Document:

Exhibit

Exhibit 10.1
WEX Inc.
2019 EQUITY AND INCENTIVE PLAN
		
	1.
	Purpose

The purpose of this 2019 Equity and Incentive Plan (the “Plan”) of WEX Inc., a Delaware corporation (the “Company”), is to advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate persons who are expected to make important contributions to the Company and by providing such persons with equity ownership opportunities and cash and equity performance-based incentives that are intended to better align the interests of such persons with those of the Company’s stockholders.  Except where the context otherwise requires, the term “Company” shall include any of the Company’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations thereunder (the “Code”) and any other business venture (including, without limitation, joint venture or limited liability company) in which the Company has a controlling interest, as determined by the Board of Directors of the Company (the “Board”).
		
	2.
	Eligibility

All of the Company’s employees, officers and directors, as well as consultants and advisors to the Company (as the terms consultants and advisors are defined and interpreted for purposes of Form S-8 under the Securities Act of 1933, as amended (the “Securities Act”), or any successor form) are eligible to be granted Awards (as defined below) under the Plan.  Each person who is granted an Award under the Plan is deemed a “Participant.”  The Plan provides for the following types of awards, each of which is referred to as an “Award”:  Options (as defined in Section 5), SARs (as defined in Section 6), Restricted Stock (as defined in Section 7), RSUs (as defined in Section 7), Other Stock-Based Awards (as defined in Section 8) and Cash-Based Awards (as defined in Section 8).  Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award.  The terms of each Award need not be identical, and the Board need not treat Participants uniformly.
		
	3.
	Administration and Delegation

(a)Administration by Board of Directors.  The Plan will be administered by the Board.  The Board shall have authority to grant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable.  The Board may construe and interpret the terms of the Plan and any Award agreements entered into under the Plan.  The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award.  All actions and decisions by the Board with respect to the Plan and any Awards shall be made in the Board’s discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award.

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(b)Appointment of Committees.  To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a “Committee”).  All references in the Plan to the “Board” shall mean the Board or a Committee of the Board or the officers referred to in Section 3(c) to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee or officers.

(c)Delegation to Officers. Subject to any requirements of applicable law (including as applicable Sections 152 and 157(c) of the General Corporation Law of the State of Delaware), the Board may delegate to one or more officers of the Company the power to grant Awards (subject to any limitations under the Plan) to employees or officers of the Company and to exercise such other powers under the Plan as the Board may determine, provided that the Board shall fix the terms of Awards to be granted by such officers, the maximum number of shares subject to Awards that the officers may grant, and the time period in which such Awards may be granted; and provided further, that no officer shall be authorized to grant Awards to any “executive officer” of the Company (as defined by Rule 3b-7 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or to any “officer” of the Company (as defined by Rule 16a-1(f) under the Exchange Act).

(d)Awards to Non-Employee Directors.  Awards to non-employee directors will be granted and administered by a Committee, all of the members of which are independent directors as defined by Section 303A.02 of the New York Stock Exchange Listed Company Manual.

		
	4.
	Stock Available for Awards

(a)Number of Shares; Share Counting.

(1)Authorized Number of Shares.  Subject to adjustment under Section 10, Awards may be made under the Plan for up to a number of shares of common stock, $0.01 par value per share, of the Company (the “Common Stock”),  as is equal to the sum of:

(A)3,700,000 shares of Common Stock; and

(B)such additional number of shares of Common Stock (up to 1,501,676 shares) as is equal to the number of shares of Common Stock subject to awards granted under the Company’s 2010 Equity and Incentive Plan (the “Existing Plan”) which awards expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right (subject, however, in the case of Incentive Stock Options to any limitations under the Code).  For the avoidance of doubt, (i) to the extent a share that was subject to an award granted under the Existing Plan that counted as one share is returned to the Plan pursuant to this Section 4(a)(1)(B), each applicable share reserve will be credited with one share and (ii) to the extent that a share that was subject to an award granted under the Existing Plan that counted as 1.53 shares is returned to the Plan pursuant to this Section 4(a)(1)(B), each applicable share reserve will be credited with 1.53 shares.  Any or all of which Awards may be in the form of Incentive Stock Options (as defined in Section 5(b)).  Shares of 

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Common Stock issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.

(2)Fungible Share Pool.  Subject to adjustment under Section 10, any Award that is not a Full-Value Award (as defined below) shall be counted against the share limits specified in Sections 4(a)(1) as one share for each share of Common Stock subject to such Award and any Award that is a Full-Value Award shall be counted against the share limits specified in Sections 4(a)(1) as 1.7 shares for each one share of Common Stock subject to such Full-Value Award.  “Full-Value Award” means any award of Restricted Stock, RSUs or Other Stock-Based Award with a per share price or per unit purchase price lower than 100% of the fair market value per share of Common Stock (valued in the manner determined or approved by the Board) on the date of grant.  To the extent a share that was subject to an Award that counted as one share is returned to the Plan pursuant to Section 4(a)(3), each applicable share reserve will be credited with one share.  To the extent that a share that was subject to an Award that counts as 1.7 shares is returned to the Plan pursuant to Section 4(a)(3), each applicable share reserve will be credited with 1.7 shares.

(3)Share Counting.  For purposes of counting the number of shares available for the grant of Awards under the Plan under this Section 4(a) and under the sublimits contained in Section 4(b)(1):

(A)all shares of Common Stock covered by SARs shall be counted against the number of shares available for the grant of Awards under the Plan and against the sublimits contained in Section 4(b)(1);  provided, however, that (i) SARs that may be settled only in cash shall not be so counted and (ii) if the Company grants a SAR in tandem with an Option for the same number of shares of Common Stock and provides that only one such Award may be exercised (a “Tandem SAR”), only the shares covered by the Option, and not the shares covered by the Tandem SAR, shall be so counted, and the expiration of one in connection with the other’s exercise will not restore shares to the Plan;

(B)to the extent that an RSU may be settled only in cash, no shares shall be counted against the shares available for the grant of Awards under the Plan;

(C)if any Award (i) expires or is terminated, surrendered or cancelled without having been fully exercised or is forfeited in whole or in part (including as the result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right) or (ii) results in any Common Stock not being issued (including as a result of a SAR that was settleable either in cash or in stock actually being settled in cash), the unused Common Stock covered by such Award shall again be available for the grant of Awards; provided, however, that (1) in the case of Incentive Stock Options, the foregoing shall be subject to any limitations under the Code, (2) in the case of the exercise of a SAR, the number of shares counted against the shares available under the Plan and against the sublimits contained in Section 4(b)(1) shall be the full number of shares subject to the SAR multiplied by the percentage of the SAR actually exercised, regardless of the number of shares actually used to settle such SAR upon exercise and (3) the shares covered by a Tandem SAR shall not again become available for grant upon the expiration or termination of such Tandem SAR;

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(D)shares of Common Stock delivered (either by  actual delivery, attestation, or net exercise) to the Company by a Participant to (i) purchase shares of Common Stock upon the exercise of an Award or (ii) satisfy tax withholding obligations with respect to Awards (including shares retained from the Award creating the tax obligation) shall not be added back to the number of shares available for the future grant of Awards; and 

(E)shares of Common Stock repurchased by the Company on the open market using the proceeds from the exercise of an Award shall not increase the number of shares available for future grant of Awards.

