outstanding
      Options, which were vested on the date of termination, may be exercised by
      the Participant, the Participant's legal guardian, the Participant’s
      estate or a person who acquires the right to exercise the Option by
      bequest or inheritance, as the case may be, within twelve  (12)
      months after termination (but in no event later than the expiration of the
      term of such Option as set forth in the Option Agreement).  If,
      on the date of termination, there are Options which are not entirely vested, the Shares
      covered by the unvested portion of the Options shall revert
      to the Plan. If the Option is not so exercised within the time specified
      herein, the Option shall terminate, and the Shares covered by such Option
      shall revert to the Plan.

            


    

     

    If a
Participant's Employment is terminated for Cause (or, if after the Participant's
termination of Employment, the Committee determines that the Participant's
Employment could have been terminated for Cause had the Participant still been
employed or has otherwise engaged in conduct that is detrimental to the
interests of the Company, as determined by the Committee in its sole
discretion), all Options held by the Participant shall immediately terminate,
regardless of whether then exercisable.

    


    In the
event of a Participant's termination of Employment for any reason not described
in the preceding sentences, the Participant (or, in the event of the
Participant's death or Disability during the period during which an Option is
exercisable under this sentence, the Participant's beneficiary or legal
representative) may exercise any Option which was exercisable at the time of
such termination for 90 days (or such greater or lesser period as the Committee
shall specify at or after the grant of such Option) following the date of such
termination, but in no event after the date the Option otherwise
expires.

    


    
      	
               
      

            	
              (h)

            	
              Reload Options. The
      Committee may provide that a Participant (or, if applicable, his permitted
      transferee) who delivers shares of Common Stock that have been owned by
      such Participant (or permitted transferee) for any minimum period of time
      specified by the Committee to exercise an Option (when the fair market
      value of Common Stock exceeds the exercise price of such Option) will
      automatically be granted new Options ("Reload Options") for a number of
      shares of Common Stock equal to the number of shares so delivered. Unless
      the Committee determines otherwise, such Reload Options will be subject to
      the same terms and conditions (including the same expiration date) as the
      related Option except (i) that the exercise price shall initially be equal
      to the Fair Market Value of a share of Common Stock on the date such
      Reload Option is granted and (ii) such Reload Option shall not be
      exercisable prior to the six month anniversary of the date of grant and,
      thereafter, shall be exercisable in
full.

            


    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    
      	
              6.  

            	
              Stock
      Appreciation Rights

            


    

    


    
      	
               
      

            	
              (a)

            	
              Grant of SARs. The
      Committee shall have the authority to grant Stock Appreciation Rights in
      tandem with an Option, in addition to an Option, or freestanding and
      unrelated to an Option. Notwithstanding the foregoing, in no event shall
      the Committee grant any Participant SARs with respect to more than 600,000
      shares of Common Stock authorized for issuance under the Plan, as such
      number may be adjusted pursuant to Section
4(c).

            


    

    


    
      	
                 (b)  

            	
              Exercise of SARs. A
      Stock Appreciation Right shall entitle the Participant to receive from the
      Company an amount equal to the excess of the Fair Market Value of a share
      of Common Stock on the date of exercise of the Stock Appreciation Right
      over the base price thereof. The Committee shall determine the time or
      times at which or the event or events (including, without limitation, a
      change of control) upon which a Stock Appreciation Right may be exercised
      in whole or in part, the method of exercise and whether such Stock
      Appreciation Right shall be settled in cash, shares of Common Stock or a
      combination of cash and shares of Common Stock; provided, however, that
      unless otherwise specified by the Committee at or after grant, a Stock
      Appreciation Right granted in tandem with an Option shall be exercisable
      only at the same time or times as the related Option is
      exercisable.

            


    

    


    
      	
              7.  

            	
              Restricted
      Stock and Restricted Units

            


    

    


    
      	
                (a)  

            	
              Grant of Restricted Stock or
      Restricted Units. The Committee may grant Awards of Restricted
      Stock or Restricted Units to Participants at such times and in such
      amounts, and subject to such other terms and conditions not inconsistent
      with the Plan, as it shall determine. Each grant of Restricted Stock or
      Restricted Units shall be evidenced by an Award Agreement. Unless the
      Committee provides otherwise at or after the date of grant, stock
      certificates evidencing any shares of Restricted Stock so granted shall be
      held in the custody of the Secretary of the Company until the Restricted
      Period lapses, and, as a condition to the grant of any Award of shares of
      Restricted Stock, the Participant shall have delivered to the Secretary of
      the Company a certificate, endorsed in blank, relating to the shares of
      Common Stock covered by such Award.

