Document:

EXHIBIT 10.1

 

E-Z-EM, INC.

INDEMNIFICATION AGREEMENT 

 

This INDEMNIFICATION AGREEMENT (this “Agreement”) is made as of October 31, 2007, by and between E-Z-EM, Inc., a Delaware corporation (the “Company”), and [__________] (the “Indemnitee”).

WHEREAS, it is essential to the Company to retain and attract as directors and officers the most capable persons available;

WHEREAS, the Indemnitee is a director or officer of the Company;

WHEREAS, the Company and the Indemnitee recognize the increased risk of litigation and other claims being asserted against directors and officers of companies in today’s environment;

WHEREAS, basic protection against undue risk of personal liability of directors and officers heretofore has been provided through insurance coverage providing reasonable protection at reasonable cost, and the Indemnitee has relied on the availability of such coverage; but as a result of substantial changes in the marketplace for such insurance it has become increasingly difficult to obtain such insurance on terms providing reasonable protection at reasonable cost;

WHEREAS, the Company’s By-Laws (as amended from time to time, the “By-Laws”) require the Company to indemnify and advance expenses to its directors and officers to the extent provided therein, and the Indemnitee serves as a director or officer of the Company, in part, in reliance on such provisions in the By-Laws; 

WHEREAS, the current difficulty in obtaining adequate director and officer liability insurance coverage at a reasonable cost, and uncertainties as to the availability of indemnification created by recent court decisions, have increased the risk that the Company will be unable to retain and attract as directors and officers the most capable persons available;

WHEREAS, the Company has determined that its inability to retain and attract as directors and officers the most capable persons would be detrimental to the interests of the Company, and that Company therefore should seek to assure such persons that indemnification and insurance coverage will be available in the future; and

WHEREAS, in recognition of the Indemnitee’s need for substantial protection against personal liability in order to enhance the Indemnitee’s continued service to the Company in an effective manner, the increasing difficulty in obtaining satisfactory director and officer liability insurance coverage, and the Indemnitee’s reliance on the By-Laws, and in part to provide the Indemnitee with specific contractual assurance that the protection promised by the By-Laws will be available to the Indemnitee (regardless of, among other things, any amendment to or revocation of the 

 

 

applicable provisions of the By-Laws or any change in the composition of the governing bodies of the Company or acquisition transaction relating to the Company), the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to the Indemnitee to the fullest extent (whether partial or complete) permitted by law and as set forth in this Agreement, and, to the extent insurance is maintained, for the continued coverage of the Indemnitee under the directors’ and officers’ liability insurance policy of the Company.

NOW, THEREFORE, in consideration of the premises and of the Indemnitee continuing to serve the Company directly or, at its request, as an officer, director, manager, member, partner, tax matters partner, fiduciary or trustee of, or in any other capacity with, another Person (as defined below) or any employee benefit plan, and intending to be legally bound hereby, the parties hereto agree as follows:

1.          Certain Definitions.  In addition to terms defined elsewhere herein, the following terms have the following meanings when used in this Agreement:

	
            (a)
 	
            Board of Directors:  shall mean the Board of Directors of the Company.
 
	
            (b)
 	
            Change in Control:  shall be deemed to have occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company’s then outstanding Voting Securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 50% of the total voting power represented by the Voting Securities of the Company or such 
 

 

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surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of transactions) all or substantially all of the Company’s assets.

	
            (c)
 	
            Claim:  means any threatened, asserted, pending or completed civil, criminal, administrative, investigative or other action, suit or proceeding, or appeal thereof, or any inquiry or investigation, whether instituted by the Company, any governmental agency or any other party, that the Indemnitee in good faith believes might lead to the institution of any such action, suit or proceeding, whether civil, criminal, administrative, investigative or other, including any arbitration or other alternative dispute resolution mechanism.
 
	
            (d)
 	
            Indemnifiable Expenses:  means (i) all expenses and liabilities, including judgments, fines, penalties, interest, amounts paid in settlement with the approval of the Company, and counsel fees and disbursements (including, without limitation, experts’ fees, court costs, retainers, transcript fees, duplicating, printing and binding costs, as well as telecommunications, postage and courier charges) paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to investigate, defend, be a witness in or participate in, any Claim relating to any Indemnifiable Event, (ii) any liability pursuant to a loan guaranty or otherwise, for any indebtedness of the Company or any subsidiary of the Company, including, without limitation, any
indebtedness which the Company or any subsidiary of the Company has assumed or taken subject to, and (iii) any liabilities which an Indemnitee incurs as a result of acting on behalf of the Company (whether as a fiduciary or otherwise) in connection with the operation, administration or maintenance of an employee benefit plan or any related trust or funding mechanism (whether such liabilities are in the form of excise taxes assessed by the United States Internal Revenue Service, penalties assessed by the Department of Labor, restitutions to such a plan or trust or other funding mechanism or to a participant or beneficiary of such plan, trust or other funding mechanism, or otherwise).
 
	
            (e)
 	
            Indemnifiable Event:  means any act or omission, whether occurring before, on or after the date of this Agreement, arising from the performance of the Indemnitee’s duties or obligations to the Company or any of its subsidiaries, including in connection with any civil, criminal, administrative, investigative or other action, suit or proceeding to which the Indemnitee may hereafter 
 

 

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be made a party by reason of being or having been an officer, director, manager, member, partner, tax matters partner, fiduciary or trustee of, or having served in any other capacity with, another Person or any employee benefit plan at the request of the Company.