(b)Sublimits.  The following sublimits on the number of shares subject to Awards shall apply:

(1)Per-Participant Limit.  The maximum number of shares of Common Stock with respect to which Awards may be granted to any Participant under the Plan in the form of Options or SARs shall be 1,000,000 per calendar year.  The maximum number of shares of Common Stock with respect to which Awards may be granted to any Participant under the Plan   in the form of Restricted Stock, RSUs, or Other Stock-Based Awards shall be 1,000,000 per calendar year.  For purposes of the foregoing limit, the combination of an Option in tandem with a SAR shall be treated as a single Award.  In addition to Awards settleable in Common Stock, Performance Awards (as defined in Section 9) in the form of Cash-Based Awards may also provide for cash payments of up to $10,000,000 per calendar year per Participant.  The per participant limits set forth in this Section 4(b)(1) shall be subject to adjustment under Section 10.

(2) Limits on Awards to Non-Employee Directors.  The maximum amount of cash and equity compensation (calculated based on grant date fair value for financial reporting purposes) granted in any calendar year to any individual non-employee director shall not exceed $750,000.   The Compensation Committee may make exceptions to this limit for individual non-employee directors in extraordinary circumstances, as the Committee may determine in its discretion, provided that the non-employee director receiving such additional compensation may not participate in the decision to award such compensation.
(c)Substitute Awards.  In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant Awards in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof.  Substitute Awards may be granted on such terms as the Board deems appropriate in the circumstances, notwithstanding any limitations on Awards contained in the Plan.  Substitute Awards shall not count against the overall share limit set forth in Section 4(a)(1) or any sublimits contained in the Plan, except as may be required by reason of Section 422 and related provisions of the Code.

		
	5.
	Stock Options.

(a)General.  The Board may grant options to purchase Common Stock (each, an “Option”) and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as the Board considers necessary or advisable.

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(b)Incentive Stock Options.  An Option that the Board intends to be an “incentive stock option” as defined in Section 422 of the Code (an “Incentive Stock Option”) shall only be granted to employees of WEX Inc., any of WEX Inc.’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Code, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code, and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code.  An Option that is not intended to be an Incentive Stock Option shall be designated a “Nonstatutory Stock Option.”  The Company shall have no liability to a Participant, or any other person, if an Option (or any part thereof) that is intended to be an Incentive Stock Option is not an Incentive Stock Option or if the Company converts an Incentive Stock Option to a Nonstatutory Stock Option.

(c)Exercise Price.  The Board shall establish the exercise price of each Option or the formula by which such exercise price will be determined.  The exercise price shall be specified in the applicable Option agreement. The exercise price shall be not less than 100% of the Grant Date Fair Market Value (as defined below) of the Common Stock on the date the Option is granted; provided that if the Board approves the grant of an Option with an exercise price to be determined on a future date, the exercise price shall be not less than 100% of the Grant Date Fair Market Value on such future date.  “Grant Date Fair Market Value” of a share of Common Stock for purposes of the Plan will be determined as follows:

(1)if the Common Stock trades on a national securities exchange, the closing sale price (for the primary trading session) on the applicable date; or

(2)if the Common Stock does not trade on any such exchange, the average of the closing bid and asked prices on the applicable date as reported by an over-the-counter marketplace designated by the Board; or

(3)if the Common Stock is not publicly traded, the Board will determine the Grant Date Fair Market Value for purposes of the Plan using any measure of value it determines to be appropriate (including, as it considers appropriate, relying on appraisals) in a manner consistent with the valuation principles under Code Section 409A, except as the Board may expressly determine otherwise.

For any date that is not a trading day, the Grant Date Fair Market Value of a share of Common Stock for such date will be determined by using the closing sale price or average of the bid and asked prices, as appropriate, for the immediately preceding trading day and with the timing in the formulas above adjusted accordingly.  The Board can substitute a particular time of day or other measure of “closing sale price” or “bid and asked prices” if appropriate because of exchange or market procedures or can, in its sole discretion, use weighted averages either on a daily basis or such longer period as complies with Code Section 409A.
The Board has sole discretion to determine the Grant Date Fair Market Value for purposes of the Plan, and all Awards are conditioned on the Participant’s agreement that the Administrator’s determination is conclusive and binding even though others might make a different determination.

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(d)Duration of Options.  Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable Option agreement; provided, however, that no Option will be granted with a term in excess of 10 years.

(e)Exercise of Options.  Options may be exercised by delivery to the Company of a notice of exercise in a form (which may be electronic) approved by the Company, together with payment in full (in the manner specified in Section 5(f)) of the exercise price for the number of shares for which the Option is exercised.  Shares of Common Stock subject to the Option will be delivered by the Company as soon as practicable following exercise.

(f)Payment Upon Exercise.  Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for as follows:

(1)in cash or by check, payable to the order of the Company;

(2)except as may otherwise be provided in the applicable Option agreement or approved by the Board, by (i) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding or (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding;

(3)to the extent provided for in the applicable Option agreement or approved by the Board, by delivery (either by actual delivery or attestation) of shares of Common Stock owned by the Participant valued at their fair market value (valued in the manner determined by (or in a manner approved by) the Board), provided (i) such method of payment is then permitted under applicable law, (ii) such Common Stock, if acquired directly from the Company, was owned by the Participant for such minimum period of time, if any, as may be established by the Board and (iii) such Common Stock is not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements;

(4)to the extent provided for in the applicable Nonstatutory Stock Option agreement or approved by the Board, by delivery of a notice of “net exercise” to the Company, as a result of which the Participant would receive (i) the number of shares underlying the portion of the Option being exercised, less (ii) such number of shares as is equal to (A) the aggregate exercise price for the portion of the Option being exercised divided by (B) the fair market value of the Common Stock (valued in the manner determined by (or in a manner approved by) the Board) on the date of exercise;

(5)to the extent permitted by applicable law and provided for in the applicable Option agreement or approved by the Board, by payment of such other lawful consideration as the Board may determine; provided, however, that in no event may a promissory note of the Participant be used to pay the Option exercise price; or

(6)by any combination of the above permitted forms of payment.