            


    

    


    
      	
               
      

            	
              (b)

            	
              Termination of
      Employment. Unless the Committee otherwise determines at or after
      grant, the rights of a Participant with respect to an award of Restricted
      Stock or Restricted Units outstanding at the time of the Participant's
      termination of Employment shall be determined under this Section 7(b). In
      the event that a Participant's Employment terminates due to the
      Participant's (i) death, (ii) Disability, (iii) Early Retirement with the
      consent of the Committee or (iv) Normal Retirement, any award of
      Restricted Stock or Restricted Units shall become vested and
      nonforfeitable as to that number of shares which is equal to the number of
      shares of Common Stock subject to such Award times a fraction, the
      numerator of which is the number of days actually worked during the
      Restricted Period (or, in the case of an Award which has previously vested
      in part (an "Installment Award"), the number of days worked since the last
      vesting date) and the denominator of which is the total number of days
      during the Restricted Period (or, in the case of an Installment Award, the
      number of days between the last vesting date and the end of the Restricted
      Period). Unless the Committee otherwise determines, any portion of any
      Restricted Stock or Restricted Unit Award that has not become
      nonforfeitable at the date of a Participant's termination of Employment
      shall be forfeited as of such date.

            


    

     

    
      	
               
      

            	
              (c)

            	
              Delivery of Shares. Upon
      the expiration or termination of the Restricted Period and the
      satisfaction (as determined by the Committee) of any other conditions
      determined by the Committee, the restrictions applicable to the Restricted
      Stock or Restricted Units shall lapse and a stock certificate for the
      number of shares of Common Stock with respect to which the restrictions
      have lapsed shall be delivered, free of all such restrictions, except any
      that may be imposed by law, to the Participant or the Participant's
      beneficiary or estate, as the case may be. No payment will be required to
      be made by the Participant upon the delivery of such shares of Common
      Stock and/or cash, except as otherwise provided in Section 13(a) of the
      Plan. At or after the date of grant, the Committee may accelerate the
      vesting of any award of Restricted Stock or Restricted Units or waive any
      conditions to the vesting of any such
award.

            


    

    


    
      	
               
      

            	
              (d)

            	
              Restricted Period; Restrictions
      on Transferability during Restricted Period. Unless otherwise
      determined by the Committee at or after the date of grant, the Restricted
      Period applicable to any award of Restricted Stock or Restricted Units
      shall lapse, and the shares related to such award shall become freely
      transferable, on the third anniversary of the date of grant. Restricted
      Stock or Restricted Units may not be sold, assigned, pledged or otherwise
      encumbered, except as herein provided, during the Restricted Period. Any
      certificates issued in respect of Restricted Stock shall be registered in
      the name of the Participant and deposited by such Participant, together
      with a stock power endorsed in blank, with the Company. At the expiration
      of the Restricted Period with respect to any award of Restricted Stock,
      unless otherwise forfeited, the Company shall deliver such certificates to
      the Participant or to the Participant's legal representative. Payment for
      Restricted Stock Units shall be made by the Company in shares of Common
      Stock, cash or in any combination thereof, as determined by the
      Committee.

            


    

    


    
      	
               
      

            	
              (e)

            	
              Rights as a Stockholder;
      Dividend Equivalents. Unless otherwise determined by the Committee
      at or after the date of grant, Participants granted shares of Restricted
      Stock shall be entitled to receive, either currently or at a future date,
      as specified by the Committee, all dividends and other distributions paid
      with respect to those shares, provided that if any such dividends or
      distributions are paid in shares of Common Stock or other property (other
      than cash), such shares and other property shall be subject to the same
      forfeiture restrictions and restrictions on transferability as apply to
      the shares of Restricted Stock with respect to which they were paid. The
      Committee will determine whether and to what extent to credit Dividend
      Equivalents to the account of, or to pay dividends currently to, each
      recipient of Restricted Units. To the extent provided by the Committee at
      or after the date of grant, any Dividend Equivalents credited to a
      Participant's account shall be deemed to have been invested in shares of
      Common Stock on the record date established for the related dividend and,
      accordingly, a number of additional Restricted Units shall be credited to
      such Participant's account equal to the greatest whole number which may be
      obtained by dividing (x) the value of such Dividend Equivalent on the
      record date by (y) the Fair Market Value of a share of Common Stock on
      such date.

            


    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    
      	
              8.  

