Exhibit 10.1


                       INNOVATIVE CARD TECHNOLOGIES, INC.
                            2004 Stock Incentive Plan


                                   ARTICLE ONE

                               GENERAL PROVISIONS

I. PURPOSE OF THE PLAN

      This 2004 Stock Incentive Plan is intended to promote the interests of
Innovative Card Technologies, Inc. (the "Corporation") by providing eligible
persons with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for them
to remain in the Service of the Corporation. Capitalized terms shall have the
meanings assigned to them in the attached Appendix.

II. STRUCTURE OF THE PLAN

      A. The Plan shall be divided into two separate equity programs:

      -     the Discretionary Option Grant Program under which eligible persons
            may, at the discretion of the Plan Administrator, be granted options
            to purchase shares of Common Stock and stock appreciation rights;
            and

      -     the Stock Issuance Program under which eligible persons may, at the
            discretion of the Plan Administrator, be issued shares of Common
            Stock directly, either through the immediate purchase of such shares
            or as a bonus for services rendered the Corporation (or any Parent
            or Subsidiary).

      B. The provisions of Articles One and Four shall apply to all equity
programs under the Plan and shall govern the interests of all persons under the
Plan.

III. ADMINISTRATION OF THE PLAN

      A. The Plan shall be administered by the Board or one or more committees
appointed by the Board, provided that (1) beginning with the Section 12
Registration Date, the Primary Committee shall have sole and exclusive authority
to administer the Plan with respect to Section 16 Insiders, and (2)
administration of the Plan may otherwise, at the Board's discretion, be vested
in the Primary Committee or a Secondary Committee. Beginning with the Section 12
Registration Date, any discretionary option grants or stock issuances to members
of the Primary Committee must be authorized and approved by a disinterested
majority of the Board.

      B. Members of the Primary Committee or any Secondary Committee shall serve
for such period of time as the Board may determine and may be removed by the
Board at any time. The Board may also at any time terminate the functions of any
Secondary Committee and reassume all powers and authority previously delegated
to such committee.

      C. Each Plan Administrator shall, within the scope of its administrative
functions under the Plan, have full power and authority (subject to the
provisions of the Plan) to establish such rules and regulations as it may deem
appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or
any option or stock issuance thereunder.


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      D. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.

IV. ELIGIBILITY

      A. The persons eligible to participate in the Discretionary Option Grant
and Stock Issuance Programs are as follows:

            (i) Employees,

            (ii) non-employee members of the Board or the board of directors of
any Parent or Subsidiary, and

            (iii) consultants and other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary).

      B. Each Plan Administrator shall, within the scope of its administrative
jurisdiction under the Plan, have full authority to determine: (i) with respect
to the option grants or stock appreciation rights under the Discretionary Option
Grant Program, which eligible persons are to receive grants, the time or times
when such grants are to be made, the number of shares to be covered by each such
grant, the status of a granted option as either an Incentive Option or a
Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding; and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
for such shares.

      C. The Plan Administrator shall have the absolute discretion either to
grant options or stock appreciation rights in accordance with the Discretionary
Option Grant Program or to effect stock issuances in accordance with the Stock
Issuance Program.

V. STOCK SUBJECT TO THE PLAN

      A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
initially reserved for issuance over the term of the Plan shall not exceed
2,215,000 shares.

      B. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) those options
expire or terminate for any reason prior to exercise in full or (ii) the options
are cancelled in accordance with the cancellation-regrant provisions of Article
Two. Unvested shares issued under the Plan and subsequently cancelled or
repurchased by the Corporation at the original exercise or issue price paid per
share, pursuant to the Corporation's repurchase rights under the Plan, shall be
added back to the number of shares of Common Stock reserved for issuance under
the Plan and shall accordingly be available for reissuance through one or more
subsequent option grants or direct stock issuances under the Plan. In addition,
should the exercise price of an option under the Plan be paid with shares of
Common Stock or should shares of Common Stock otherwise issuable under the Plan
be withheld by the Corporation in satisfaction of the withholding taxes incurred
in connection with the exercise of an option or the vesting of a stock issuance
under the Plan, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced only by the net number of shares of Common Stock
issued to the holder of such option or stock issuance, and not by the gross
number of shares for which the option is exercised or which vest under the stock
issuance. However, shares of Common Stock underlying one or more stock
appreciation rights exercised under Section V of Article Two of the Plan shall
not be available for subsequent issuance under the Plan.