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(g)Limitation on Repricing.  Unless such action is approved by the Company’s stockholders, the Company may not (except as provided for under Section 10):  (1) amend any outstanding Option granted under the Plan to provide an exercise price per share that is lower than the then-current exercise price per share of such outstanding Option, (2) cancel any outstanding option (whether or not granted under the Plan) and grant in substitution therefor new Awards under the Plan (other than Awards granted pursuant to Section 4(c)) covering the same or a different number of shares of Common Stock and having an exercise price per share lower than the then-current exercise price per share of the cancelled option, (3) cancel in exchange for a cash payment any outstanding Option with an exercise price per share above the then-current fair market value of the Common Stock (valued in the manner determined by (or in a manner approved by) the Board), or (4) take any other action under the Plan that constitutes a “repricing” within the meaning of the rules of the New York Stock Exchange (“NYSE”).

(h)No Reload Options.  No Option granted under the Plan shall contain any provision entitling the Participant to the automatic grant of additional Options in connection with any exercise of the original Option.

(i)No Dividend Equivalents.  No Option shall provide for the payment or accrual of dividend equivalents.

		
	6.
	Stock Appreciation Rights

(a)General.  The Board may grant Awards consisting of stock appreciation rights (“SARs”) entitling the holder, upon exercise, to receive an amount of Common Stock or cash or a combination thereof (such form to be determined by the Board) determined by reference to appreciation, from and after the date of grant, in the fair market value of a share of Common Stock (valued in the manner determined by (or in a manner approved by) the Board) over the measurement price established pursuant to Section 6(b).  The date as of which such appreciation is determined shall be the exercise date.

(b)Measurement Price.  The Board shall establish the measurement price of each SAR and specify it in the applicable SAR agreement.  The measurement price shall not be less than 100% of the Grant Date Fair Market Value of the Common Stock on the date the SAR is granted; provided that if the Board approves the grant of a SAR effective as of a future date, the measurement price shall be not less than 100% of the Grant Date Fair Market Value on such future date.

(c)Duration of SARs.  Each SAR shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable SAR agreement; provided, however, that no SAR will be granted with a term in excess of 10 years.

(d)Exercise of SARs.  SARs may be exercised by delivery to the Company of a notice of exercise in a form (which may be electronic) approved by the Company, together with any other documents required by the Board.

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(e)Limitation on Repricing.  Unless such action is approved by the Company’s stockholders, the Company may not (except as provided for under Section 10):  (1) amend any outstanding SAR granted under the Plan to provide a measurement price per share that is lower than the then-current measurement price per share of such outstanding SAR, (2) cancel any outstanding SAR (whether or not granted under the Plan) and grant in substitution therefor new Awards under the Plan (other than Awards granted pursuant to Section 4(c)) covering the same or a different number of shares of Common Stock and having a measurement price per share lower than the then-current measurement price per share of the cancelled SAR, (3) cancel in exchange for a cash payment any outstanding SAR with a measurement price per share above the then-current fair market value of the Common Stock (valued in the manner determined by (or in a manner approved by) the Board), or (4) take any other action under the Plan that constitutes a “repricing” within the meaning of the rules of the NYSE.

(f)No Reload SARs.  No SAR granted under the Plan shall contain any provision entitling the Participant to the automatic grant of additional SARs in connection with any exercise of the original SAR.

(g)No Dividend Equivalents.  No SAR shall provide for the payment or accrual of dividend equivalents.

		
	7.
	Restricted Stock; RSUs

(a)General.  The Board may grant Awards entitling recipients to acquire shares of Common Stock (“Restricted Stock”), subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award.  The Board may also grant Awards entitling the recipient to receive shares of Common Stock or cash to be delivered at the time such Award vests (“RSUs”).

(b)Terms and Conditions for Restricted Stock and RSUs.  The Board shall determine the terms and conditions of Restricted Stock and RSUs, including the conditions for vesting and repurchase (or forfeiture) and the issue price, if any.

(c)Additional Provisions Relating to Restricted Stock.

(1)Dividends.  Any dividends (whether paid in cash, stock or property) declared and paid by the Company with respect to shares of Restricted Stock (“Unvested Dividends”) shall be paid to the Participant only if and when such shares become free from the restrictions on transferability and forfeitability that apply to such shares.  Each payment of Unvested Dividends will be made no later than the end of the calendar year in which the dividends are paid to stockholders of that class of stock or, if later, the 15th day of the third month following the lapsing of the restrictions on transferability and the forfeitability provisions applicable to the underlying shares of Restricted Stock.  No interest will be paid on Unvested Dividends.

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(2)Stock Certificates.  The Company may require that any stock certificates issued in respect of shares of Restricted Stock, as well as dividends or distributions paid on such Restricted Stock, shall be deposited in escrow by the Participant, together with a stock power endorsed in blank, with the Company (or its designee).  At the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or if the Participant has died, to his or her Designated Beneficiary.  “Designated Beneficiary” means (i) the beneficiary designated, in a manner determined by the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant’s death or (ii) in the absence of an effective designation by a Participant, the Participant’s estate.

(d)Additional Provisions Relating to RSUs.

(1)Settlement.  Upon the vesting of and/or lapsing of any other restrictions (i.e., settlement) with respect to each RSU, the Participant shall be entitled to receive from the Company the number of shares of Common Stock specified in the Award agreement or (if so provided in the applicable Award agreement or otherwise determined by the Board) an amount of cash equal to the fair market value (valued in the manner determined by (or in a manner approved by) the Board) of such number of shares or a combination thereof.  The Board may provide that settlement of RSUs shall be deferred, on a mandatory basis or at the election of the Participant, in a manner that complies with Section 409A of the Code or any successor provision thereto, and the regulations thereunder (“Section 409A”).

(2)Voting Rights.  A Participant shall have no voting rights with respect to any RSUs.