            	
              Incentive
      Awards

            


    

    


    
      	
               
      

            	
              (a)

            	
              Incentive Stock and Incentive
      Units. Subject to the provisions of the Plan, the Committee shall
      have the authority to grant Incentive Stock or Incentive Units to any
      Eligible Employee and to determine (i) the number of shares of Incentive
      Stock and the number of Incentive Units to be granted to each Participant
      and (ii) the other terms and conditions of such Awards; provided that, to
      the extent necessary to comply with applicable law, Incentive Stock shall
      only be awarded to an Eligible Employee who has been employed for such
      minimum period of time as shall be determined by the Committee. The
      Restricted Period related to Incentive Stock or Incentive Units shall
      lapse upon the determination by the Committee that the performance
      objectives established by the Committee have been attained, in whole or in
      part. Such performance objectives may be related to the performance of (i)
      the Company, (ii) a Subsidiary, (iii) a division or unit of the Company or
      any Subsidiary, (v) the Participant or (vi) any combination of the
      foregoing, over a measurement period or periods established by the
      Committee. Unless the Committee otherwise determines at the time of grant
      of Incentive Stock or Incentive Units, the perfor mance objectives with
      respect to such Award shall be related to at least one of the following
      criteria, which may be determined solely by reference to the performance
      of the Company or a Subsidiary or a division or unit of the Company or a
      Subsidiary or based on comparative performance relative to other
      companies: (i) consolidated earnings before income taxes, depreciation and
      amortization; (ii) revenues; (iii) earnings per share; (iv) net income;
      (v) gross profit margin; (vi) maximum capital expenditures; (vii) return
      on equity; and/or (viii) return on total capital. Except to the extent
      otherwise expressly provided herein, the Committee may, at any time and
      from time to time, change the performance objectives applicable with
      respect to any Incentive Stock or Incentive Units to reflect such factors,
      including, without limitation, changes in a Participant's duties or
      responsibilities or changes in business objectives (e.g., from corporate
      to Subsidiary or business unit performance or vice versa), as the
      Committee shall deem necessary or appropriate. In making any such
      adjustment, the Committee shall adjust the number of Incentive Stock or
      Incentive Units or take other appropriate actions to prevent any
      enlargement or diminution of the Participant's rights related to service
      rendered and performance attained prior to the effective date of such
      adjustment.

            


    

    


    
      	
               
      

            	
              (b)

            	
              Termination of
      Employment. Unless the Committee otherwise determines at or after
      grant, the rights of a Participant with respect to an award of Incentive
      Stock or Incentive Units outstanding at the time of the Participant's
      termination of Employment shall be determined under this Section 8(b). In
      the event that a Participant's Employment terminates due to the
      Participant's (i) death, (ii) Disability, (iii) Early Retirement with the
      consent of the Committee or (iv) Normal Retirement, any award of Incentive
      Stock or Incentive Units shall become vested and nonforfeitable at the end
      of the measurement period as to that number of shares which is equal to
      that percentage, if any, of such award that would have been earned based
      on the attainment or partial attainment of such performance objectives
      times a fraction, the numerator of which is the number of days employed
      during the Restricted Period (or, in the case of an Award which has
      previously vested in part (an "Installment Award"), the number of days
      employed since the last vesting date) and the denominator of which is the
      total number of days during the Restricted Period (or, in the case of an
      Installment Award, the number of days between the last vesting date and
      the end of the Restricted Period); provided that, any portion of any
      Incentive Stock or Incentive Unit award that does not become vested as of
      the times set forth in this sentence shall be forfeited at such times. In
      all other cases, any portion of any award of Incentive Stock or Incentive
      Units that has not become nonforfeitable at the date of a Participant's
      termination of Employment shall be forfeited as of such
    date.

            


    

     

    
      	
               
      

            	
              (c)

            	
              Awards Nontransferable.
      Incentive Stock or Incentive Units may not be sold, assigned, pledged or
      otherwise encumbered, except as herein provided, during the Restricted
      Period. Any certificates issued in respect of Incentive Stock shall be
      registered in the name of the Participant and deposited by such
      Participant, together with a stock power endorsed in blank, with the
      Company. At the expiration of the Restricted Period with respect to any
      award of Incentive Stock, unless otherwise forfeited, the Company shall
      deliver such certificates to the Participant or to the Participant's legal
      representative. Payment for Incentive Stock Units shall be made by the
      Company in shares of Common Stock, cash or in any combination thereof, as
      determined by the Committee.

            


    

    


    
      	
               
      

            	
              (d)

            	
              Rights as a Stockholder;
      Dividend Equivalents. Unless otherwise determined by the Committee
      at or after the date of grant, Participants granted shares of Incentive
      Stock shall be entitled to receive, either currently or at a future date,
      as specified by the Committee, all dividends and other distributions paid
      with respect to those shares, provided that if any such dividends or
      distributions are paid in shares of Common Stock or other property (other
      than cash), such shares and other property shall be subject to the same
      forfeiture restrictions and restrictions on transferability as apply to
      the shares of Incentive Stock with respect to which they were paid. The
      Committee will determine whether and to what extent to credit Dividend
      Equivalents to the account of, or to pay dividends currently to, each
      recipient of Incentive Units during the period of deferral. To the extent
      provided by the Committee at or after the date of grant, any Dividend
      Equivalents credited to a Participant's account shall be deemed to have
      been invested in shares of Common Stock on the record date established for
      the related dividend and, accordingly, a number of additional Incentive
      Units shall be credited to such Participant's account equal to the
      greatest whole number which may be obtained by dividing (x) the value of
      such Dividend Equivalent on the record date by (y) the Fair Market Value
      of a share of Common Stock on such
date.