	
            (f)
 	
            Independent Legal Counsel:  an attorney or firm of attorneys, selected in accordance with the provisions of Section 3, who shall not have otherwise performed services for the Company or Indemnitee within the last five years (other than with respect to matters concerning the rights of Indemnitee under this Agreement, or of other indemnitees under similar indemnity agreements) and shall have significant experience in matters of the type contemplated as being performed by the Independent Legal Counsel under this Agreement.
 
	
            (g)
 	
            Person:  means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity.
 
	
            (h)
 	
            Reviewing Party:  means any appropriate person or body consisting of a member or members of the Board of Directors or any other person or body appointed by the Board of Directors who is not a party to the particular Claim for which Indemnitee is seeking indemnification, or Independent Legal Counsel.
 
	
            (i)
 	
            Voting Securities:  any securities of the Company which vote generally in the election of directors.
 

	
            2.
 	
            Basic Indemnification Arrangement; Advancement of Expenses.
 

(a)        In the event that the Indemnitee was, is or becomes subject to, a party to or witness or other participant in, or is threatened to be made subject to, a party to or witness or other participant in, a Claim by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify the Indemnitee, or cause such Indemnitee to be indemnified, to the fullest extent permitted by Delaware law in effect on the date hereof and as amended from time to time; provided, however, that no change in Delaware law shall have the effect of reducing the benefits available to the Indemnitee hereunder based on Delaware law as in effect on the date hereof or as such benefits may improve as a result of amendments after the date hereof. The rights of the
Indemnitee provided in this Section 2 shall include, without limitation, the rights set forth in the other sections of this Agreement. Payments of Indemnifiable Expenses shall be made as soon as practicable but in any event no later than thirty (30) days after written demand is presented to the Company, against any and all Indemnifiable Expenses.

(b)        If so requested by the Indemnitee, the Company shall advance, or cause to be advanced (within two business days of such request), any and all Indemnifiable Expenses incurred by the Indemnitee (an “Expense Advance”).  The 

 

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Company shall, in accordance with such request (but without duplication), either (i) pay, or cause to be paid, such Indemnifiable Expenses on behalf of the Indemnitee, or (ii) reimburse, or cause the reimbursement of, the Indemnitee for such Indemnifiable Expenses.  The Indemnitee’s right to an Expense Advance is absolute and shall not be subject to any condition that the Reviewing Party shall not have determined that the Indemnitee is not entitled to be indemnified under applicable law.  However, the obligation of the Company to make an Expense Advance pursuant to this Section 2(b) shall be subject to the condition that, if, when and to the extent that a final judicial determination is made (as to which all rights of appeal therefrom have been exhausted or lapsed) that the Indemnitee is not entitled to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by the
Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid (it being understood and agreed that the foregoing agreement by the Indemnitee shall be deemed to satisfy any requirement that the Indemnitee provide the Company with an undertaking to repay any Expense Advance if it is ultimately determined that the Indemnitee is not entitled to indemnification under applicable law).  The Indemnitee’s undertaking to repay such Expense Advances shall be unsecured and interest-free.  

(c)        Notwithstanding anything in this Agreement to the contrary, the Indemnitee shall not be entitled to indemnification or advancement of Indemnifiable Expenses pursuant to this Agreement in connection with any Claim initiated by the Indemnitee unless (i) the Company has joined in or the Board of Directors of the Company has authorized or consented to the initiation of such Claim or (ii) the Claim is one to enforce the Indemnitee’s rights under this Agreement (including an action pursued by the Indemnitee to secure a determination that the Indemnitee should be indemnified under applicable law).

(d)        The indemnification obligations of the Company under Section 2(a) shall be subject to the condition that the Reviewing Party shall not have determined (in a written opinion, in any case in which the Independent Legal Counsel referred to in Section 3 hereof is involved) that the indemnification of the Indemnitee is not proper in the circumstances because the Indemnitee is not entitled to be indemnified under applicable law.  If there has not been a Change in Control, the Reviewing Party shall be selected by the Company’s Board of Directors, and if there has been such a Change in Control, the Reviewing Party shall be the Independent Legal Counsel referred to in Section 3 hereof selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld).  If the Reviewing Party determines that the Indemnitee is
not entitled to be indemnified in whole or in part under applicable law, the Indemnitee shall have the right to commence litigation in any court in the State of Delaware having subject matter jurisdiction thereof and in which venue is proper, seeking an initial determination by the court or challenging any such determination by the Reviewing Party or any aspect thereof, including the legal or factual bases therefor, and the Company hereby consents to service of process and to appear in any such proceeding.  If the Indemnitee commences legal proceedings in a court of competent jurisdiction to secure a determination that the Indemnitee should be indemnified under applicable law, any determination made by the Reviewing Party that the Indemnitee is not entitled to be indemnified under applicable law shall not be binding, the Indemnitee shall continue to 

 

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be entitled to receive Expense Advances, and the Indemnitee shall not be required to reimburse the Company for any Expense Advance, until a final judicial determination is made (as to which all rights of appeal therefrom have been exhausted or lapsed) that the Indemnitee is not entitled to be so indemnified under applicable law.  Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and the Indemnitee.

(e)        To the extent that the Indemnitee has been successful on the merits or otherwise in defense of any or all Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter therein, including dismissal without prejudice, the Indemnitee shall be indemnified against all Indemnifiable Expenses actually and reasonably incurred in connection therewith, notwithstanding an earlier determination by the Reviewing Party that the Indemnitee is not entitled to indemnification under applicable law.