(3)Dividend Equivalents.  The Award agreement for RSUs may provide Participants with the right to receive an amount equal to any dividends or other distributions declared and paid on an equal number of outstanding shares of Common Stock (“Dividend Equivalents”).  Dividend Equivalents will be credited to an account for the Participant, may be settled in cash and/or shares of Common Stock as set forth in the Award agreement and shall be subject to the same restrictions on transfer and forfeitability as the RSUs with respect to which paid.  No interest will be paid on Dividend Equivalents.

		
	8.
	Other Stock-Based and Cash-Based Awards

(a)General.  The Board may grant other Awards of shares of Common Stock, and other Awards that are valued in whole or in part by reference to, or are otherwise based on, shares of Common Stock or other property (“Other Stock-Based Awards”).  Such Other Stock-Based Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan or as payment in lieu of compensation to which a Participant is otherwise entitled.  Other Stock-Based Awards may be paid in shares of Common Stock or cash, as the Board shall determine.  The Company may also grant Awards denominated in cash rather than shares of Common Stock (“Cash-Based Awards”).

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(b)Terms and Conditions.  Subject to the provisions of the Plan, the Board shall determine the terms and conditions of each Other Stock-Based Award or Cash-Based Award, including any purchase price applicable thereto.

(c)Dividend Equivalents.  The Award agreement for an Other Stock-Based Award may provide Participants with the right to receive Dividend Equivalents.  Dividend Equivalents will be credited to an account for the Participant, may be settled in cash and/or shares of Common Stock as set forth in the Award agreement and shall be subject to the same restrictions on transfer and forfeitability as the Other Stock-Based Award with respect to which paid.  No interest will be paid on Dividend Equivalents.

		
	9.
	Performance Awards.

(a)Grants.  Awards under the Plan may be made subject to the achievement of performance goals pursuant to this Section 9 (“Performance Awards”).

(b)Performance Measures.  The Board may specify that the degree of granting, vesting and/or payout of any Performance Award shall be subject to the achievement of one or more performance measures established by the Board, which may be based on the relative or absolute attainment of specified levels of one or any combination of the following, which may be determined pursuant to generally accepted accounting principles (“GAAP”) or on a non-GAAP basis, as determined by the Board:  (i) pre-tax income or after-tax income, (ii) income or earnings, including operating income, earnings before or after taxes, earnings before or after interest, depreciation, amortization or extraordinary or special items, (iii) net income excluding amortization of intangible assets, depreciation and impairment of goodwill and intangible assets and/or excluding charges attributable to the adoption of new accounting pronouncements, (iv) earnings or book value per share (basic or diluted), (v) return on assets (gross or net), return on investment, return on capital, or return on equity, (vi) return on revenues, (vii) cash flow, free cash flow, cash flow return on investment (discounted or otherwise), net cash provided by operations, or cash flow in excess of cost of capital, (viii) economic value created, (ix) operating margin or profit margin, (x) stock price or total stockholder return, (xi) income or earnings from continuing operations, (xii) sales, sales growth, earnings growth or market share, (xiii) achievement of balance sheet objectives, (xiv) cost targets, reductions and savings, expense management, productivity and efficiencies, improvement of financial ratings; (xv) strategic business criteria, consisting of one or more measures based on meeting specified employee satisfaction, human resource management, supervision of litigation, information technology, customer satisfaction, goals relating to divestitures, joint ventures and similar transactions, and any corporate or business objectives or strategic initiatives and (xvi) any other measure selected by the Board. Such goals may reflect absolute entity or business unit performance or a relative comparison to the performance of a peer group of entities or other external measure of the selected performance criteria and may be absolute in their terms or measured against or in relationship to other companies comparably, similarly or otherwise situated.  The Board may specify that such performance measures shall be adjusted to exclude any one or more of (A) extraordinary items, (B) gains or losses on the dispositions of discontinued operations, (C) the cumulative effects of changes in accounting principles, (D) the writedown of any asset, (E) fluctuation in foreign currency exchange rates, (F) charges for restructuring and rationalization programs, (G) non-cash, mark-to-market adjustments on derivative instruments, (H) amortization of purchased intangibles, (I) the net impact of tax rate changes, (J) non-cash asset 

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impairment charges, (K) gains on extinguishment of the tax receivable agreement and (L) any other factors as the Board may determine.  Such performance measures:  (x) may vary by Participant and may be different for different Awards; (y) may be particular to a Participant or the department, branch, line of business, subsidiary or other unit in which the Participant works and (z) may cover such period as may be specified by the Board.  The Board shall have the authority to make equitable adjustments to the performance goals in recognition of unusual or non-recurring events affecting the Company or the financial statements of the Company, in response to changes in applicable laws or regulations or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles.

(c)Adjustments.  The Board may adjust the cash or number of shares payable pursuant to such Performance Award, and the Board may, at any time, waive the achievement of the applicable performance measures, including in the case of the death or disability of the Participant or a change in control of the Company.

		
	10.
	Adjustments for Changes in Common Stock and Certain Other Events

(a)Changes in Capitalization.  In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of Common Stock other than an ordinary cash dividend, (i) the number and class of securities available under the Plan, (ii) the share counting rules and sublimits set forth in Sections 4(a) and 4(b)(1), (iii) the number and class of securities and exercise price per share of each outstanding Option, (iv) the share and per-share provisions and the measurement price of each outstanding SAR, (v) the number of shares subject to and the repurchase price per share subject to each outstanding award of Restricted Stock and (vi) the share and per-share-related provisions and the purchase price, if any, of each outstanding RSU and each Other Stock-Based Award, shall be equitably adjusted by the Company (or substituted Awards may be made, if applicable) in the manner determined by the Board.  Without limiting the generality of the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend and the exercise price of and the number of shares subject to an outstanding Option are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who exercises an Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend.

(b)Reorganization Events.

(1)Definition.  A “Reorganization Event” shall mean:  (a) any merger or consolidation of the Company with or into another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property or is canceled, (b) any transfer or disposition of all of the Common Stock of the Company for cash, securities or other property pursuant to a share exchange or other transaction or (c) any liquidation or dissolution of the Company.

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(2)Consequences of a Reorganization Event on Awards Other than Restricted Stock.