            


    

    


    
      	
               
      

            	
              (e)

            	
              Interpretation.
      Notwithstanding anything else contained in this Section 8 to the contrary,
      if any award of Incentive Stock or Incentive Units is intended, at the
      time of grant, to be other performance-based compensation within the
      meaning of Section 162(m)(4)(C) of the Code, to the extent required to so
      qualify any Award hereunder, the Committee shall not be entitled to
      exercise any discretion otherwise authorized under this Section 8 with
      respect to such award if the ability to exercise such discretion (as
      opposed to the exercise of such discretion) would cause such award to fail
      to qualify as other performance-based
  compensation.

            


    

    


    
      	
              9.  

            	
              Elective
      and Supplemental Units

            


    

    


    
      	
               
      

            	
              (a)

            	
              Elective Units; Supplemental
      Units. On such date or dates as shall be established by the
      Committee and subject to such terms and conditions as the Committee shall
      determine, a Participant may be permitted to elect to defer receipt of all
      or a portion of his annual compensation and/or annual incentive bonus
      ("Deferred Annual Amount") payable by the Company or a Subsidiary and
      receive in lieu thereof a number of Elective Units equal to the greatest
      whole number which may be obtained by dividing (x) the amount of the
      Deferred Annual Amount by (y) the Fair Market Value of a share of Common
      Stock on the date of grant. No shares of Common Stock will be issued upon
      the issuance of Elective Units; the Company will establish a separate
      account for the Participant and will record in such account the number of
      Elective Units issued to the Participant. To the extent the Committee so
      determines, a Participant who elects to receive Elective Units shall also
      receive that number of Supplemental Units equal to the greatest whole
      number which may be obtained by dividing (x) such percentage of the
      Deferred Annual Amount as is determined by the Committee at the date of
      grant by (y) the Fair Market Value of a share of Common Stock on the date
      of grant.

            


    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (b)

            	
              Rights as a Stockholder;
      Dividend Equivalents. A Participant shall not have any right in
      respect of Elective Units issued pursuant to the Plan to vote on any
      matter submitted to the Company's stockholders until such time as the
      shares of Common Stock attributable to such Elective Units have been
      issued to such Participant or his beneficiary. The Committee will
      determine whether and to what extent to credit Dividend Equivalents to the
      account of, or to pay dividends currently to, each recipient of Elective
      Units. Dividend Equivalents credited to a Participant's account shall be
      deemed to have been invested in shares of Common Stock on the record date
      established for the related dividend and, accordingly, a number of
      Elective Units shall be credited to such Participant's account equal to
      the greatest whole number which may be obtained by dividing (x) the value
      of such Dividend Equivalent on the record date by (y) the Fair Market
      Value of a share of Common Stock on such
date.

            


    

    


    
      	
               
      

            	
              (c)

            	
              Vesting of Elective Units and
      Supplemental Units. The Elective Units credited to a Participant,
      together with any Dividend Equivalents credited in respect of such
      Elective Units, shall be fully vested at all times. Unless the Committee
      provides otherwise at or after the date of grant, the Supplemental Units
      credited to a Participant, together with any Dividend Equivalents credited
      in respect of Supplemental Units, shall become vested in full on the third
      anniversary of the date the corresponding Deferred Annual Amount would
      have been paid absent the Participant's election to defer provided the
      Participant remains in the continuous employ of the Company or a
      Subsidiary through such date. Notwithstanding the foregoing, the Committee
      may accelerate the vesting of any Supplemental Units at or after the date
      of grant.

            


    

    


    
      	
               
      

            	
              (d)

            	
              Settlement of Elective Units
      and Supplemental Units. Unless the Committee determines otherwise
      at or after the date of grant, a Participant shall receive one share of
      Common Stock for each Elective Unit (and related Dividend Equivalents) as
      of the date of such Participant's termination of employment (or such later
      date as may be elected by the Participant in accordance with the rules and
      procedures of the Committee). Unless the Committee determines otherwise at
      or after the date of grant, a Participant shall receive one share of
      Common Stock for each Supplemental Unit (and related Dividend Equivalents)
      that shall have become vested on or prior to the date of such
      Participant's termination of employment with the Company and the
      Subsidiaries, other than any such termination for Cause, on the date of
      such termination of employment (or on such earlier date as the Committee
      shall permit or such later date as may be elected by the Participant in
      accordance with the rules and procedures of the Committee). In the event
      of the termination of a Participant's employment with the Company and the
      Subsidiaries for Cause, the Participant shall immediately forfeit all
      rights with respect to any Supplemental Units (and related Dividend
      Equivalents) credited to his account. The Committee may provide in the
      Award Agreement applicable to Elective Units that, in lieu of issuing
      shares of Common Stock in settlement of the vested Supplemental Units (and
      related Dividend Equivalents), the Committee may direct the Company to pay
      to the Participant the cash value
thereof.