3.          Change in Control.  The Company agrees that if there is a Change in Control of the Company, then with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any other agreement relating to Claims for Indemnifiable Events, the Company shall seek legal advice only from Independent Legal Counsel selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld).  Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent the Indemnitee would be permitted to be indemnified under applicable law.  The Company agrees to pay the reasonable fees of the Independent Legal Counsel referred to above
and to indemnify fully such counsel against any and all expenses (including attorneys’ fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

4.          Indemnification for Additional Expenses.  The Company shall indemnify, or cause the indemnification of, the Indemnitee against any and all Indemnifiable Expenses and, if requested by the Indemnitee, shall advance such Indemnifiable Expenses to the Indemnitee subject to and in accordance with Section 2(b) and (d), which are incurred by the Indemnitee in connection with any action brought by the Indemnitee for (i) indemnification or an Expense Advance by the Company under this Agreement or any provision of the By-Laws and/or (ii) recovery under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether the Indemnitee ultimately is determined to be entitled to such indemnification, Expense Advance or insurance recovery,
as the case may be.

5.          Partial Indemnity, Etc.  If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Indemnifiable Expenses in respect of a Claim but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion thereof to which the Indemnitee is entitled.

6.          Burden of Proof.  In connection with any determination by the Reviewing Party, any court or otherwise as to whether the Indemnitee is entitled to be indemnified 

 

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hereunder, the Reviewing Party or court shall presume that the Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification, and the burden of proof shall be on the Company or its representative to establish, by clear and convincing evidence, that the Indemnitee is not so entitled.

7.          Reliance as Safe Harbor.  The Indemnitee shall be entitled to indemnification for any action or omission to act undertaken (a) in good faith reliance upon the records of the Company, including its financial statements, or upon information, opinions, reports or statements furnished to the Indemnitee by the officers or employees of the Company or any of its subsidiaries in the course of their duties, or by committees of the Board of Directors, or by any other Person as to matters the Indemnitee reasonably believes are within such other Person’s professional or expert competence, or (b) on behalf of the Company in furtherance of the interests of the Company in good faith in reliance upon, and in accordance with, the advice of legal counsel or accountants, provided such
legal counsel or accountants were selected with reasonable care by or on behalf of the Company.  In addition, the knowledge and/or actions, or failures to act, of any director, officer, agent or employee of the Company shall not be imputed to the Indemnitee for purposes of determining the right to indemnity hereunder.

8.          No Other Presumptions.  For purposes of this Agreement, the termination of any claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, shall not create a presumption that the Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law.  In addition, neither the failure of the Reviewing Party to have made a determination as to whether the Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Reviewing Party that the Indemnitee has not met such standard of conduct or did not have such
belief, prior to the commencement of legal proceedings by the Indemnitee to secure a judicial determination that the Indemnitee should be indemnified under applicable law shall be a defense to the Indemnitee’s claim or create a presumption that the Indemnitee has not met any particular standard of conduct or did not have any particular belief.

9.          Nonexclusivity, Etc.  The rights of the Indemnitee hereunder shall be in addition to any other rights the Indemnitee may have under the By-Laws, the laws of the State of Delaware, or otherwise.  To the extent that a change in Delaware law or the interpretation thereof (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the By-Laws, it is the intent of the parties hereto that the Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change.

10.        Liability Insurance.  To the extent the Company maintains an insurance policy or policies providing directors’ and officers’ liability insurance, the Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for the Company directors or officers.

 

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11.        Period of Limitations.  No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against the Indemnitee, the Indemnitee’s spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two-year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern.

12.        Amendments, Etc.  No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

13.        Subrogation.  In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all papers reasonably required and shall do everything that may be reasonably necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.

14.        No Duplication of Payments.  The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against the Indemnitee to the extent the Indemnitee has otherwise actually received payment (under any insurance policy, any provision of the By-Laws, or otherwise) of the amounts otherwise indemnifiable hereunder.

15.        Defense of Claims.  The Company shall be entitled to participate in the defense of any Claim relating to an Indemnifiable Event or to assume the defense thereof, with counsel reasonably satisfactory to the Indemnitee; provided that if the Indemnitee believes, after consultation with counsel selected by the Indemnitee, that (i) the use of counsel chosen by the Company to represent the Indemnitee would present such counsel with an actual or potential conflict of interest, (ii) the named parties in any such Claim (including any impleaded parties) include the Company or any subsidiary of the Company and the Indemnitee and the Indemnitee concludes that there may be one or more legal defenses available to him or her that are different from or in
addition to those available to the Company or any subsidiary of the Company or (iii) any such representation by such counsel would be precluded under the applicable standards of professional conduct then prevailing, then the Indemnitee shall be entitled to retain separate counsel (but not more than one law firm plus, if applicable, local counsel in respect of any particular Claim) at the Company’s expense.  The Company shall not be liable to the Indemnitee under this Agreement for any amounts paid in settlement of any Claim relating to an Indemnifiable Event effected without the Company’s prior written consent.  The Company shall not, without the prior written consent of the Indemnitee, effect any settlement of any Claim relating to an Indemnifiable Event which the Indemnitee is or could have been a party unless such settlement solely involves the 

 

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payment of money, includes a complete and unconditional release of the Indemnitee from all liability on all claims that are the subject matter of such Claim and does not contain any admission of liability or wrongdoing by the Indemnitee.  Neither the Company nor the Indemnitee shall unreasonably withhold its or his or her consent to any proposed settlement; provided that the Indemnitee may withhold consent to any settlement that does not provide a complete and unconditional release of the Indemnitee.

16.        Binding Effect, Etc.  This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives.  The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of the Company, by written agreement in form and substance satisfactory to the Indemnitee and his or her counsel, expressly to assume and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform if no such succession had taken place.  This Agreement shall continue in effect regardless of whether the Indemnitee continues to serve as an officer, manager and/or director of the Company or any other entity or enterprise at the request of the Company.