(A)In connection with a Reorganization Event, the Board may take any one or more of the following actions as to all or any (or any portion of) outstanding Awards other than Restricted Stock on such terms as the Board determines (except to the extent specifically provided otherwise in an applicable Award agreement or another agreement between the Company and the Participant):  (i) provide that such Awards shall be assumed, or substantially equivalent Awards shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof), (ii) upon written notice to a Participant, provide that all of the Participant’s unvested Awards will be forfeited immediately prior to the consummation of such Reorganization Event and/ or that all of the Participant’s unexercised Awards will terminate immediately prior to the consummation of such Reorganization Event unless exercised by the Participant (to the extent then exercisable) within a specified period following the date of such notice, (iii) provide that outstanding Awards shall become exercisable, realizable or deliverable, or restrictions applicable to an Award shall lapse, in whole or in part prior to or upon such Reorganization Event, (iv) in the event of a Reorganization Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share surrendered in the Reorganization Event (the “Acquisition Price”), make or provide for a cash payment to Participants with respect to each Award held by a Participant equal to (A) the number of shares of Common Stock subject to the vested portion of the Award (after giving effect to any acceleration of vesting that occurs upon or immediately prior to such Reorganization Event) multiplied by (B) the excess, if any, of (I) the Acquisition Price over (II) the exercise, measurement or purchase price of such Award and any applicable tax withholdings, in exchange for the termination of such Award, (v) provide that, in connection with a liquidation or dissolution of the Company, Awards shall convert into the right to receive liquidation proceeds (if applicable, net of the exercise, measurement or purchase price thereof and any applicable tax withholdings) and (vi) any combination of the foregoing.  In taking any of the actions permitted under this Section 10(b)(2)(A), the Board shall not be obligated by the Plan to treat all Awards, all Awards held by a Participant, or all Awards of the same type, identically.

(B)Notwithstanding the terms of Section 10(b)(2)(A)(i), in the case of outstanding RSUs that are subject to Section 409A: (i) if the applicable RSU agreement provides that the RSUs shall be settled upon a “change in control event” within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(i), and the Reorganization Event constitutes such a “change in control event”, then no assumption or substitution shall be permitted pursuant to Section 10(b)(2)(A)(i) and the RSUs shall instead be settled in accordance with the terms of the applicable RSU agreement; and (ii) the Board may only undertake the actions set forth in clauses (iii), (iv) or (v) of Section 10(b)(2)(A) if the Reorganization Event constitutes a “change in control event” as defined under Treasury Regulation Section 1.409A-3(i)(5)(i) and such action is permitted or required by Section 409A; if the Reorganization Event is not a “change in control event” as so defined or such action is not permitted or required by Section 409A, and the acquiring or succeeding corporation does not assume or substitute the RSUs pursuant to clause (i) of Section 10(b)(2)(A), then the unvested RSUs shall terminate immediately prior to the consummation of the Reorganization Event without any payment in exchange therefor.

(C)For purposes of Section 10(b)(2)(A)(i), an Award (other than Restricted Stock) shall be considered assumed if, following consummation of the Reorganization Event, such Award confers the right to purchase or receive pursuant to the terms of such Award, for each share of Common Stock subject to the Award 

12

immediately prior to the consummation of the Reorganization Event, the consideration (whether cash, securities or other property) received as a result of the Reorganization Event by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Reorganization Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Reorganization Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise or settlement of the Award to consist solely of such number of shares of common stock of the acquiring or succeeding corporation (or an affiliate thereof) that the Board determined to be equivalent in value (as of the date of such determination or another date specified by the Board) to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Reorganization Event.

(3)Consequences of a Reorganization Event on Restricted Stock.  Upon the occurrence of a Reorganization Event other than a liquidation or dissolution of the Company, the repurchase and other rights of the Company with respect to outstanding Restricted Stock shall inure to the benefit of the Company’s successor and shall, unless the Board determines otherwise, apply to the cash, securities or other property which the Common Stock was converted into or exchanged for pursuant to such Reorganization Event in the same manner and to the same extent as they applied to such Restricted Stock; provided, however, that the Board may either provide for termination or deemed satisfaction of such repurchase or other rights under the instrument evidencing any Restricted Stock or any other agreement between a Participant and the Company, either initially or by amendment, or provide for forfeiture of such Restricted Stock if issued at no cost.  Upon the occurrence of a Reorganization Event involving the liquidation or dissolution of the Company, except to the extent specifically provided to the contrary in the instrument evidencing any Restricted Stock or any other agreement between a Participant and the Company, all restrictions and conditions on all Restricted Stock then outstanding shall automatically be deemed terminated or satisfied.

(c)Change in Control Events.

(1)Definitions.

(A)“Change in Control” shall mean:

(i)     any “person”, as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (x) the Company, (y) any trustee or other fiduciary holding securities under an employee benefit plan of the Company and (z) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company’s then outstanding voting securities (excluding any person who becomes such a beneficial owner in connection with a transaction immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the Board, the board of the entity surviving such transaction or, if the Company or the entity surviving the transaction is then a subsidiary, the board of the ultimate parent thereof);

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(ii)     the following individuals cease for any reason to constitute a majority of the number of directors then serving:  individuals who, on the Effective Date, constitute the Board or any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the Effective Date or whose appointment, election or nomination for election was previously so approved or recommended;
(iii)     there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than a merger or consolidation immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the Board, the board of the entity surviving such merger or consolidation or, if the Company or the entity surviving such merger is then a subsidiary, the board of the ultimate parent thereof; or
(iv)     the stockholders of the Company approve a plan of complete liquidation of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets (or any transaction having similar effect), other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of the entity to which such assets are sold or disposed of or, if such entity is a subsidiary, the board of the ultimate parent thereof.
(B)“Cause” shall mean willful misconduct by the Participant or willful failure by the Participant to perform his or her responsibilities to the Company (including, without limitation, breach by the Participant of any provision of any employment, consulting, advisory, nondisclosure, non-competition or other similar agreement between the Participant and the Company), as determined by the Company, which determination shall be conclusive.  The Participant’s employment shall be considered to have been terminated for Cause if the Company determines, within 30 days of the Participant’s termination, that termination for Cause was warranted.

(C)“Good Reason” shall mean any significant diminution in the duties, authority or responsibilities of the Participant from and after the Change in Control, any material reduction in the base compensation payable to the Participant from and after the Change in Control, or any relocation of the place of business at which the Participant is principally located to a location that is greater than 50 miles from its location immediately prior to the Change in Control.  Notwithstanding the occurrence of any such event or circumstance, such occurrence shall not be deemed to constitute Good Reason unless (x) the Participant gives the Company notice of termination no more than 90 days after the initial existence of such event or circumstance, (y) such event or circumstance has not been fully corrected and the Participant has not been reasonably compensated for any losses or damages resulting therefore within 30 days of the Company’s receipt of the notice and (z) the Participant’s termination of employment actually occurs within six months following the Company’s receipt of such notice.