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      C. If any change is made to the Common Stock by reason of any stock split,
stock dividend, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration, appropriate adjustments shall be made
to: (i) the maximum number and/or class of securities issuable under the Plan;
(ii) the number and/or class of securities for which any one person may be
granted stock options and direct stock issuances under this Plan per calendar
year; and (iii) the number and/or class of securities and the exercise price per
share in effect under each outstanding option under the Plan. Such adjustments
to the outstanding options are to be effected in a manner which shall preclude
the enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.

                                   ARTICLE TWO

                       DISCRETIONARY OPTION GRANT PROGRAM

I. OPTION TERMS

      Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such option.

      A. EXERCISE PRICE.

      1. The exercise price per share shall be fixed by the Plan Administrator
but shall not be less than eighty-five percent (85%) of the Fair Market Value
per share of Common Stock on the option grant date, except that the exercise
price shall not be less than one hundred ten percent (110%) of the Fair Market
Value per share of Common Stock on the option grant date in the case of any
person who owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation or its parent
or subsidiary corporations.

      2. The exercise price shall become immediately due upon exercise of the
option and may, subject to the provisions of Section I of Article Four and the
documents evidencing the option, be payable in one or more of the forms
specified below:

            (i) cash or check made payable to the Corporation,


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            (ii) with respect to the exercise of options after the Section 12
Registration Date, shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date, or

            (iii) with respect to the exercise of options for vested shares
after the Section 12 Registration Date and to the extent the sale complies with
all applicable laws relating to the regulation and sale of securities, through a
special sale and remittance procedure pursuant to which the Optionee shall
concurrently provide irrevocable written instructions to: (a) a
Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be withheld by the
Corporation by reason of such exercise; and (b) the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in order
to complete the sale.

      Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

      B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at such
time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.

      C. EFFECT OF TERMINATION OF SERVICE.

      1. The following provisions shall govern the exercise of any options held
by the Optionee at the time of cessation of Service or death:

            (i) Any option outstanding at the time of the Optionee's cessation
of Service for any reason shall remain exercisable for such period of time
thereafter as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option.

            (ii) Any option held by the Optionee at the time of death and
exercisable in whole or in part at that time may be subsequently exercised by
the personal representative of the Optionee's estate or by the person or persons
to whom the option is transferred pursuant to the Optionee's will or in
accordance with the laws of descent and distribution of by the Optionee's
designated beneficiary or beneficiaries of that option.

            (iii) Should the Optionee's Service be terminated for Misconduct or
should the Optionee otherwise engage in Misconduct while holding one or more
outstanding options under this Article Two, then all those options shall
terminate immediately and cease to be outstanding.

            (iv) During the applicable post-Service exercise period, the option
may not be exercised in the aggregate for more than the number of vested shares
for which the option is exercisable on the date of the Optionee's cessation of
Service. Upon the expiration of the applicable exercise period or (if earlier)
upon the expiration of the option term, the option shall terminate and cease to
be outstanding for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the Optionee's cessation
of Service, terminate and cease to be outstanding to the extent the option is
not otherwise at that time exercisable for vested shares.


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<PAGE>

      2. The Plan Administrator shall have complete discretion, either at the
time an option is granted or at any time while the option remains outstanding,
to:

            (i) extend the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service from the limited
exercise period otherwise in effect for that option to such greater period of
time as the Plan Administrator shall deem appropriate, but in no event beyond
the expiration of the option term, and/or

            (ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of vested
shares of Common Stock for which such option is exercisable at the time of the
Optionee's cessation of Service but also with respect to one or more additional
installments in which the Optionee would have vested had the Optionee continued
in Service.

      D. NO STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.

      E. REPURCHASE RIGHTS. The Plan Administrator shall have the discretion to
grant options which are exercisable for unvested shares of Common Stock. Should
the Optionee cease Service while holding such unvested shares, the Corporation
shall have the right to repurchase, at the exercise price paid per share, any or
all of those unvested shares. The terms upon which such repurchase right shall
be exercisable (including the period and procedure for exercise and the
appropriate vesting schedule for the purchased shares) shall be established by
the Plan Administrator and set forth in the document evidencing such repurchase
right.

      F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. Non-Statutory Options shall be
subject to the same limitation, except that a Non-Statutory Option may be
assigned in whole or in part during Optionee's lifetime to one or more members
of the Optionee's Immediate Family or to a trust established for the exclusive
benefit of one or more family members or the Optionee's former spouse, to the
extent such assignment is in connection with Optionee's estate plan or pursuant
to a domestic relations order. The assigned portion shall be exercisable only by
the person or persons who acquire a proprietary interest in the option pursuant
to such assignment. The terms applicable to the assigned portion shall be the
same as those in effect for this option immediately prior to such assignment and
shall be set forth in such documents issued to the assignee as the Plan
Administrator may deem appropriate. Notwithstanding the foregoing, the Optionee
may also designate one or more persons as the beneficiary or beneficiaries of
his or her outstanding options under this Article Two, and those options shall,
in accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionee's death while holding those
options. Such beneficiary or beneficiaries shall take the transferred option
subject to all the terms and conditions of this Agreement, including (without
limitation) the limited time period during which the option may be exercised
following the Optionee's death.


