Exhibit
10.16




RESTRICTED
UNIT AGREEMENT


DELTATHREE,
INC.




This
Restricted Unit Agreement (this “Agreement”) is made as of the [____] day of
[______], [____] (the “Grant Date”), between deltathree, Inc., a
Delaware corporation (the “Company”), and [_______________] (the
“Participant”).




WHEREAS,
the Company has adopted the 2004 Stock Incentive Plan, as amended (the “Plan”),
to promote the interests of the Company by providing
an incentive for employees and consultants of the Company and its Affiliates
(any terms used and not defined herein shall have the meanings ascribed
to such terms in the Plan);




WHEREAS,
pursuant to the provisions of the Plan, the Company desires to offer to the
Participant units (“Units”) that are convertible, at the option of
Participant, into an equal number of shares (“Shares”) of the Company’s Class A
common stock, par value $0.001 per share (“Common Stock”),
in accordance with the provisions of the Plan, all on the terms and conditions
hereinafter set forth; and WHEREAS,
Participant wishes to accept said offer;




NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:




1. Terms of Grant. The Participant hereby
accepts the offer of the Company to issue to the Participant, in accordance with
the terms of the Plan and
this Agreement, [___________(______)] Units (such Units, subject to adjustment pursuant to Subsection
2.1(g) hereof, the “Restricted Units”),
receipt of which is hereby acknowledged by the Participant’s service to the
Company and which will be reported by the Participant in accordance
with all tax laws applicable to Participant.




2.1.
Restricted Period and Forfeiture
Provisions.




(a) Forfeiture. In the event that the
Participant is no longer an employee or consultant of the Company or an
Affiliate for any reason, other than for
a reason as specified in Section 2.1(b) or 2.1(c) below, prior to the third
anniversary of the Grant Date (the “Termination”), a number of Restricted
Units shall become vested and shall not be forfeited in accordance with the
vesting schedule set forth on Schedule A attached hereto. Upon the
expiration or termination of the Restricted Period, the restrictions applicable
to the Restricted Units shall lapse pursuant to Sections 7(c) and (d) of the
Plan.




(b) Effect of Termination for Disability, Death,
Early Retirement, or Normal Retirement. In the event the 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, a certain
number of Restricted Units shall vest and not be forfeited in accordance with
Section 7(b) of the Plan.




(c) Effect of a For Cause Termination.
Notwithstanding anything to the contrary contained in this Agreement, in the
event the Company or an Affiliate
terminates the Participant’s employment or service for “cause” (as defined in
the Plan) or in the event the Administrator determines, within one (1)
year after the Participant’s termination, that either prior or subsequent to the
Participant’s termination the Participant engaged in conduct that would
constitute “cause,” all of the Restricted Units then held by the Participant
shall be forfeited to the Company immediately as of the time the Participant
is notified that he or she has been terminated for “cause” or that he or she
engaged in conduct which would constitute “cause”.




(d) Change of Control. The Committee shall
determine the effect that certain events (including a change of control) will
have on the vesting and
forfeiture of the Restricted Units.




(e) Prohibition on Transfer. The
Participant recognizes and agrees that during the Restricted Period the
Restricted Units (except as provided in this
Section 2.1) may not be sold, transferred, assigned, hypothecated, pledged,
encumbered or otherwise disposed of, whether voluntarily or by operation
of law, other than to the Company (or its designee). However, the Participant,
with the approval of the Administrator, may transfer the Restricted
Units for no consideration to or for the benefit of the Participant’s Immediate
Family (including, without limitation, to a trust for the benefit of the
Participant’s Immediate Family or to a partnership or limited liability company
for one or more members of the Participant’s Immediate Family), subject
to such limits as the Administrator may establish, and the transferee shall
remain subject to all the terms and conditions applicable to this Agreement
prior to such transfer and each such transferee shall so acknowledge in writing
as a condition precedent to the effectiveness of such transfer. The term
“Immediate Family” shall mean the Participant’s spouse, former spouse, parents,
children, stepchildren, adoptive relationships, sisters, brothers,
nieces and nephews and grandchildren (and, for this purpose, shall also include
the Participant). The Company shall not be required to transfer
any Restricted Units on its books which shall have been sold, assigned or
otherwise transferred in violation of this Subsection 2.1(e), or to treat as the
owner of such Restricted Units, or to pay dividends to, any person or
organization to which any such Restricted Units shall have been so sold, assigned
or otherwise transferred, in violation of this Subsection 2.1(e).