17.        Security.  To the extent requested by the Indemnitee, the Company shall at any time and from time to time provide security to the Indemnitee for the obligations of the Company hereunder through an irrevocable bank line of credit, funded trust or other collateral or by other means.  Any such security, once provided to the Indemnitee, may not be revoked or released without the prior written consent of such Indemnitee.

18.        Severability.  The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable in any respect, and the validity and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired and shall remain enforceable to the fullest extent permitted by law.

19.        Specific Performance, Etc.  The parties recognize that if any provision of this Agreement is violated by the parties hereto, the Indemnitee may be without an adequate remedy at law.  Accordingly, in the event of any such violation, the Indemnitee shall be entitled, if the Indemnitee so elects, to institute proceedings, either in law or at equity, to obtain damages, to enforce specific performance, to enjoin such violation, or to obtain any relief or any combination of the foregoing as the Indemnitee may elect to pursue.

20.        Notices.   All notices, requests, consents and other communications hereunder to any party shall be deemed to be sufficient if contained in a written document delivered in person or sent by telecopy, nationally recognized overnight courier or personal delivery, addressed to such party at the address set forth below or such other 

 

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address as may hereafter be designated on the signature pages of this Agreement or in writing by such party to the other parties:

	
            (a)
 	
            If to the Company, to:  
 

E-Z-EM, Inc.

1111 Marcus Avenue, 

Lake Success, New York 11042

	
            Fax:
 	
            (516) 302-2918
 	
             

	
            Attn:
 	
            Peter J. Graham,
 

Senior Vice President - Chief Legal Officer

	
            Email:
 	
            pgraham@ezem.com
 

 

with a copy (which shall not constitute notice) to:

Skadden, Arps, Slate, Meagher & Flom LLP

One Rodney Square

Wilmington, DE  19801

	
            Fax:
 	
            (302) 651-3000
 

Attention:  Robert B. Pincus, Esq.

	
            Email:
 	
            bpincus@skadden.com
 

 

	
            (b)
 	
            If to the Indemnitee, to the address set forth on Annex A hereto.
 

All such notices, requests, consents and other communications shall be deemed to have been given or made if and when received (including by overnight courier) by the parties at the above addresses or sent by electronic transmission, with confirmation received, to the telecopy numbers specified above (or at such other address or telecopy number for a party as shall be specified by like notice).  Any notice delivered by any party hereto to any other party hereto shall also be delivered to each other party hereto simultaneously with delivery to the first party receiving such notice.

21.        Counterparts.  This Agreement may be executed in counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same agreement.  Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

22.        Headings.  The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation thereof.

23.        Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such state without giving effect to the principles of conflicts of laws.

 

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24.        Venue and Consent to Jurisdiction.  The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be commenced, prosecuted and continued only in the Court of Chancery of the State of Delaware in and for New Castle County, which shall be the exclusive and only proper forum for adjudicating such a claim

[SIGNATURE PAGE FOLLOWS]

 

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

E-Z-EM, Inc.

	 By:________________________
        

Name:
  

Title:
  

  __________________________

  [Indemnitee]

 

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Annex A

Name and Business Address.

 

	________________________

      ________________________

      ________________________

      ________________________ 
	 Attn:
        ________________________

	 Tel:
        _________________________ 

	 Fax:
        _________________________S-8

Exhibit 4.1  

BLUEPHOENIX SOLUTIONS LTD

BLUEPHOENIX 2003 EMPLOYEE STOCK OPTION PLAN

As amended on December 30, 2004

(former name: CRYSTAL SYSTEMS SOLUTIONS LTD

1996 EMPLOYEE SHARE OPTION PLAN - PART ONE) 

December 30, 2004 

BLUEPHOENIX SOLUTIONS
LTD. 

2003 EMPLOYEE SHARE
OPTION PLAN 

     A. NAME AND PURPOSE 

	1.  	Name. This
plan, as amended from time to time, shall be known as the           “BluePhoenix
2003 Employee Stock Option Plan” (the “Plan”). 

	2.  	Purpose. The
purpose and intent of the Plan is to provide incentives to           employees,
directors, officers and consultants of BluePhoenix Solutions Ltd.           (the “Company”)
and of its subsidiaries and affiliates who are not           controlling shareholders of
the Company, by providing them with opportunities to           purchase Ordinary Shares,
nominal value 0.01 New Israeli Shekels each (the           “Shares”), of the
Company, pursuant to a plan approved by the Board of           Directors of the Company
which with respect to employees of the Company, is           designed to benefit from,
and is made pursuant to, the provisions of           Section 102 of the Israeli
Income Tax Ordinance [New Version], 1961 (the           “Tax Ordinance”), and
the rules and regulations
promulgated thereunder (the “Regulations”). Grant of options to Non –
Israeli residents shall be in accordance with the provisions of Appendix A of this Plan.

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     B. GENERAL TERMS AND CONDTIONS OF THE PLAN 

	3.  	Administration.  

	 	3.1 	The
Plan will be administered by the Board of Directors of the Company (the “Board”)
or by a committee appointed by the Board (the “Committee”), which, if
appointed, will consist of such number of Directors of the Company as may be fixed, from
time to time, by the Board. If a Committee is not appointed, or if it is required under
any law the term Committee, whenever used herein, shall mean the Board. The Board shall
appoint the members of the Committee, may from time to time remove members from, or add
members to, the Committee and shall fill vacancies in the Committee however caused. 

	 	3.2 	The
Committee shall select one of its members as its Chairman and shall hold its meetings at
such times and places as it shall determine. Actions taken by a majority of the members
of the Committee, at a meeting at which a majority of its members is present, or acts
reduced to or approved in writing by all members of the Committee, shall be the valid
acts of the Committee. The Committee may appoint a Secretary, who shall keep records of
its meetings and shall make such rules and regulations for the conduct of its business as
it shall deem advisable. 