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<PAGE>

II. INCENTIVE OPTIONS

            The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Four shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options when
issued under the Plan shall NOT be subject to the terms of this Section II.

            A. ELIGIBILITY. Incentive Options may only be granted to Employees.

            B. EXERCISE PRICE. The exercise price per share shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.

            C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.

            D. FAILURE TO QUALIFY AS INCENTIVE OPTION. To the extent that any
option governed by this Plan does not qualify as an Incentive Option by reason
of the dollar limitation described in Section II.C of Article Two or for any
other reason, such option shall be exercisable as a Non-Statutory Option under
the Federal tax laws.

            E. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.

III. CANCELLATION AND REGRANT OF OPTIONS

      The Plan Administrator shall have the authority to effect, at any time and
from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program and to grant in substitution new options covering the same or
different number of shares of Common Stock but with an exercise price per share
based on the Fair Market Value per share of Common Stock on the new grant date.

IV. CHANGE IN CONTROL/HOSTILE TAKE-OVER

            A. No option outstanding at the time of a Change in Control shall
become exercisable on an accelerated basis if and to the extent: (i) that option
is, in connection with the Change in Control, assumed by the successor
corporation (or parent thereof) or otherwise continued in full force and effect
pursuant to the terms of the Change in Control transaction, (ii) such option is
replaced with a cash incentive program of the successor corporation which
preserves the spread existing at the time of the Change in Control on the shares
of Common Stock for which the option is not otherwise at that time exercisable
and provides for subsequent payout in accordance with the same exercise/vesting
schedule applicable to those option shares or (iii) the acceleration of such
option is subject to other limitations imposed by the Plan Administrator at the
time of the option grant. However, if none of the foregoing conditions are
satisfied, then each option outstanding at the time of the Change in Control but
not otherwise exercisable for all the shares of Common Stock at that time
subject to such option shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Change in Control, become
exercisable for all the shares of Common Stock at the time subject to such
option and may be exercised for any or all of those shares as fully vested
shares of Common Stock.


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      B. All of the Corporation's outstanding repurchase rights under the
Discretionary Option Grant Program shall also terminate automatically, and the
shares of Common Stock subject to those terminated rights shall immediately vest
in full, in the event of any Change in Control, except to the extent: (i) those
repurchase rights are assigned to the successor corporation (or parent thereof)
or otherwise continued in full force and effect pursuant to the terms of the
Change in Control transaction or (ii) such accelerated vesting is precluded by
other limitations imposed by the Plan Administrator at the time the repurchase
right is issued.

      C. Immediately following the consummation of the Change in Control, all
outstanding options shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation (or parent thereof) or otherwise
expressly continued in full force and effect pursuant to the terms of the Change
in Control transaction.

      D. Each option which is assumed in connection with a Change in Control or
otherwise continued in effect shall be appropriately adjusted, immediately after
such Change in Control, to apply to the number and class of securities which
would have been issuable to the Optionee in consummation of such Change in
Control had the option been exercised immediately prior to such Change in
Control. Appropriate adjustments to reflect such Change in Control shall also be
made to: (i) the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
the same; (ii) the maximum number and/or class of securities available for
issuance over the remaining term of the Plan; and (iii) the maximum number
and/or class of securities for which any one person may be granted options,
separately exercisable stock appreciation rights and direct stock issuances or
share right awards under the Plan per calendar year. To the extent the actual
holders of the Corporation's outstanding Common Stock receive cash consideration
for their Common Stock in consummation of the Change in Control transaction, the
successor corporation may, in connection with the assumption of the outstanding
options under the Discretionary Option Grant Program, substitute one or more
shares of its own common stock with a fair market value equivalent to the cash
consideration paid per share of Common Stock in such Change in Control
transaction.

      E. The Plan Administrator shall have the discretionary authority to
structure one or more outstanding options under the Discretionary Option Grant
Program so that those options shall, immediately prior to the effective date of
a Change in Control, become exercisable for all the shares of Common Stock at
that time subject to such options on an accelerated basis and may be exercised
for any or all of such shares as fully vested shares of Common Stock, whether or
not those options are to be assumed or otherwise continued in full force and
effect pursuant to the express terms of the Change in Control transaction. In
addition, the Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the
Discretionary Option Grant Program so that those rights shall immediately
terminate at the time of such Change in Control and shall not be assignable to
the successor corporation (or parent thereof), and the shares subject to those
terminated rights shall accordingly vest in full at the time of such Change in
Control.