            


    

     

    
      	
              10.  

            	
              Designation
      of Awards Pursuant to Section 102 of the Tax
  Ordinance

            


    

    


    
      	
               
      

            	
              (a)

            	
              The
      Committee may designate Awards granted to Employees pursuant to Section
      102 of the Tax Ordinance as Unapproved 102 Awards or as Approved 102
      Awards.

            


    

     

    
      	
                 
      (b)  

            	
              The
      grant of an Approved 102 Award under the Plan shall be conditioned upon
      the approval of the Plan by the Israeli Tax
  Authorities.

            


    

     

    
      	
                 
      (c)  

            	
              Approved
      102 Awards may either be classified as Capital Gain Awards or Ordinary
      Income Awards.

            


    

     

    
      	
                
      (d)  

            	
              Each
      Award Agreement shall state, inter alia, the type of
      Award granted thereunder (whether a CGA, OIA, Unapproved 102 Award or a
      3(i) Award), the vesting provisions and the Exercise
  Price.

            


    

     

    
      	
               
      

            	
              (e)

            	
              No
      Approved 102 Awards may be granted under this Plan to any eligible
      Employee, unless and until, the Company’s election of the type of Approved
      102 Awards as CGA or OIA granted to Employees (the “Election”), shall be
      appropriately filed with the Israeli Tax Authorities at least thirty (30)
      days before the first Date of Grant of an Approved 102 Option under this
      Plan. Such Election shall become effective beginning the first Date of
      Grant of an Approved 102 Option under the Plan and shall remain in effect
      until at least the end of the year following the year during which the
      Company first granted Approved 102 Awards. The Election shall obligate the
      Company to grant only the type of
      Approved 102 Option it has elected, and shall apply to all Approved 102
      Awards granted during the period indicated herein, all in accordance with
      the provisions of Section 102(g) of the Tax Ordinance, as now in effect or
      as hereafter ammended. For the avoidance of doubt, such Election shall not
      prevent, subject to the Board’s sole discretion, the Company from
      simultaneously (i) granting Unapproved 102 Awards; or (ii) 3(i)
      Options.

            


    

     

    
      	
                 (f)   

            	
               All
      Approved 102 Awards must be held in trust by a Trustee, as described in
      Section 11 below.

            


    

     

    
      	
                
      (g)  

            	
              For
      the avoidance of doubt, the designation of Unapproved 102 Awards and
      Approved 102 Awards shall be subject to the terms and conditions set forth
      in Section 102 of the Tax Ordinance and regulations, rules, orders or
      procedures promulgated thereunder as now in effect or as hereafter
      amended.

            


    

     

    
      	
                 (h)  

            	
              With
      regards to Approved 102 Awards, the provisions of the Plan and 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 Company and the
      Participants.

            


    

     

    
      	
              11.  

            	
              Trustee

            


    

    


    
      	
               
      

            	
              (a)

            	
              The
      Committee may choose to deposit the Awards granted pursuant to the Plan
      with a trustee (the
      "Trustee").  In such event, the Trustee shall hold such
      Awards, and any Shares issued upon the exercise of any of such Awards, in
      trust pursuant to the Company's instructions from time to
      time.  The Trustee shall be entitled to make such provisions and
      take such steps as it may deem necessary or appropriate for the
      withholding of all taxes required by law to be withheld with respect to
      the exercise of the Awards or their sale to a third party. The Company
      shall deliver the Trustee all the necessary information required by him.
      The Trustee shall be exempt from any liability with respect to any action
      or decision duly taken in its/his capacity as
  Trustee.

            


    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    
 

    
      	
               
      

            	
              (b)

            	
              Anything
      herein to the contrary notwithstanding, Approved 102 Awards granted under
      the Plan and/or all Shares allocated or issued upon exercise of such
      Approved 102 Awards and/or all other shares received subsequently
      following any realization of rights in connection with such Approved 102
      Awards or Shares and all rights attached to shares described above or
      Approved 102 Awards, shall be allocated or issued to the Trustee and held
      for the benefit of the Participant for such period of time as required by
      Section 102 or any regulations, rules, orders or procedures promulgated
      there under as now in effect or as hereafter amended (the “Restricted Period Per Section
      102”). All of the rights attached to Shares issued upon exercise of
      Approved 102 Awards, including without limitation dividend in shares,
      shall be subject to the same tax treatment as the treatment to which such
      Awards are subject to. In case the requirements pursuant to Section 102
      for an Approved 102 Awards are not met, then the Approved 102 Awards may
      be regarded as Unapproved 102 Awards, all in accordance with the
      provisions of Section 102 and regulations, rules, orders or procedures
      promulgated there under as now in effect or as hereafter
      amended.