(f) Failure to Deliver Restricted Stock to be
Forfeited. In the event that the Restricted Units to be forfeited to the
Company under this Agreement
are not in the Company’s possession and the Participant or the Participant’s
Survivor fails to deliver such Restricted Units to the Company (or its
designee), the Company may immediately take such action as is appropriate to
transfer record title of such Restricted Units from the Participant to the
Company (or its designee) and treat the Participant and such Restricted Units in
all respects as if delivery of such Restricted Units had been made as
required by this Agreement. The Participant hereby irrevocably grants the
Company a power of attorney which shall be coupled with an interest for the
purpose of effectuating the preceding sentence.




(g) Adjustments. The Plan contains
provisions covering the treatment of Units and Shares in a number of
contingencies such as stock splits and
mergers. Provisions in the Plan for adjustment with respect to the Restricted
Units and any Shares acquired upon conversion of Units and the related
provisions with respect to successors to the business of the Company are hereby
made applicable hereunder and are incorporated herein by reference.







2.2 General Restrictions on Transfer of
Restricted Units.




(a) The
Participant agrees that in the event the Company proposes to offer for sale to
the public any of its equity securities and such Participant
is requested by the Company and any underwriter engaged by the Company in
connection with such offering to sign an agreement restricting
the sale or other transfer of Units or Shares, then it will promptly sign such
agreement and will not transfer, whether in privately negotiated transactions
or to the public in open market transactions or otherwise, any Units or Shares
or other securities of the Company held by him or her during such
period as is determined by the Company and the underwriters, not to exceed 90
days following the closing of the offering, plus such additional period of
time as may be required to comply with Marketplace Rule 2711 of the National
Association of Securities Dealers, Inc. or similar rules thereto (such
period, the “Lock-Up Period”). Such agreement shall be in writing and in form
and substance reasonably satisfactory to the Company and such underwriter
and pursuant to customary and prevailing terms and conditions. Notwithstanding
whether the Participant has signed such an agreement, the Company
may impose stop-transfer instructions with respect to the Units or Shares or
other securities of the Company subject to the foregoing restrictions
until the end of the Lock-Up Period.




(b) The
Participant acknowledges and agrees that neither the Company nor its
shareholders, directors and officers, has any duty or obligation to
disclose to the Participant any material information regarding the business of
the Company or affecting the value of the Units or Shares before, at the time of,
or following a Termination, including, without limitation, any information
concerning plans for the Company to make a public offering of its securities
or to be acquired by or merged with or into another firm or entity.




3. Conversion of Units into Shares of Common
Stock. Following such time as any Restricted Units become vested, except
as provided herein the
Participant may convert some or all of such Units into an equal number Shares of
Common Stock at a purchase price of $0.001 per Share (which such
amount may be withheld by the Company from future payments to be made by the
Company to the Participant), by providing written notice thereof
to the Senior Vice President of Finance and Treasurer of the Company as provided
in Section 10 below. Such notice shall include, at a minimum,
the Participant’s name and the number of Units that the Participant elects to so
convert. Within three (3) business days of its receipt of such request,
the Company shall arrange to have such number of Shares transferred into a
separate account for the Participant at the brokerage house that holds the
Company’s securities.




4. Securities Law Compliance. The
Participant specifically acknowledges and agrees that any sales of Restricted
Units shall be made by the Participant
solely in accordance with the requirements of the U.S. Securities Act of 1933,
as amended.