	 	3.3 	Subject
to the general terms and conditions of this Plan, the Committee shall have the full
authority in its discretion, from time to time and at any time, to determine: 

	 	(i) 	Whether
the Options shall be issued to a trustee nominated by the Committee
               pursuant to Section 102(b) of the Tax Ordinance, or the Options shall
issued                without a trustee pursuant to Section 102(c) of the Tax Ordinance;  

	 	(ii) 	The
person to be nominated as a trustee pursuant to the Plan;  

	 	(iii) 	In
the event that the Company elects to grant Options pursuant to Section 102(b)
               of the Tax Ordinance – whether the Options be granted pursuant to
Section                102(b)(1) of the Tax Ordinance (“Income Track Options”)
or pursuant to                Section 102(b)(2) of the Tax Ordinance (“Capital Gains
Track                Options”). (issuance of Income Track Options or Capital Gains
Track Options                shall be referred to herein as “Tax Track(s)”). In
the event that the                Company elects one of the Tax Tracks as described
above, it may not grant                Options pursuant to the other Tax Track during a
period commencing on the end of                the year in which the Options were granted
until the end of the subsequent year;  

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	 	(iv) 	(a)
The persons (“Grantees”) to whom options to purchase Shares                (“Option(s)”)
shall be granted, (b) the number of Options to be                granted to each
Grantee, (c) the time or times at which the same shall be                granted, (d) the
schedule and conditions on which such Options may be                exercised and on
which such Shares shall be paid for, and/or (e) any other                matter
which is necessary or desirable for, or incidental to, the administration
               of the Plan. In determining the number of Options to be granted to each
Grantee,                the Committee may consider, among other things, the Grantee’s
salary and                the duration of the Grantee’s employment by the Company.  

	 	         3.4 	The
    Committee     may,     from     time     to     time,     adopt     such     rules
    and regulations    for    carrying    out    the    Plan    as    it    may    deem
   necessary.    No    member    of the      Board      or     of     the      Committee
     shall      be      liable      for     any     act     or determination     made
    in    good     faith     with     respect     to    the     Plan    or    any
    Option granted                                                 thereunder.

	 	         3.5 	The
    interpretation     and     construction    by    the    Committee    of    any
   provision of    the     Plan     or    of     any     Option     thereunder     shall
    be     final     and     conclusive unless
                                     otherwise determined by the Board.

3

	4.  	Eligible
Grantees and General Terms.  

	 	4.1 	The
Committee, at its discretion, may grant Options to employees, directors, officers and
consultants of the Company and its subsidiaries and affiliates provided that such
Grantees are not controlling shareholders of the Company (as such term is defined in
Section 32(9) of the Tax Ordinance). Anything in this Plan to the contrary,
notwithstanding all grants of Options to directors and officers -“Nosei Misra” -
as such term is defined in the Israeli Companies Law, 1999, (the “Companies Law”) -
shall be authorized and implemented only in accordance with the provisions of the
Companies Law. The grant of an Option to a Grantee hereunder, shall neither entitle such
Grantee to participate, nor disqualify him from participating, in any other grant of
options pursuant to this Plan or any other stock option plan of the Company. 

	 	4.2 	Each
Option is exercisable into one Share.

4

	5.  	The
Trust.  

	 	         5.1 	The
Trustee.

	 	(a) 	In
the event that the Committee has elected to grant Options to a trustee
               designated by the Board and approved by the Israeli Commissioner of Income
Tax                (the “Trustee”), as prescribed under Section 3.3(i) above,
the Trustee                shall hold each such issued Option and the Shares issued upon
exercise thereof                in trust (the “Trust”) for the benefit of the
Grantee in respect of                whom such Option was granted (the “Beneficial
Grantee”).  

	 	(b) 	Issuance
of Options to a Trustee pursuant to any of the Tax Tracks is subject to
               the completion and execution of all procedures required under the Tax
Ordinance                and/or the Regulations.  

	 	(c) 	All
certificates representing Shares issued to the Trustee under the Plan shall
               be deposited with the Trustee, and shall be held by the Trustee until such
time                that such Shares are released from the Trust as herein provided.  

5

	 	(d) 	Pursuant
to the provisions of Section 102 of the Tax Ordinance and the                Regulations,
the taxation of the Options or Shares issued upon the exercise of                Options
pursuant to any of the Tax Tracks, are subject to their deposition in
               Trust for the required holding period (the “Required Holding Period”)
               as follows: (i) in the event that the Company elects the Income Tax Track
–               twelve (12) months after the end of the year in which the Options
were granted                and deposited in Trust; (ii) in the event that the Company
elects the Capital                Gains Tax Track – twenty four (24) months after
the end of the year in                which the Options were granted and deposited in
Trust; or (iii) any other                shorter period to be determined by the Committee
which was approved by the tax                authorities or in accordance with tax
regularization to be adopted from time to                time.  

	 	
No
Options or Shares shall be released from the Trust until the later of (i) the end of the
Required Holding Period; and (ii) the vesting of such Options pursuant to Section 7.4
hereof (such later date being hereinafter referred to as the “Release Date”). 

	 	(e) 	Subject
to the terms hereof, at any time after the Release Date with respect to           any
Options or Shares the following shall apply:  

6

	 	(i) 	Options
and/or Shares issued to the Trustee shall continue to be held by the
               Trustee, on behalf of the Beneficial Grantee. From and after the Release
Date,                upon the written request of any Beneficial Grantee, the Trustee
shall release                from the Trust the Options and/or the Shares issued, on
behalf of such                Beneficial Grantee, by executing and delivering to the
Company such                instrument(s) as the Company may require, giving due notice
of such release to                such Beneficial Grantee, provided, however, that the
Trustee shall not so                release any such Options and/or Shares to such
Beneficial Grantee unless the                latter, prior to, or concurrently with, such
release, provides the Trustee with                evidence, satisfactory in form and
substance to the Trustee, that all taxes or                other compulsory payments, if
any, required to be paid upon such release have,                in fact, been paid.  