            


    

    


    
      	
               
      

            	
              (c)

            	
              Notwithstanding
      anything to the contrary, the Trustee shall not make any transaction or
      take any action with respect to Approved 102 Awards or Shares issued upon
      exercise thereof, will not transfer, assign, release, pledge, mortgage
      voluntarily, or grant in connection therewith any proxy or assignment
      deed, whether immediately effective or effective at a future date, other
      than by will or by operation of law, until after the full payment of the
      Participant’s tax liabilities arising from the grant of such Awards or
      their exercise or release or transfer by the Trustee or after guarantying
      the payment of said taxes. If such Options or Shares have been transferred
      by will or by operation of law, the provisions of Section 102 will apply
      with respect to the heirs or the transferees of the Participant or
      Stockholder, as the case may be.

            


    

    


    
      	
               
      

            	
              (d)

            	
              Upon
      receipt of an Approved 102 Award, the Participant 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 Award or Share held, released or transferred by the
      Trustee, in accordance with the terms of Section
  102.

            


    

    


    
      	
               
      

            	
              (e)

            	
              Subject
      to the provisions of Section 102 and any regulations, rules, orders or
      procedures promulgated there under as now in effect or as hereafter
      amended, during the Restricted Period
      Per Section 102 a Participant may not release the Approved 102 Awards or
      Shares issued upon exercise thereof from trust or sell such Awards or
      Shares while they are held by the Trustee. At any time thereafter each Participant
      may require (but shall not be Participant, any
      Approved 102 Awards or Shares issued pursuant to the exercise of
      such Approved 102 Awards, provided that (1)
      such transfer is in compliance with all applicable securities laws, and
      (2) all applicable tax due pursuant to such a sale or transfer has
      been paid in accordance with Section 102 and the Trustee has received an
      acknowledgment from the Israeli Tax Authorities that the Participant has
      paid any applicable tax due pursuant to the Tax Ordinance. Notwithstanding
      the above, if any such sale or release occurs during the Restricted Period Per
      Section 102, the sanctions under Section 102 of the Tax Ordinance
      and under any rules or regulation or orders or procedures promulgated
      there under as now in effect or as hereafter amended, shall apply to and
      shall be borne by such Participant.

            


    

     

    
      	
              12.  

            	
              Stock
      in Lieu of Cash

            


    

    


    The
Committee may grant Awards or shares of Common Stock in lieu of all or a portion
of an award otherwise payable in cash to an Executive Officer pursuant to any
bonus or incentive compensation plan of the Company (subject to any applicable
limitations in such bonus or incentive compensation plan). If shares are issued
in lieu of cash, the number of shares of Common Stock to be issued shall be the
greatest number of whole shares which has an aggregate Fair Market Value on the
date the cash would otherwise have been payable pursuant to the terms of such
other plan equal to or less than the amount of such cash.

    


    
      	
              13.  

            	
              General
      Provisions

            


    

    


    
      	
               
      

            	
              (a)

            	
              Withholding. The Company
      shall have the right to deduct from all amounts paid to a Participant in
      cash (whether under this Plan or otherwise) any taxes required by law to
      be withheld in respect of Awards under this Plan. In the case of any Award
      satisfied in the form of Common Stock, no shares shall be issued unless
      and until arrangements satisfactory to the Committee shall have been made
      to satisfy any withholding tax obligations applicable with respect to such
      Award. Without limiting the generality of the foregoing and subject to
      such terms and conditions as the Committee may impose, the Company shall
      have the right to retain, or the Committee may, subject to such terms and
      conditions as it may establish from time to time, permit Participants to
      elect to tender, Common Stock (including Common Stock issuable in respect
      of an Award) to satisfy, in whole or in part, the amount required to be
      withheld.

            


    

    


    
      	
               
      

            	
              (b)

            	
              Awards. Each Award
      hereunder shall be evidenced by a written or electronic agreement. The
      agreement shall be delivered to the Participant and shall incorporate the
      terms of the Plan by reference and specify the terms and conditions
      thereof and any rules applicable thereto (each, an "Award
      Agreement").

            


    

    


    
      	
               
      

            	
              (c)

            	
              Non-transferability. No
      Award shall be transferable by a Participant otherwise than by will or
      under the applicable laws of descent and distribution, unless such
      transfer shall be (i) permitted by the Committee (on such terms as it
      shall establish) or (ii) if the Award Agreement pursuant to which an Award
      is made so provides, to (A) the spouse, children or grandchildren of such
      Participant (collectively, "Family Members"), (B) a trust or trusts for
      the exclusive benefit of such Family Members, or (C) a partnership or
      limited liability company in which such Family Members and trusts for the
      exclusive benefit of such Family Members are the only partners or members,
      as the case may be. In addition, no Award shall be assigned, negotiated,
      pledged or hypothecated in any way (whether by operation of law or
      otherwise) and no Award shall be subject to execution, attachment or
      similar process. Upon any attempt to transfer, assign, negotiate, pledge
      or hypothecate any Award, or in the event of any levy upon any Award by
      reason of any attachment or similar process, in either case contrary to
      the provisions hereof, such Award shall immediately become null and
      void.