5. Rights as a Stockholder. The
Participant shall have all the rights set forth in Section 7(e) of the
Plan.




6. Incorporation of the Plan. The
Participant specifically understands and agrees that the Restricted Units issued
under the Plan are being provided
to the Participant pursuant to the Plan, a copy of which the Participant
acknowledges he or she has read and understands and by which he or she
agrees to be bound. The provisions of the Plan are incorporated herein by
reference. Copies of the Plan and the Summary Plan Description of the Plan are
accessible at:




[Link to
webpage]




7. Tax Liability of the Participant and Payment
of Taxes. The Participant acknowledges and agrees that any income or
other taxes due from the
Participant with respect to the Restricted Units or the Stock issued pursuant to
this Agreement shall be the Participant’s sole responsibility. Without limiting
the foregoing, the Participant agrees that, to the extent that the conversion of
Units into Shares of Common Stock or the declaration of dividends
on any Restricted Units before the lapse of restrictions on disposition of any
such Units results in the Participant’s being deemed to be in receipt
of earned income under the provisions of the Code, the Company shall be entitled
to immediate payment from the Participant of the amount of any tax
required to be withheld by the Company. Without limiting the foregoing, in the
event that the Participant shall no longer be an employee or consultant
of the Company or any Affiliate and such Participant is entitled to Restricted
Units pursuant to the terms of this Agreement, the Participant agrees to
take any action to settle any outstanding tax matters (including required
payments, if applicable) with the Company arising from the conversion
of Units into Shares of Common Stock within ten (10) days of the date that the
Participant ceases to be an employee or consultant of the Company
or any Affiliate.




The
Participant acknowledges that at such times as the Restricted Units are
converted into Shares of Common Stock in accordance with Section 3
above the Participant will have income for tax purposes equal to the fair market
value of the Shares at such date less the price paid for the Restricted
Units by the Participant. If the Participant is a United States taxpayer, the
Participant may be able to file an election under Section 83 of the Code and
elect to include the gross income in the year of the transfer of the Stock. If
the Participant makes such election, the Participant shall provide the
Company with a copy of such form of election. The Participant understands and
acknowledges that he or she should obtain the advice of his or her tax
advisors with respect to the tax consequences of the Restricted Units, the
conversion of such Units into Shares, and the provisions of this Agreement.




8. Equitable Relief. The Participant
specifically acknowledges and agrees that in the event of a breach or threatened
breach of the provisions of this
Agreement or the Plan, including the attempted transfer of the Restricted Units
by the Participant in violation of this Agreement, monetary damages
may not be adequate to compensate the Company, and, therefore, in the event of
such a breach or threatened breach, in addition to any right to damages,
the Company shall be entitled to equitable relief in any court having competent
jurisdiction. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available to it for any such breach or
threatened breach.




9. No Obligation to Maintain
Relationship. The Company is not obligated, by the Plan or this
Agreement, to continue to employ or engage the Participant
as an employee or consultant of the Company or an Affiliate. The Participant
acknowledges: (i) that the Plan is discretionary in nature and may be
suspended or terminated by the Company at any time; (ii) that the grant of the
Restricted Units is a one-time benefit which does not create any contractual
or other right to receive future grants of Units or benefits in lieu of Units;
(iii) that all determinations with respect to any such future grants, including,
but not limited to, the times when Units shall be granted, the number of Units
to be granted, the purchase price per Share acquirable upon conversion
of Units, and the time or times when each Unit shall be free from a lapsing
repurchase or forfeiture right, will be at the sole discretion of the Company;
(iv) that the Participant’s participation in the Plan is voluntary; (v) that the
value of the Units is an extraordinary item of compensation which is
outside the scope of the Participant’s employment contract, if any; and (vi)
that the Units are not part of normal or expected compensation for purposes
of calculating any severance, resignation, redundancy, end of service payments,
bonuses, long-service awards, pension or retirement benefits or
similar payments.