      F. The Plan Administrator shall have full power and authority to structure
one or more outstanding options under the Discretionary Option Grant Program so
that those options shall vest and become exercisable for all the shares of
Common Stock at that time subject to such options on an accelerated basis in the
event the Optionee's Service is subsequently terminated by reason of an
Involuntary Termination within a designated period (not to exceed eighteen (18)
months) following the effective date of any Change in Control in which those
options do not otherwise accelerate. Any options so accelerated shall remain
exercisable for fully vested shares of Common Stock until the expiration or
sooner termination of the option term. In addition, the Plan Administrator may
structure one or more of the Corporation's repurchase rights under the
Discretionary Option Grant Program so that those rights shall immediately
terminate with respect to any shares of Common Stock held by the Optionee at the
time of his or her Involuntary Termination, and the shares subject to those
terminated repurchase rights shall accordingly vest in full at that time.


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      G. The Plan Administrator shall have the discretionary authority to
structure one or more outstanding options under the Discretionary Option Grant
Program so that those options shall, immediately prior to the effective date of
a Hostile Take-Over, vest and become exercisable for all the shares of Common
Stock at that time subject to such options on an accelerated basis and may be
exercised for any or all of such shares as fully vested shares of Common Stock.
In addition, the Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the
Discretionary Option Grant Program so that those rights shall terminate
automatically upon the consummation of such Hostile Take-Over, and the shares
subject to those terminated rights shall thereupon immediately vest in full.
Alternatively, the Plan Administrator may condition the automatic acceleration
of one or more outstanding options under the Discretionary Option Grant Program
and the termination of one or more of the Corporation's outstanding repurchase
rights under such program upon the Involuntary Termination of the Optionee's
Service within a designated period (not to exceed eighteen (18) months)
following the effective date of such Hostile Take-Over. Each option so
accelerated shall remain exercisable for fully vested shares of Common Stock
until the expiration or sooner termination of the option term.

      H. The portion of any Incentive Option accelerated in connection with a
Change in Control or Hostile Take-Over shall remain exercisable as an Incentive
Option only to the extent the applicable One Hundred Thousand Dollar ($100,000)
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a Non-Statutory
Option under the Federal tax laws.

      I. The grant of options under the Discretionary Option Grant Program shall
in no way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

V. STOCK APPRECIATION RIGHTS

      The Plan Administrator may, subject to such conditions as it may
determine, grant to selected Optionee's stock appreciation rights which will
allow the holders of those rights to elect between the exercise of the
underlying option for shares of Common Stock and the surrender of that option in
exchange for a distribution from the Corporation in an amount equal to the
excess of: (A) the Option Surrender Value of the number of shares for which the
option is surrendered; over (B) the aggregate exercise price payable for such
shares. The distribution may be made in shares of Common Stock valued at Fair
Market Value on the option surrender date, in cash, or partly in shares and
partly in cash, as the Plan Administrator shall in its sole discretion deem
appropriate.


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                                  ARTICLE THREE

                             STOCK ISSUANCE PROGRAM

I. STOCK ISSUANCES

      Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.

II. STOCK ISSUANCE TERMS

      A. PURCHASE PRICE.

      1. The purchase price per share shall be fixed by the Plan Administrator,
but shall not be less than eighty-five percent (85%) of the Fair Market Value
per share of Common Stock on the issuance date, except that the exercise price
shall not be less than one hundred percent (100%) of the Fair Market Value per
share of Common Stock on the issuance date in the case of any person who owns
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Corporation or its parent or subsidiary
corporations.

      2. Subject to the provisions of Section I of Article Four, shares of
Common Stock may be issued under the Stock Issuance Program for any of the
following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:

            (i) cash or check made payable to the Corporation, or

            (ii) past services rendered to the Corporation (or any Parent or
Subsidiary).

      B. VESTING PROVISIONS.

      1. Shares of Common Stock issued under the Stock Issuance Program may, in
the discretion of the Plan Administrator, be fully and immediately vested upon
issuance or may vest in one or more installments over the Participant's period
of Service or upon attainment of specified performance objectives. The elements
of the vesting schedule applicable to any unvested shares of Common Stock issued
under the Stock Issuance Program shall be determined by the Plan Administrator
and incorporated into the Stock Issuance Agreement. Shares of Common Stock may
also be issued under the Stock Issuance Program pursuant to share right awards
which entitle the recipients to receive those shares upon the attainment of
designated performance goals. Upon the attainment of such performance goals,
fully vested shares of Common Stock shall be issued upon satisfaction of those
share right awards.