            


    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
               (d)

            	
              Legend. To the extent
      any stock certificate is issued to a Participant in respect of shares of
      Restricted Stock or Incentive Stock awarded under the Plan prior to the
      expiration of the applicable Restricted Period, such certificate shall be
      registered in the name of the Participant and shall bear the following (or
      similar) legend:

            


    

    


    "The
shares of stock represented by this certificate are subject to the terms and
conditions contained in the deltathree,  Inc. 2004 Stock Incentive
Plan and the Award Agreement, dated as of _____, between the Company and the
Participant, and may not be sold, pledged, transferred, assigned, hypothecated
or otherwise encumbered in any manner (except as provided in Section 13(c) of
the Plan or in such Award Agreement) until _________________ ."

    


    Upon the
lapse of the Restricted Period with respect to any such shares of Restricted
Stock or Incentive Stock, the Company shall issue or have issued new share
certificates without the legend described herein in exchange for those
previously issued.

     

    
      	
               
      

            	
              (e)

            	
              No Right to Employment.
      No person shall have any claim or right to be granted an Award, and the
      grant of an Award shall not be construed as giving a Participant the right
      to be retained in the employ of the Company or any Subsidiary. Further,
      the Company and each Subsidiary expressly reserves the right at any time
      to dismiss a Participant free from any liability, or any claim under the
      Plan, except as provided herein or in any agreement entered into with
      respect to an Award.

            


    

    


    
      	
               
      

            	
              (f)

            	
              No Rights to Awards, No
      Shareholder Rights. No Participant or Eligible Employee shall have
      any claim to be granted any Award under the Plan, and there is no
      obligation of uniformity of treatment of Participants and Eligible Employ
      ees. Subject to the provisions of the Plan and the applicable Award, no
      person shall have any rights as a shareholder with respect to any shares
      of Common Stock to be issued under the Plan prior to the issuance
      thereof.

            


    

    


    
      	
               
      

            	
              (g)

            	
              Effective Date and Termination
      of the Plan. The Plan shall become effective on the Effective Date.
      No Awards may be granted under the Plan after the expiration of ten years
      from the date this Plan is adopted.  The Plan will terminate on
      September 23, 2014, the date which is ten years from the earlier of the
      date of its adoption by the Board of Directors and the date of its
      approval by the shareholders.  The Plan may be terminated at an
      earlier date by vote of the shareholders or the Board of Directors of the
      Company; provided, however, that any such earlier termination shall not
      affect any Award Agreements executed prior to the effective date of such
      termination.

            


    

    


    
      	
               
      

            	
              (h)

            	
              Amendment of Plan. The
      Board or the Committee may amend, suspend or terminate the Plan or any
      portion thereof at any time, provided that no amendment shall be made
      without shareholder approval if such amendment
  would:

            


    

    


    
      	
               
      

            	
              (1)

            	
              increase
      the number of shares of Common Stock subject to the Plan, except pursuant
      to Section 4(c);

            


    

    


    
      	
               
      

            	
              (2)

            	
              determine
      the price at which Options may be granted;
or

            


    

    


    
      	
               
      

            	
              (3)

            	
              remove
      the administration of the Plan from the
  Committee.

            


    

    


    Without
the written consent of an affected Participant, no termination, suspension or
modification of the Plan shall adversely affect any right of such Participant
under the terms of an Award granted before the date of such termination,
suspension or modification.

    


    
      	
               
      

            	
              (i)

            	
              Application of Proceeds.
      The proceeds received by the Company from the sale of its shares under the
      Plan will be used for general corporate
  purposes.

            


    

     

    
      	
               
      

            	
              (j)

            	
              Compliance with Legal and
      Exchange Requirements. The Plan, the granting and exercising of
      Awards thereunder, and the other obligations of the Company under the
      Plan, shall be subject to all applicable federal and state laws, rules,
      and regulations, and to such approvals by any regulatory or governmental
      agency as may be required. The Company, in its discretion, may postpone
      the granting and exercising of Awards, the issuance or delivery of Common
      Stock under any Award or any other action permitted under the Plan to
      permit the Company, with reasonable diligence, to complete such stock
      exchange or similar listing or registration or qualification of such
      Common Stock or other required action under any federal or state law,
      rule, or regulation and may require any Participant to make such
      representations and furnish such information as it may consider
      appropriate in connection with the issuance or delivery of Common Stock in
      compliance with applicable laws, rules, and regulations. The Company shall
      not be obligated by virtue of any provision of the Plan to recognize the
      exercise of any Award or to otherwise sell or issue Common Stock in
      violation of any such laws, rules, or regulations; and any postponement of
      the exercise or settlement of any Award under this provision shall not
      extend the term of such Awards, and neither the Company nor its directors
      or officers shall have any obligation or liability to the Participant with
      respect to any Award (or Stock issuable thereunder) that shall lapse
      because of such postponement.