	 	(ii) 	Alternatively,
from and after the Release Date, upon the written instructions of                the
Beneficial Grantee to sell any Shares issued upon exercise of Options, the
               Trustee shall use its best efforts to effect such sale and shall transfer
such                Shares to the purchaser thereof concurrently with the receipt, or
after having                made suitable arrangements to secure the payment of the
proceeds, of the                purchase price in such transaction. The Trustee shall
withhold from such                proceeds any and all taxes or other compulsory required
to be paid in respect of                such sale, shall remit the amount so withheld to
the appropriate tax authorities                and shall pay the balance thereof directly
to the Beneficial Grantee, reporting                to such Beneficial Grantee and to the
Company the amount so withheld and paid to                said tax authorities.  

7

	 	
Should
the Trustee sell Shares at the request of the Beneficial Grantee, the company shall pay
the Trustee for his services and expenses incurred with respect to such sale of Shares,
and the Trustee will be entitled to withhold such amounts and pay the balance thereof to
said Beneficial Grantee. 

Notwithstanding the provisions of Subsection (d) above, Subject
to the approval of the Committee, the Beneficial Grantee may sell or transfer the Options
or Shares issued upon the exercise of Options prior to the end of the Required Holding
Period, provided however that the Trustee shall withhold applicable tax or shall insure
withholding of applicable tax in accordance with the provisions of the Regulations and
Section 102 of the tax Ordinance relating to transfer prior to the end of the Required
Holding Period.  

	 	5.2 	Dividend
and Voting Rights. All Shares issued upon the exercise of Options granted under the
Plan shall entitle the Beneficial Grantee thereof to receive dividends with respect
thereto, and to vote the same at any meeting of the shareholders of the Company. For so
long as Shares issued to the Trustee on behalf of a Beneficial Grantee are held in the
Trust, the dividends paid or distributed with respect thereto shall be remitted to the
Trustee for the benefit of such Beneficial Grantee, and the Trustee shall vote all such
Shares in accordance with the instructions of such Grantee. 

	6.	Reserved
Shares. The Company has reserved 3,700,000 authorized but                unissued
Shares for purposes of the Plan subject to adjustments as provided in
               Section 11 hereof. All Shares under the Plan or any previous option
plan,                in respect of which the right thereunder of a Grantee to purchase
the same                shall, for any reason, terminate, expire or otherwise cease to
exist, shall                again be available for grant through Options under the Plan
or under any other                plan. 

8

	7.  	Grant
of Options.  

	 	7.1 	The
effective date of the grant of an Option (the “Date of Grant”) shall be the
date specified by the Committee in its determination relating to the award of such
Option. The Committee shall promptly give the Grantee written notice (the “Notice of
Grant”) of the grant of an Option. The Committee in its discretion may award to
Grantees Options to purchase Shares in the Company available under the Plan. The
execution of the Plan and issuance of Options pursuant thereto are subject to obtaining
all permits and approvals by the appropriate authorities to which the Plan, the Options
and Shares issuable upon exercise of the Options are subject. 

	 	7.2 	The
Notice of Grant shall state, inter alia, the applicable tax Track (if any), the number of
Shares covered thereby, the dates when the Option may be exercised, the exercise price,
and such other terms and conditions as the Committee at its discretion may prescribe,
provided that they are consistent with this Plan. 

	 	7.3 	The
issuance of Options to a Grantee hereunder is subject to the signing of the Grantee on an
application form to receive such Options (the “Application Form”) and returning
such signed Application Form to the Company within the time schedule specified in the
Notice of Grant. By affixing his signature on the Application Form, the Grantee shall
confirm his consent to receive all the Options granted to him subject to the terms and
conditions applicable to such Options pursuant to the Plan, the provisions of Section 102
of the Tax Ordinance and the Regulations and the provisions of the applicable Tax Track
and shall represent and warrant that he acknowledges the provisions of Section 102 of the
Tax Ordinance and the applicable Tax Track and that he agrees to the trust agreement
between the Company and the Trustee, a copy of which shall be enclosed to the Application
Form. The Grantee shall also 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 to the Plan, such Options or any shares acquired upon the exercise thereof. 

9

	 	7.4 	Vesting
Period and date of Exercise. 

	 	(a) 	The
term “Vesting Period” shall mean the period commencing on the Date
               of Grant until the first date on which the Option may be exercised,
namely,                after the Release Date as defined in Section 5.1(d) above. The
Vesting Period                shall be determined by the Committee from time to time. The
committee may decide                on different vesting Periods applicable to different
Grantees.  

	 	(b) 	The
Committee may, at its sole discretion, accelerate the Vesting Period with
               respect to certain Options granted pursuant to the Plan, subject to the
               provisions of Section 5.1(d) above.  

	 	(c) 	Without
derogating from the provisions of Section 5.1(d) and 10 hereof and the
               rights and powers of the Committee under Sections 3.3 and 7.2 hereof,
               unless otherwise specified in the Notice of Grant (a) each Option under
the Plan                shall be exercisable following the end of the Vesting Period ,
and (b) the                schedule pursuant to which such Options shall vest, and the
Beneficial Grantee                thereof shall be entitled to pay for, and acquire, the
Shares, shall be such                that one-third of such Options shall vest on each of
the first, second and third                anniversaries of the Date of Grant.  