      2. Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to: (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock;
and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.

      3. The Participant shall have full stockholder rights with respect to any
shares of Common Stock issued to the Participant under the Stock Issuance
Program, whether or not the Participant's interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares.


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      4. Should the Participant cease to remain in Service while holding one or
more unvested shares of Common Stock issued under the Stock Issuance Program or
should the performance objectives not be attained with respect to one or more
such unvested shares of Common Stock, then those shares shall be immediately
surrendered to the Corporation for cancellation, and the Participant shall have
no further stockholder rights with respect to those shares. To the extent the
surrendered shares were previously issued to the Participant for consideration
paid in cash or cash equivalent (including the Participant's purchase-money
indebtedness), the Corporation shall repay to the Participant the cash
consideration paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase-money note of the Participant
attributable to the surrendered shares.

      5. The Plan Administrator may in its discretion waive the surrender and
cancellation of one or more unvested shares of Common Stock which would
otherwise occur upon the cessation of the Participant's Service or the
non-attainment of the performance objectives applicable to those shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant's cessation of Service or the
attainment or non-attainment of the applicable performance objectives.

      6. Outstanding share right awards under the Stock Issuance Program shall
automatically terminate, and no shares of Common Stock shall actually be issued
in satisfaction of those awards, if the performance goals or Service
requirements established for such awards are not attained. The Plan
Administrator, however, shall have the discretionary authority to issue shares
of Common Stock under one or more outstanding share right awards as to which the
designated performance goals or Service requirements have not been attained.

III. CHANGE IN CONTROL/HOSTILE TAKE-OVER

      A. All of the Corporation's outstanding repurchase rights under the Stock
Issuance Program shall terminate automatically, and all the shares of Common
Stock subject to those terminated rights shall immediately vest in full, in the
event of any Change in Control, except to the extent (i) those repurchase rights
are assigned to the successor corporation (or parent thereof) or otherwise
continued in full force and effect pursuant to the express terms of the Change
in Control transaction or (ii) such accelerated vesting is precluded by other
limitations imposed in the Stock Issuance Agreement.

      B. The Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the Stock
Issuance Program so that those rights shall automatically terminate in whole or
in part upon the occurrence of a Change in Control and shall not be assignable
to the successor corporation (or parent thereof), and the shares of Common Stock
subject to those terminated rights shall immediately vest in full at the time of
such Change in Control.

      C. The Plan Administrator shall also have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the Stock
Issuance Program so that those rights shall automatically terminate in whole or
in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, upon the Involuntary Termination of the Participant's
Service within a designated period (not to exceed eighteen (18) months)
following the effective date of any Change in Control in which those repurchase
rights do not otherwise terminate.


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      D. The Plan Administrator shall also have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the Stock
Issuance Program so that those rights shall automatically terminate in whole or
in part upon the occurrence of a Hostile Take-Over, and the shares of Common
Stock subject to those terminated rights shall immediately vest in full at the
time of such Hostile Take-Over.

                                  ARTICLE FOUR
                                  MISCELLANEOUS

I. FINANCING

      The Plan Administrator may permit any Optionee or Participant to pay the
option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.

II. SHARE ESCROW/LEGENDS

      Unvested shares issued under the Plan may, in the Plan Administrator's
discretion, be held in escrow by the Corporation until the Participant's
interest in such shares vests or may be issued directly to the Participant with
restrictive legends on the certificates evidencing those unvested shares.

III. VESTING

      Notwithstanding any other provision of this Plan, the vesting schedule
imposed with respect to any option grant, share issuance or the lapse of any
repurchase right shall not result in the Optionee or Participant vesting or a
repurchase right lapsing at a rate of less than 20% per year for five years from
the date of the option grant or share issuance.

IV. TAX WITHHOLDING

      A. The Corporation's obligation to deliver shares of Common Stock upon the
exercise of options or the issuance or vesting of such shares under the Plan
shall be subject to the satisfaction of all applicable Federal, state and local
income and employment tax withholding requirements.

      B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan with the right to use shares of Common Stock in satisfaction of all or part
of the Taxes incurred by such holders in connection with the exercise of their
options or the vesting of their shares. Such right may be provided to any such
holder in either or both of the following formats:

            1. Stock Withholding: The election to have the Corporation withhold,
from the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the amount of the Taxes (not to
exceed one hundred percent (100%) of such Taxes) to be satisfied in such manner
as designated by the holder in writing; or


                                       11
<PAGE>

            2. Stock Delivery: The election to deliver to the Corporation, at
the time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Taxes) with
an aggregate Fair Market Value equal to the amount of the Taxes (not to exceed
one hundred percent (100%) of such Taxes) to be satisfied in such manner as
designated by the holder in writing.