(2)Consequences of a Change in Control on Awards other than Restricted Stock.  Notwithstanding the provisions of Section 10(b), except to the extent specifically provided otherwise in an applicable Award agreement or another agreement between the Company and the Participant, each Award other than Restricted 

14

Stock shall become immediately exercisable, realizable, or deliverable in full or restrictions applicable to such Awards shall lapse in full if, on or prior to the first anniversary of the date of the Change in Control, the Participant’s employment with the Company or an acquiring or succeeding corporation is terminated for Good Reason by the Participant or is terminated without Cause by the Company or the acquiring or succeeding corporation.

(3)Consequences of a Change in Control on Restricted Stock.  Notwithstanding the provisions of Section 10(b), except to the extent specifically provided otherwise in an applicable Award agreement or another agreement between the Company and the Participant, each Award of Restricted Stock shall become immediately free from all conditions and restrictions if, on or prior to the first anniversary of the date of the Change in Control, the Participant’s employment with the Company or an acquiring or succeeding corporation is terminated for Good Reason by the Participant or is terminated without Cause by the Company or the acquiring or succeeding corporation.

		
	11.
	General Provisions Applicable to Awards

(a)Transferability of Awards.  Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by a Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution or, other than in the case of an Incentive Stock Option, pursuant to a qualified domestic relations order, and, during the life of the Participant, shall be exercisable only by the Participant; provided, however, that, except with respect to Awards subject to Section 409A, the Board may permit or provide in an Award for the gratuitous transfer of the Award by the Participant to or for the benefit of any immediate family member, family trust or other entity established for the benefit of the Participant and/or an immediate family member thereof if the Company would be eligible to use a Form S-8 under the Securities Act for the registration of the sale of the Common Stock subject to such Award to such proposed transferee; provided further, that the Company shall not be required to recognize any such permitted transfer until such time as such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument in form and substance satisfactory to the Company confirming that such transferee shall be bound by all of the terms and conditions of the Award.  References to a Participant, to the extent relevant in the context, shall include references to authorized transferees.  For the avoidance of doubt, nothing contained in this Section 11(a) shall be deemed to restrict a transfer to the Company.

(b)Documentation.  Each Award shall be evidenced in such form (written, electronic or otherwise) as the Board shall determine.  Each Award may contain terms and conditions in addition to those set forth in the Plan.

(c)Termination of Status.  The Board shall determine the effect on an Award of the disability, death, termination or other cessation of employment, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, or the Participant’s legal representative, conservator, guardian or Designated Beneficiary, may exercise rights, or receive any benefits, under an Award.

(d)Withholding.  The Participant must satisfy all applicable federal, state, and local or other income and employment tax withholding obligations before the Company will deliver stock certificates or otherwise recognize ownership of Common Stock under an Award.  The Company may elect to satisfy the withholding obligations through 

15

additional withholding on salary or wages.  If the Company elects not to or cannot withhold from other compensation, the Participant must pay the Company the full amount, if any, required for withholding or have a broker tender to the Company cash equal to the withholding obligations.  Payment of withholding obligations is due before the Company will issue any shares on exercise, vesting or release from forfeiture of an Award or at the same time as payment of the exercise or purchase price, unless the Company determines otherwise.  If provided for in an Award or approved by the Board, a Participant may satisfy the tax obligations in whole or in part by delivery (either by actual delivery or attestation) of shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their fair market value (valued in the manner determined by (or in a manner approved by) the Company); provided, however, except as otherwise provided by the Board, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Company’s minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income), except that, to the extent that the Company is able to retain shares of Common Stock having a fair market value (determined by, or in a manner approved by, the Company)  that exceeds the statutory minimum applicable withholding tax without financial accounting implications or the Company is withholding in a jurisdiction that does not have a statutory minimum withholding tax, the Company may retain such number of shares of Common Stock (up to the number of shares having a fair market value equal to the maximum individual statutory rate of tax (determined by, or in a manner approved by, the Company)) as the Company shall determine in its sole discretion to satisfy the tax liability associated with any Award.  Shares used to satisfy tax withholding requirements cannot be subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.

(e)Amendment of Award.  Except as otherwise provided in Sections 5(g) and 6(e) related to repricings, the Board may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option.  The Participant’s consent to such action shall be required unless (i) the Board determines that the action, taking into account any related action, does not materially and adversely affect the Participant’s rights under the Plan or (ii) the change is permitted under Section 10.

(f)Conditions on Delivery of Stock.  The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously issued or delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and regulations and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations.

(g)Limitations on Vesting.  Subject to Section 11(h), no Award shall vest earlier than the first anniversary of its date of grant, unless such Award is granted in lieu of salary, bonus or other compensation otherwise earned by or payable to the Participant.  The foregoing sentence shall not apply to Awards granted, in the aggregate, for up to 5% of the maximum number of authorized shares set forth in Section 4(a).

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(h)Acceleration.  The Board may at any time provide that any Award shall become immediately exercisable in whole or in part, free from some or all restrictions or conditions or otherwise realizable in whole or in part, as the case may be.

		
	12.
	Miscellaneous

(a)No Right To Employment or Other Status.  No person shall have any claim or right to be granted an Award by virtue of the adoption of the Plan, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company.  The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award.

(b)No Rights As Stockholder; Clawback.  Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be issued with respect to an Award until becoming the record holder of such shares.  In accepting an Award under the Plan, the Participant agrees to be bound by any clawback policy that the Company has in effect or may adopt in the future.

(c)Effective Date and Term of Plan.  The Plan shall become effective on the Effective Date.  No Awards shall be granted under the Plan after the expiration of 10 years from the Effective Date, but Awards previously granted may extend beyond that date.