10. Notices. Any notices required or
permitted by the terms of this Agreement or the Plan shall be given in person or
by recognized overnight courier
service, facsimile or e-mail (in either case with confirmation of receipt),
registered or certified mail (return receipt requested), addressed as follows:




If to the
Company:




deltathree,
Inc.


75 Broad
Street, 31stFloor


New York,
NY 10004


Attn:
Senior Vice President of Finance and Treasurer




If to the
Participant:




[_____________]
 [_____________]
 [_____________]


or to
such other address or addresses of which notice in the same manner has
previously been given. Any such notice shall be deemed to have been given on
the earliest of receipt, one business day following delivery by the sender to a
recognized overnight courier service, upon delivery by facsimile or e-mail
during normal business hours with confirmation of receipt, or three business
days following mailing by registered or certified mail.




11. Benefit of Agreement. Subject to the
provisions of the Plan and the other provisions hereof, this Agreement shall be
for the benefit of and shall be
binding upon the heirs, executors, administrators, successors and assigns of the
parties hereto.




12. Governing Law. This Agreement shall be
construed and enforced in accordance with the laws of the State of Delaware,
without giving effect to
the conflict of law principles thereof. For the purpose of litigating any
dispute that arises under this Agreement, whether at law or in equity, the
parties hereby consent to exclusive jurisdiction in New York and agree that such
litigation shall be conducted in the state courts of New York or the federal
courts of the United States District Court for the Southern District of New
York.




13. Severability. If any provision of this
Agreement is held to be invalid or unenforceable by a court of competent
jurisdiction, then such provision
or provisions shall be modified to the extent necessary to make such provision
valid and enforceable, and to the extent that this is impossible, then such
provision shall be deemed to be excised from this Agreement, and the validity,
legality and enforceability of the rest of this Agreement shall not be
affected thereby.




14. Entire Agreement. This Agreement,
together with the Plan, constitutes the entire agreement and understanding
between the parties hereto with
respect to the subject matter hereof and supersedes all prior oral or written
agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement not expressly set
forth in this Agreement shall affect or be used to interpret, change or restrict
the express terms and provisions of this Agreement provided, however, in any
event, this Agreement shall be subject to and governed by the Plan.




15. Modifications and Amendments; Waivers
and Consents. The terms and provisions of this Agreement may be modified or
amended as provided
in the Plan. Except as provided in the Plan, the terms and provisions of this
Agreement may be waived, or consent for the departure therefrom granted,
only by written document executed by the party entitled to the benefits of such
terms or provisions. No such waiver or consent shall be deemed to
be or shall constitute a waiver or consent with respect to any other terms or
provisions of this Agreement, whether or not similar. Each such waiver or
consent shall be effective only in the specific instance and for the purpose for
which it was given, and shall not constitute a continuing waiver or
consent.




16. Counterparts. This Agreement may be
executed in one or more counterparts, and by the different parties hereto on
separate counterparts, each of
which shall be deemed an original, but both of which together shall constitute
one and the same instrument.






17. Data Privacy. By entering into this
Agreement, the Participant: (i) authorizes the Company and each Affiliate, and
any agent of the Company
or any Affiliate administering the Plan or providing Plan record keeping
services, to disclose to the Company or any of its Affiliates such information
and data as the Company or any such Affiliate shall request in order to
facilitate the grant of Units and the administration of the Plan; (ii) waives
any data privacy rights he or she may have with respect to such information; and
(iii) authorizes the Company and each Affiliate to store and transmit
such information in electronic form.




[THE NEXT
PAGE IS THE SIGNATURE PAGE]









IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year first above written.


DELTATHREE,
      INC.By:_________________________Name:_______________________Title:________________________Participant:_________________________Print
      Name:_________________________





SCHEDULE
A




Vesting
Schedule





[TO BE
INSERTED]