V. EFFECTIVE DATE AND TERM OF THE PLAN

      A. The Plan shall become effective immediately upon the Plan Effective
Date. Options may be granted under the Discretionary Option Grant at any time on
or after the Plan Effective Date. However, no options granted under the Plan may
be exercised, and no shares shall be issued under the Plan, until the Plan is
approved by the Corporation's stockholders. If such stockholder approval is not
obtained within twelve (12) months after the Plan Effective Date, then all
options previously granted under this Plan shall terminate and cease to be
outstanding, and no further options shall be granted and no shares shall be
issued under the Plan.

      B. The Plan shall terminate upon the EARLIEST of (i) the tenth anniversary
of the Plan Effective Date, (ii) the date on which all shares available for
issuance under the Plan shall have been issued as fully-vested shares or (iii)
the termination of all outstanding options in connection with a Change in
Control. Upon such plan termination, all outstanding option grants and unvested
stock issuances shall thereafter continue to have force and effect in accordance
with the provisions of the documents evidencing such grants or issuances.

VI. AMENDMENT OF THE PLAN

      A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
stock options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws or regulations.

      B. Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant Program and shares of Common Stock may be issued
under the Stock Issuance Program that are in each instance in excess of the
number of shares then available for issuance under the Plan, provided any excess
shares actually issued under those programs shall be held in escrow until there
is obtained any required approval of an amendment sufficiently increasing the
number of shares of Common Stock available for issuance under the Plan. If such
approval is not obtained within twelve (12) months after the date the first such
excess issuances are made, then (i) any unexercised options granted on the basis
of such excess shares shall terminate and cease to be outstanding and (ii) the
Corporation shall promptly refund to the Optionees and the Participants the
exercise or purchase price paid for any excess shares issued under the Plan and
held in escrow, together with interest (at the applicable Short Term Federal
Rate) for the period the shares were held in escrow, and such shares shall
thereupon be automatically cancelled and cease to be outstanding.

VII. USE OF PROCEEDS

      Any cash proceeds received by the Corporation from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes.


                                       12
<PAGE>

VIII. REGULATORY APPROVALS

      A. The implementation of the Plan, the granting of any stock option under
the Plan and the issuance of any shares of Common Stock (i) upon the exercise of
any granted option or (ii) under the Stock Issuance Program shall be subject to
the Corporation's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.

      B. No shares of Common Stock or other assets shall be issued or delivered
under the Plan unless and until there shall have been compliance with all
applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any Stock Exchange (or a Nasdaq market or the Over-the-Counter Bulletin
Board, as applicable) on which Common Stock is then listed for trading.

IX. NO EMPLOYMENT/SERVICE RIGHTS

      Nothing in the Plan shall confer upon the Optionee or the  Participant any
right to continue in Service  for any period of specific  duration or  interfere
with or  otherwise  restrict  in any way the rights of the  Corporation  (or any
Parent or Subsidiary  employing or retaining  such person) or of the Optionee or
the  Participant,  which  rights  are  hereby  expressly  reserved  by each,  to
terminate  such  person's  Service at any time for any  reason,  with or without
cause.

X. FINANCIAL REPORTS

      The Corporation  shall deliver a balance and an income  statement at least
annually to each individual holding an outstanding option under the Plan, unless
such  individual  is  a  key  Employee  whose  duties  in  connection  with  the
Corporation  (or any Parent or  Subsidiary)  assure  such  individual  access to
equivalent information.


                 REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK


                                       13
<PAGE>

                                    APPENDIX

      The following definitions shall be in effect under the Plan:

      A. BOARD shall mean the Corporation's Board of Directors.

      B. CHANGE IN CONTROL  shall mean a change in  ownership  or control of the
Corporation effected through any of the following transactions:

            (i)  a   stockholder-approved   merger  or  consolidation  in  which
securities possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately prior to
such transaction;

            (ii) a sale,  transfer or other  disposition of all or substantially
all of the Corporation's assets; or

            (iii) the  acquisition,  directly  or  indirectly  by any  person or
related group of persons  (other than the  Corporation or a person that directly
or indirectly  controls,  is controlled by, or is under common control with, the
Corporation),  of beneficial  ownership (within the meaning of Rule 13d-3 of the
1934 Act) of  securities  possessing  more than fifty percent (50%) of the total
combined voting power of the Corporation's  outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's  stockholders  which
the Board recommends such stockholders accept.