(d)Amendment of Plan.  The Board may amend, suspend or terminate the Plan or any portion thereof at any time provided that (i) neither Section 5(g) nor 6(e) requiring stockholder approval of any option or SAR repricing may be amended without stockholder approval; (ii) no amendment that would require stockholder approval under the rules of the national securities exchange on which the Company then maintains its primary listing  may be made effective unless and until the Company’s stockholders approve such amendment; and (iii) if the national securities exchange on which the Company then maintains its primary listing  does not have rules regarding when stockholder approval of amendments to equity compensation plans is required (or if the Company’s Common Stock is not then listed on any national securities exchange), then no amendment to the Plan (A) materially increasing the number of shares authorized under the Plan (other than pursuant to Section 4(c) or 10), (B) expanding the types of Awards that may be granted under the Plan, or (C) materially expanding the class of participants eligible to participate in the Plan shall be effective unless and until the Company’s stockholders approve such amendment.  In addition, if at any time the approval of the Company’s stockholders is required as to any other modification or amendment under Section 422 of the Code or any successor provision with respect to Incentive Stock Options, the Board may not effect such modification or amendment without such approval.  Unless otherwise specified in the amendment, any amendment to the Plan adopted in accordance with this Section 12(d) shall apply to, and be binding on the holders of, all Awards outstanding under the Plan at the time the amendment is adopted, provided the Board determines that such amendment, taking into account any related action, does not materially and adversely affect the rights of Participants under the Plan.  No Award shall be made that is conditioned upon stockholder approval of any amendment to the Plan unless the Award provides that (i) it will terminate or be forfeited if stockholder approval of such amendment is not 

17

obtained within no more than 12 months from the date of grant and (2) it may not be exercised or settled (or otherwise result in the issuance of Common Stock) prior to such stockholder approval.

(e)Authorization of Sub-Plans (including for Grants to non-U.S. Employees).  The Board may from time to time establish one or more sub-plans under the Plan for purposes of satisfying applicable securities, tax or other laws of various jurisdictions.  The Board shall establish such sub-plans by adopting supplements to the Plan containing (i) such limitations on the Board’s discretion under the Plan as the Board deems necessary or desirable or (ii) such additional terms and conditions not otherwise inconsistent with the Plan as the Board shall deem necessary or desirable.  All supplements adopted by the Board shall be deemed to be part of the Plan, but each supplement shall apply only to Participants within the affected jurisdiction and the Company shall not be required to provide copies of any supplement to Participants in any jurisdiction which is not the subject of such supplement.

(f)Compliance with Section 409A of the Code. If and to the extent (i) any portion of any payment, compensation or other benefit provided to a Participant pursuant to the Plan in connection with his or her employment termination constitutes “nonqualified deferred compensation” within the meaning of Section 409A and (ii) the Participant is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, in each case as determined by the Company in accordance with its procedures, by which determinations the Participant (through accepting the Award) agrees that he or she is bound, such portion of the payment, compensation or other benefit shall not be paid before the day that is six months plus one day after the date of “separation from service” (as determined under Section 409A) (the “New Payment Date”), except as Section 409A may then permit.  The aggregate of any payments that otherwise would have been paid to the Participant during the period between the date of separation from service and the New Payment Date shall be paid to the Participant in a lump sum on such New Payment Date, and any remaining payments will be paid on their original schedule.

The Company makes no representations or warranty and shall have no liability to the Participant or any other person if any provisions of or payments, compensation or other benefits under the Plan are determined to constitute nonqualified deferred compensation subject to Section 409A but do not satisfy the conditions of that section.
(g)Limitations on Liability.  Notwithstanding any other provisions of the Plan, no individual acting as a director, officer, employee or agent of the Company will be liable to any Participant, former Participant, spouse, beneficiary, or any other person for any claim, loss, liability, or expense incurred in connection with the Plan, nor will such individual be personally liable with respect to the Plan because of any contract or other instrument he or she executes in his or her capacity as a director, officer, employee or agent of the Company.  The Company will indemnify and hold harmless each director, officer, employee or agent of the Company to whom any duty or power relating to the administration or interpretation of the Plan has been or will be delegated, against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim with the Board’s approval) arising out of any act or omission to act concerning the Plan unless arising out of such person’s own fraud or bad faith.

(h)Governing Law.  The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, excluding choice-of-law principles of the law of such state that would require the application of the laws of a jurisdiction other than the State of Delaware.

18Exhibit 4.1

 

 

 

OFFICERS’ COMPENSATION POLICY

INTERNET GOLD - GOLDEN LINES LTD.

Adopted February 21, 2019

 

		1.	General Background

 

		1.1	This Compensation Policy (hereinafter: the “Compensation Policy”), as defined
in the Companies Law, 5759 - 1999 (hereinafter: the “Companies Law” or the “Law”) is a policy
regarding the terms of office and employment of the officers of Internet Gold - Golden Lines Ltd. (hereinafter: the “Company”).
The “Officers” and “Terms of Office and Employment” - as this term is defined in the Law
from time to time.

 

		1.2	The Compensation Policy takes into account the Company’s characteristics, its business strategy
and its objectives, the characteristics of the area of its activities and the Company’s policy to ensure the recruitment
and retention of top-quality officers at the Company.

 

		1.3	Compensation Policy Approval Proceeding: at its meetings, the Compensation Committee discussed
the proposal for the Compensation Policy which had been formulated by the Company’s management, with the assistance of professional
entities, and after the discussions, during which the members of the Committee made comments, asked questions and received answers
from the Company’s management on various matters contained in the Compensation Policy, the Compensation Committee recommended
that the Board of Directors of the Company approve the Compensation Policy. The Board of Directors of the Company approved the
Compensation Policy, after considering the Compensation Committee’s recommendations.

 

		1.4	It should be clarified that the rules set forth in this Policy form an upper threshold for the
Officers’ Terms of Office and Employment. It should be emphasized that the Company is not obligated to grant the Officers
all of the components set forth in this Policy, nor is it obligated to grant the maximum rate in any of the components of the Terms
of Office and Employment set forth in this Policy. The contents of this Policy do not create any right for any officer whatsoever
of the Company, and the rights of each Officer shall be those set forth in the employment agreement applicable between the said
Officer and the Company.

 

		2.	Objectives of the Compensation Policy

 

		2.1	The Company attaches great importance to devising a correct and appropriate Compensation Policy
for the Company’s Officers, inter alia, by creating appropriate incentives for the Company’s Officers, promoting
the Company’s objectives, its work plans and its policy, for both the long and short term, taking into consideration, inter
alia, the Officers’ areas of responsibility, and also the risks applicable to the Company’s activities.