            


    

    


    
      	
               
      

            	
              (k)

            	
              Gender and Number.
      Except when otherwise indicated by the context, words in the masculine
      gender used in the Plan shall include the feminine gender, the singular
      shall include the plural, and the plural shall include the
      singular.

            


    

    


    
      	
               
      

            	
              (l)

            	
              Governing
      Law.

            


    

    


    (i)       The
Plan and all instruments issued thereunder or in connection therewith the
Delaware Company shall be governed by, construed, enforced and interpreted in
accordance with, the laws of the State of New York.

    


    (ii)         The
Plan and all instruments issued there under or in connection therewith the
Company’s affiliates and/or subsidiaries, shall be governed by, and interpreted
in accordance with, the applicable laws within the county of incorporation of
the Company’s affiliate and/or subsidiary.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    
 

    
      	
               
      

            	
              (m)

            	
              Compliance with Section
      409A.  Awards
      shall be designed, granted and administered in such a manner that they are
      either exempt from the application of, or comply with, the requirements of
      Section 409A. If the Committee determines that an Award, Award Agreement,
      payment, distribution, deferral election, transaction, or any other action
      or arrangement contemplated by the provisions of the Plan would, if
      undertaken, cause a Participant to become subject to additional taxes
      under Section 409A, then unless the Committee specifically provides
      otherwise, such Award, Award Agreement, payment, distribution, deferral
      election, transaction or other action or arrangement shall not be given
      effect to the extent it causes such result and the related provisions of
      the Plan and/or Award Agreement will be deemed modified, or, if necessary,
      suspended in order to comply with the requirements of Section 409A to the
      extent determined appropriate by the Committee, in each case without the
      consent of or notice to the Participant. The exercisability of an Option
      or a Stock Appreciation Right shall not be extended to the extent that
      such extension would subject the Participant to additional taxes under
      Section 409A.

            


    

     

    
      	
              14.  

            	
              Date
      of Grant

            


    

    


    Subject
to Applicable Laws, the Date of Grant of an Award shall, for all purposes, be
the date on which the Committee makes the determination granting such
Award.

     

    
      	
              15.  

            	
              Tax
      Consequences

            


    

    


    Any tax
consequences arising from the grant or exercise of any Award or from the
disposition of Shares or from any other event or act (whether of the Participant
or of the Company or of its Trustee) hereunder, shall be borne solely by the
Participant. The Company and/or the Trustee shall withhold taxes according to
the requirements under the Applicable Laws, rules, and regulations, including
withholding taxes at source.   Furthermore, such Participant
shall agree to indemnify the Company that employs the Participant and/or the
Trustee, and/or the Company’s shareholders and/or directors and/or officers if
applicable, 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 Participant.  Except as otherwise
required by law, the Company shall not be obligated to honor the exercise of any
Option by or on behalf of an Participant until all tax consequences (if any)
arising from the exercise of such Options are resolved in a manner reasonably
acceptable to the Company.

     

    
      	
              16.  

            	
              Non-Exclusivity
      of the Plan

            


    

    


    The
adoption of the Plan by the Board shall not be construed as amending, modifying
or rescinding any previously approved incentive arrangements or as creating any
limitations on the power of the Board to adopt such other incentive arrangements
as it may deem desirable, including, without limitation, the granting of Options
otherwise then under the Plan, and such arrangements may be either applicable
generally or only in specific cases.

    


    For the
avoidance of doubt, prior grant of options to Participants of the Company under
their employment agreements, and not in the framework of any previous option
plan, shall not be deemed an approved incentive arrangement for the purpose of
this Section.

    


    
      	
              17.  

            	
              Inability
      to Obtain Authority

            


    

    


    The
inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company's counsel to be necessary
to the lawful issuance of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.

    


    
      	
              18.  

            	
              Multiple
      Agreements

            


    

    


    The terms
of each Award may differ from other Awards granted to each Participant under the
Plan at the same time.  The Administrator may also grant more than one
Award to a given Participant during the term of the Plan, either in addition to,
or in substitution for, one or more Awards previously granted to that
Participant.

    


    
      	
              19.  

            	
              Disputes

            


    

    


    Any
dispute or disagreement which may arise under or as a result of or pursuant to
this Plan or the Award Agreements shall be determined by the Board in its sole
discretion and any interpretation made by the Board of the terms of the Plan or
the Award Agreements shall be final, binding and conclusive.

    


    


    
      
        
        

      

      
        11