      C. CODE shall mean the Internal Revenue Code of 1986, as amended.

      D. COMMON STOCK shall mean the Corporation's common stock.

      E. CORPORATION shall mean Innovative Card  Technologies,  Inc., a Delaware
corporation, and its successors.

      F. DISCRETIONARY  OPTION GRANT PROGRAM shall mean the discretionary option
grant program in effect under the Plan.

      G.  EMPLOYEE  shall  mean  an  individual  who  is in  the  employ  of the
Corporation (or any Parent or Subsidiary),  subject to the control and direction
of the employer  entity as to both the work to be  performed  and the manner and
method of performance.

      H. EXERCISE DATE shall mean the date on which the  Corporation  shall have
received written notice of the option exercise.

      I. FAIR MARKET VALUE per share of Common Stock on any relevant  date shall
be determined in accordance with the following provisions:

            (i) If the Common Stock is at the time traded on any Nasdaq  market,
national  quotation  system, or bulletin board, then the Fair Market Value shall
be deemed  equal to the closing  selling  price per share of Common Stock on the
date in question,  as such price is reported on thereon.  If there is no closing
selling price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing  selling price on the last  preceding  date for which
such quotation exists.


                                       14
<PAGE>

            (ii)  If  the  Common  Stock  is at the  time  listed  on any  Stock
Exchange,  then the Fair  Market  Value  shall be  deemed  equal to the  closing
selling  price per share of Common  Stock on the date in  question  on the Stock
Exchange  determined by the Plan  Administrator to be the primary market for the
Common  Stock,  as such  price is  officially  quoted in the  composite  tape of
transactions  on such  exchange.  If there is no closing  selling  price for the
Common  Stock on the date in  question,  then the Fair Market Value shall be the
closing  selling  price on the last  preceding  date for  which  such  quotation
exists.

            (iii) If the  Common  Stock can not be  determined  pursuant  to the
foregoing  sections,  then the Fair Market Value shall be determined by the Plan
Administrator  after taking into account such factors as the Plan  Administrator
shall deem appropriate.

      J. HOSTILE TAKE-OVER shall mean:

            (i) the  acquisition,  directly  or  indirectly,  by any  person  or
related group of persons  (other than the  Corporation or a person that directly
or indirectly  controls,  is controlled by, or is under common control with, the
Corporation)  of beneficial  ownership  (within the meaning of Rule 13d-3 of the
1934 Act) of  securities  possessing  more than fifty percent (50%) of the total
combined voting power of the Corporation's  outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's  stockholders  which
the Board does not recommend such stockholders to accept; or

            (ii) a change  in the  composition  of the  Board  over a period  of
thirty-six  (36)  consecutive  months or less such that a majority  of the Board
members  ceases,  by  reason  of one  or  more  contested  elections  for  Board
membership,  to be  comprised  of  individuals  who either:  (a) have been Board
members  continuously  since  the  beginning  of such  period;  or (b) have been
elected or  nominated  for  election as Board  members  during such period by at
least a majority of the Board members  described in clause (a) who were still in
office at the time the Board approved such election or nomination.

      K. IMMEDIATE FAMILY shall mean any child, stepchild,  grandchild,  parent,
stepparent,   grandparent,   spouse,  sibling,   mother-in-law,   father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include
adoptive relationships.

      L. INCENTIVE  OPTION shall mean an option which satisfies the requirements
of Code Section 422.

      M.  INVOLUNTARY  TERMINATION  shall mean the termination of the Service of
any individual which occurs by reason of:

            (i) such  individual's  involuntary  dismissal  or  discharge by the
Corporation for reasons other than Misconduct, or

            (ii) such individual's  voluntary resignation following (A) a change
in his or her position with the Corporation which materially  reduces his or her
level of  responsibility,  (B) a reduction  in his or her level of  compensation
(including   base   salary,   fringe   benefits   and   participation   in   any
corporate-performance  based bonus or  incentive  programs) by more than fifteen
percent  (15%) or (C) a relocation of such  individual's  place of employment by
more than fifty (50)  miles,  provided  and only if such  change,  reduction  or
relocation is effected by the Corporation without the individual's consent.

      N. MISCONDUCT shall mean the commission of any act of fraud,  embezzlement
or dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such person of  confidential  information or trade secrets of the Corporation
(or any  Parent or  Subsidiary),  or any other  intentional  misconduct  by such
person  adversely  affecting the business or affairs of the  Corporation (or any
Parent or Subsidiary) in a material manner.  The foregoing  definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee,  Participant or other person in the Service of the  Corporation
(or any Parent or Subsidiary).