	8.  	Exercise
Price. The exercise price per Share covered by each Option shall           be
determined by the Committee in its sole and absolute discretion. 

	 9.  	Exercise
of Options. 

	 	                  9.1 	Options
  shall   be   exercisable    pursuant   to   the   terms   under   which   they were
                         granted and subject to the terms and conditions of the Plan.

10

	 	                  9.2 	The
  exercise   of   an   Option    shall   be   made   by   a   written    notice   of
exercise     (the     "Notice     of     Exercise")     delivered     by    the
    Beneficial     Grantee     (or, with     respect    to    Options     held    in
   the    Trust,     by    the    Trustee    upon    receipt    of written
     instructions      from     the      Beneficial      Grantee)     to     the
    Company     at     its principal     executive     office,     specifying     the
    number     of     Shares     to     be     purchased and       accompanied      by
     the      payment       therefor,       and      containing       such      other
terms                                        and conditions as the Committee shall
prescribe from time to time.

	 	                  9.3 	Anything
    herein     to     the     contrary     notwithstanding,     but     without
derogating     from    the     provisions     of     Section 10     hereof,     if    any
    Option     has    not been      exercised      and      the      Shares      covered
     thereby      not      paid      for      within ten     (10)     years     after
    the     Date     of     Grant     (or     any      shorter      period     set forth
   in    the    Notice    of     Grant),     such     Option    and    the    right    to
   acquire     such Shares        shall         terminate,         all         interests
        and        rights        of        the Grantee     in    and    to    the    same
    shall     ipso     facto     expire,     and,     in    the    event that     in
     connection      therewith      any     Options     are     still     held     in
    the     Trust as      aforesaid,      the     Trust     with      respect
     thereto      shall      ipso     facto      expire and    the     Trustee     shall
    thereafter     hold     such     Options     in    an     unallocated     pool until
    instructed     by     the     Company     that     some     or     all    of     such
    Options     are again to be held in trust for one or more
                                       Grantees.

	 	                  9.4 	Each
payment for Shares shall be in respect of a whole number of
                                    Shares, and shall be effected in cash or by a
cashier's check payable to the                                     order of the Company,
or such other method of payment acceptable to the
                                    Company.

11

	10.  	Termination
of Employment.  

	 	
In
the event that a Grantee ceases, for any reason, to be employed by the Company or by any
of its subsidiaries or affiliates (or with respect to a Grantee who is a director,
officer or consultant, if his service with the Company or with any of its subsidiaries or
affiliates, terminates for any reason), all Options theretofore granted to such Grantee
shall terminate As follows:  

	 	10.1 	

	 	(a) 	If
the Grantee’s termination of employment is due to such Grantee’s
               death or “Disability” (as hereinafter defined), such Options (to
the                extent exercisable at the time of the Grantee’s termination of
employment                or provision of services, namely, Options with respect to which
the Release Date                has occurred) shall be exercisable by the Grantee’s
legal representative,                estate manager or any other person to whom the
Grantee’s rights are                transferred by will or by laws of descent or
distribution, or the Grantee, as                the case might be, for a period of six
(6) months following such termination of                employment or provision of
services (but in no event after the expiration date                of such Option), and
shall thereafter terminate. For purposes hereof,                “Disability” shall
mean the inability, due to illness, injury                or mental condition to engage
in any gainful occupation for which the individual                is qualified by
education, training or experience, and such condition continues                for at
least six (6) months.  

12

	 	(b) 	If
the Grantee’s termination of employment or provision of
services is due to, or connected with, one of the following instances, the trust with
respect to said Grantee’s options shall ipso facto expire, the options already vested
shall automatically expire and the Grantee shall not be entitled to exercise any of the
Options notwithstanding they were already vested at that time. The said instances are as
follows: 

	 	(i) 	The
Grantee commits a criminal offense (whether against the Company or any other
               person or entity);  

	 	(ii) 	The
Grantee is dishonest or breaches his fiduciary duties or duty of loyalty
               towards the Company and/or its subsidiaries;  

	 	(iii) 	The
Grantee intentionally or recklessly damages the Company’s and/or its
               subsidiaries’ property and/or good name and/or business;  

	 	(iv) 	The
Grantee is grossly negligent in fulfilling his duties towards the Company
               and/or its subsidiaries;  

	 	(v) 	The
Grantee deviates intentionally in a material way from his authority and/or
               instructions given to him by the Company’s and/or its subsidiaries’               competent
organs;  

	 	(vi) 	The
Grantee breaches intentionally in a material way the terms of his employment
               agreement, or other agreement with the Company and/or its subsidiaries.  

	 	(c) 	If
the Grantee’s termination of employment is for any reason other than
               those described in sub-sections (a) and (b) above, such Options (to the
extent                exercisable at the time of the Grantee’s termination of
employment) may be                exercisable for a period of thirty (30) days following
such termination of                employment or provision of services, and shall
thereafter terminate. Options                which are not exercisable at the time of the
Grantee’s termination of                employment (namely, which are not yet so
vested in such Grantee), shall expire                upon the termination of employment.  

13

	 	                  10.2 	Notwithstanding
      the       foregoing        provisions       of       Section 10.1, the
     Committee      may      provide,      either     at     the     time     an
    Option     is      granted or        thereafter,        that       such       Option
      may       be       exercised        after       the periods     provided     for
   in     Section 10.1,     but    in    no     event     beyond     the    term    of
the Option.