                                       15
<PAGE>

      O. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.

      P.  NON-STATUTORY  OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.

      Q.  OPTIONEE  shall mean any person to whom an option is granted under the
Discretionary Option Grant Program.

      R. OPTION  SURRENDER  VALUE shall mean the Fair Market  Value per share of
Common Stock on the date the option is surrendered to the Corporation or, in the
event of a Hostile  Take-Over,  effected  through a tender  offer,  the  highest
reported  price  per  share  of  Common  Stock  paid by the  tender  offer or in
effecting such Hostile Take-Over, if greater. However, if the surrendered option
is an Incentive  Option,  the Option  Surrender  Value shall not exceed the Fair
Market Value per share.

      S. PARENT shall mean any  corporation  (other than the  Corporation) in an
unbroken  chain of  corporations  ending  with the  Corporation,  provided  each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination,  stock possessing fifty percent (50%) or more of the total
combined  voting power of all classes of stock in one of the other  corporations
in such chain.

      T. PARTICIPANT  shall mean any person who is issued shares of Common Stock
under the Stock Issuance Program.

      U. PERMANENT  DISABILITY OR PERMANENTLY  DISABLED shall mean the inability
of the Optionee or the Participant to engage in any substantial gainful activity
by reason of any medically  determinable physical or mental impairment which can
be  expected  to result in death or has lasted or can be  expected to last for a
continuous period of twelve (12) months or more.

      V. PLAN shall mean the  Corporation's  2004 Stock  Incentive  Plan, as set
forth in this document.

      W. PLAN  ADMINISTRATOR  shall  mean the  particular  entity,  whether  the
Primary Committee, the Board or the Secondary Committee,  which is authorized to
administer  the  Discretionary  Option Grant and Stock  Issuance  Programs  with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its  administrative  functions under those programs with respect to
the persons under its jurisdiction.

      X. PLAN  EFFECTIVE  DATE shall mean the date on which the Plan was adopted
by the Board.

      Y.  PRIMARY  COMMITTEE  shall  mean  the  committee  of two  (2)  or  more
non-employee   Board  members   appointed  by  the  Board  to   administer   the
Discretionary  Option Grant and Stock Issuance  Programs with respect to Section
16 Insiders following the Section 12 Registration Date.

      Z.  SECONDARY  COMMITTEE  shall mean a committee  of two (2) or more Board
members  appointed  by the Board to  administer  any aspect of Plan not required
hereunder  to be  administered  by the  Primary  Committee.  The  members of the
Secondary  Committee may be Board members who are Employees  eligible to receive
discretionary  option  grants or direct  stock  issuances  under the Plan or any
other stock option,  stock appreciation,  stock bonus or other stock plan of the
Corporation (or any Parent or Subsidiary).


                                       16
<PAGE>

      AA. SECTION 12  REGISTRATION  DATE shall mean the date on which the Common
Stock is first registered under Section 12(g) or Section 15 of the 1934 Act.

      BB.  SECTION  16  INSIDER  shall  mean  an  officer  or  director  of  the
Corporation  subject to the short-swing  profit liabilities of Section 16 of the
1934 Act.

      CC. SERVICE shall mean the performance of services for the Corporation (or
any  Parent  or  Subsidiary)  by a person  in the  capacity  of an  Employee,  a
non-employee  member of the board of directors or a  consultant  or  independent
advisor,  except to the extent otherwise  specifically provided in the documents
evidencing the option grant or stock issuance.

      DD.  SHORT TERM  FEDERAL  RATE shall mean the federal  short-term  rate in
effect under Section  1274(d) of the Code for the period the shares were held in
escrow.

      EE. STOCK  EXCHANGE  shall mean either the American  Stock Exchange or the
New York Stock Exchange.

      FF. STOCK ISSUANCE  AGREEMENT shall mean the agreement entered into by the
Corporation  and the  Participant  at the time of  issuance  of shares of Common
Stock under the Stock Issuance Program.

      GG. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect
under the Plan.

      HH. SUBSIDIARY shall mean any corporation  (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation,  provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the  determination,  stock possessing fifty percent (50%) or more of the
total  combined  voting  power  of all  classes  of  stock  in one of the  other
corporations in such chain.

      II.  TAXES shall mean the Federal,  state and local income and  employment
tax  liabilities  incurred  by the holder of  Non-Statutory  Options or unvested
shares of Common Stock in  connection  with the exercise of those options or the
vesting of those shares.

      JJ. 10%  STOCKHOLDER  shall mean the owner of stock (as  determined  under
Code  Section  424(d))  possessing  more  than ten  percent  (10%) of the  total
combined  voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).

                                       17