	11.  	Adjustment
Upon Changes in Capitalization. 

	 	                  11.1 	Subject
to any required action by the shareholders of the Company, the
number of Shares covered by each outstanding Option,
and the number of Shares which have been authorized
for issuance under the Plan but as to which no Options
have yet been granted or which have been returned to
the Plan upon cancellation or expiration of an Option,
as well as the price per share of Shares covered by
each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the
number of issued Shares resulting from a stock
split, reverse stock split, stock dividend, combination
or reclassification of the Shares or the payment
of a stock dividend (bonus shares) with respect to the
Shares or any other increase or decrease in the
number of issued Shares effected without receipt
of consideration by the Company; provided, however,
that conversion of any convertible securities
of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment
shall be made by the Committee, whose determination
in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by
reason thereof shall be made with respect to, the number
or price of Shares subject to an Option.  

14

	 	                  11.2 	Unless
   otherwise    determined    by    the    Committee,    in    the    event    of the
    proposed     dissolution     or     liquidation     of     the     Company,     to
   the     extent     it has       not       been        previously        exercised,
       each        Option        will        terminate immediately      prior     to
    the      consummation      of     such      proposed      action.      In     the
event     of     a     consolidation      or     the     merger     of     the
    Company     with     or     into another         corporation,         each
        Option         shall        be        assumed        or        an equivalent
     option     shall     be     substituted     by     such     successor
     corporation     or     a parent or subsidiary of
                                      such successor corporation.

	12.  	Non-Transferability. 

        Unless
permitted by the Committee, no Option shall be assignable or transferable by the Grantee
to whom granted otherwise than by will or the laws of descent and distribution, and an
Option may be exercised during the lifetime of the Grantee only by such Grantee or by such
Grantee’s guardian or legal representative. The terms of such Option shall be binding
upon the beneficiaries, executors, administrators, heirs and successors of such Grantee. 

	13.  	Term
and Amendment of the Plan. 

	 	13.1 	The
Plan was authorized by the Company on August 6, 2003, and shall expire on August 6, 2013
(except as to Options outstanding on that date), but such expiration shall not affect the
instructions contained herein or in any applicable law with respect to the Options and
Shares held in the Trust at such time of expiration. The Committee may decide upon the
extension of the Plan. 

	 	13.2 	Subject
to applicable laws, the Board may, at any time and from time to time, terminate or amend
the Plan in any respect. In no event may any action of the Company alter or impair the
rights of a Grantee, without his consent, under any Option previously granted to him. 

15

	14. 	Tax
Consequences. All tax consequences and obligations regarding any           other
compulsory payments arising from the grant or exercise of any Option, from           the
payment for, or the subsequent disposition of, Shares covered thereby or           from
any other event or act (of the Company or the Grantee) hereunder, shall be
          borne solely by the Grantee, and the Grantee shall indemnify the Company and
the           Trustee and hold them harmless against and from any and all liability for
any           such tax or other compulsory payment, or interest or penalty thereon,
including           without limitation, liabilities relating to the necessity to
withhold, or to           have withheld, any such tax or other compulsory payment from
any payment made to           the Grantee. 

	15.  	Miscellaneous. 

	 	                  15.1 	Continuance
of Employment: Neither the Plan nor the grant of an Option
thereunder shall impose any obligation on the Company or on
any of its subsidiaries or affiliates to continue the
employment or service of any Grantee, and nothing in the
Plan or in any Option granted pursuant thereto shall confer
upon any Grantee any right to continue in the employ
or service as aforesaid, or restrict the right of the Company
or of any of its subsidiaries or affiliates to
terminate such employment or service at any time. 

	 	                  15.2 	Governing
Law: The Plan and all instruments issued thereunder or in
connection therewith, shall be governed by, and
interpreted in accordance with, the laws of the State of
Israel. Any action related to this Plan shall be venued
solely in the competent courts in Tel Aviv. 

16

	 	15.3	Application
of Funds: The proceeds received by the Company from the sale of Shares pursuant to
Options granted under the Plan will be used for general purposes of the Company, as may
be determined by the Board or the Company from time to time.

	 	                        15.4 	Multiple
Agreements: The terms of each Option may differ from other
Options granted under the Plan at the same time, or at
any other time. The Committee may also grant more than one
Option to a given Grantee during the term of the Plan,
either in addition to, or in substitution for, one or more
Options previously granted to that Grantee.The grant of
multiple Options may be evidenced by a single Notice of
Grant or multiple Notices of Grant, as
determined by the Committee. 

	 	                  15.5 	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 arrangement 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 stock options otherwise than under the Plan, and such
arrangements may be either applicable generally or only in
specific cases. 

17

Appendix A

to

BluePhoenix 2003 Employee Stock Option Plan

(the "Plan") 

The Committee of Board of Directors
of BluePhoenix Solutions Ltd. (the “Company”) may grant options from time to
time to any employees, officers, consultants or directors of the Company or any of its
subsidiaries who are not residents of Israel. Any such option shall be evidenced by a
stock option agreement (“Stock Option Agreement”) between the Company and
the option recipient. 

The Stock Option Agreements shall
contain provisions covering matters substantially as prescribed under Sections 7.4(c),
9.2-9.4, 10.1, 11, 12 and 15.1. Notwithstanding the foregoing, the Stock Option Agreements
may contain different language and deviate from the language which is used in the Plan. 

In addition to the aforementioned
provisions, the Stock Option Agreement shall state that the agreement is governed by the
law of the State of Israel and that all tax consequences shall be borne by the Grantee. 

The provisions of Section 15.4 of the
Plan, which allows that the terms of each option grant may differ from other options
granted under the Plan at the same time, or at any other time, shall apply also to grant
of options pursuant to this Appendix A. 

The terms in this Appendix shall have
the meaning ascribed to them in the Plan, unless otherwise expressly stated. 

18

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