 

		2.2	Emphases Regarding the Company’s Activities

 

The Company
attaches the utmost importance to retaining the Company’s Officers. As of the present date, the Company has only two
officers, whose activities require expertise, professional stability, extensive know-how, extensive experience in working
with the Group’s interfaces, and so forth. Beyond this, the activities of the Officers at the Company require the
management of a stable, efficient and productive work interface with the “Bezeq” Group (which constitutes the
Company’s underlying asset, and held by the Company’s subsidiary), both at the level of the numerous interfaces
that exist with regard to the groups’ financial systems, and also at the level of the various management interfaces
between the Company and the “Bezeq” Group. These activities require stability and preservation over time. Beyond
this, the Company’s activities involve providing support for capital/debt-raising and issue processes, providing
support for various processes with the capital markets, providing support for complex financing processes, and also providing
continuous support, on a day-to-day basis, of the management of the Group’s activities with the financing entities and
the Company’s capital market interfaces, which require skill, extensive experience and know-how which have been
acquired over the years. In view of this, the Company attaches the utmost importance to and places a vital emphasis on
retaining the Company’s Officers.

 

It should
be noted that in view of the parallel nature and activities of B Communications Ltd. (“BCOM”), the Company’s
subsidiary, and of the Company per se, which manage many similar and parallel activity interfaces, at the level of fiscal
management, financial management, activities in the capital markets, corporate headquarter activities, etc., the activities of
the Company’s Officers are divided between BCOM and the Company at a ratio of one-third (the Company) to two-thirds (BCOM),
based on an activity assessment performed by the Company’s management and considering that the scope and complexity of BCOM’’s
debt are significantly greater, as well as its equity value, both in terms of the division of time and resources and also in terms
of the division of the Officers’ salary. This being the case, the Officers’ salary is, generally speaking, low, on
average. In addition, the scope of office of the Officers is divided in the manner described above between the Company and BCOM,
and therefore the compensation data presented in this Policy reflect the said division, and create significant savings in the costs
of the two companies.

 

     1

     

    

  

		2.3	The Company has formulated the Compensation Policy for its Officers, whilst considering the following
objectives:

 

		2.3.1	Enhancing the Officers’ sense of identification with the Company and with its activities.

 

		2.3.2	Increasing the Officers’ satisfaction and motivation, for the purpose of advancing the Company’s
business and improving the Company’s financial capabilities.

 

		2.3.3	Retaining the top-quality officers at the Company for the long-term.

 

		2.4	In addition, the Compensation Policy is designed to create a uniform and clear general framework
for setting a personal compensation plan for each one of the Officers, based on joint principles and whilst making the relevant
adjustments to the Officer’s experience, the characteristics of his job and the manner of performance of the position by
him.

 

		3.	Guiding Considerations in Setting the Compensation Policy

 

		3.1	In accordance with the provisions of section 267b(a) of the Companies Law, below are the considerations
that guided the Company in setting the Compensation Policy:

 

		3.1.1	Promoting the Company’s objectives, its work plan and its policies, from a long-term perspective.

 

		3.1.2	Creating appropriate incentives for the Officers of the Company, taking into consideration, inter
alia, the Company’s risk management policy.

 

		3.1.3	The high degree of responsibility required of Officers in their work with the reporting authorities
in Israel and in the USA.

 

		3.1.4	The size of the Company, the complexity of its financial structure, its profits and the nature
of its activities.

 

		3.1.5	As regards Terms of Office and Employment which contain variable components - the Officer’s
contribution to the achievement of the Company’s targets and the maximization of the Company’s profits, all from a
long-term perspective and in accordance with the Officer’s position.

 

		3.2	In addition, at the time of determining the terms of compensation for the Officers, the Compensation
Committee and the Board of Directors may set additional, relevant criteria, besides the guiding considerations set forth above,
and they may also refer to additional data besides the data set forth below, taking into consideration the Company’s best
interests, its situation and its plans.

 

     2

     

    

  

		4.	Key Elements of the Compensation Policy

 

		4.1	Components of the Compensation

 

The total
compensation of the Company’s Officers comprises a number of components (in whole or in part)1:

 

		4.1.1	Fixed monthly salary (for details, see section 5 below).

 

		4.1.2	Related terms and conditions - such as officers’ liability insurance, indemnity and release
from liability (for details, see section 7.2 below); various social benefits (except for directors) such as contributions to executives’
insurance policies and continuing education funds; sick days, vacation days and convalescence days, a company car or the reimbursement
of car maintenance expenses (for details, see section 7 below).

 

		4.1.3	Variable Compensation:

 

		1.	“Retention” components - i.e., payment of a bonus which is contingent upon the amount
of time the Officer has served and stayed at the Company, during such period as determined.

 

It should
be clarified that in view of the unique nature of the Company’s operations, it has been determined that the Compensation
Policy will comprise the incorporation of long-term retention compensation, with the aim of providing an incentive to the Officers
to maintain their activities and the quality of their work at the Company (such as the retention plans).

 

It is worth
noting that the Company’s results as a holding company are primarily derived from the results of the Bezeq Group, and therefore,
there is an inherent difficulty in imposing a direct connection between the Company’s financial results and the Officers’
compensation. On the other hand: the Officers’ work at the Company is intensive, it demands expertise and extensive acquired
experience, and it also entails extremely significant challenges which require, in the opinion of the Company’s management,
the formulation of stable employment agreements, with long-term retention attributes.

 

Moreover,
the character of the professional activities of the Company’s Officers is designed, for the most part, to preserve the Company’s
stability, by implementing various stable work interfaces with financing entities, institutional investors, etc. These activities,
by nature, require the Company to act in order to retain its Officers, inter alia, for the purpose of reinforcing such work
interfaces on a proper and stable basis.

 

		2.	In addition, the Company may determine a particular scope of bonuses on an annual basis - bonuses
which are contingent upon the achievement of specific targets at the level of the Company, based on the Company’s strategy,
as reflected in the Company’s budget and/or bonuses which are contingent upon the achievement of personal targets, which
are defined for each Officer in accordance with his position and his contribution to the Company, and in accordance with the Company’s
strategy and its targets (for details, see section 6 below). Notwithstanding the foregoing, the Compensation Committee and the
Board of Directors may in individual cases approve at their discretion a discretionary bonus, subject to a cap of up to three salaries,
for individual achievements, for specific achievements in the course of the year or for the advancement of material/strategic issues
and/or delegate their authority to do so, subject to the provisions of the law.

____________ 

		1	It should be noted that in view of the parallel nature and activities of BCOM, and of the Company, which manage many similar
and parallel activity interfaces, at the level of fiscal management, financial management, activities in the capital markets, corporate
headquarter activities, etc., the activities of the Company’s Officers are divided between BCOM and the Company, as detailed
above, both in terms of the division of time and resources and also in terms of the division of the Officers’ salary. This
being the case, the Officers’ salary is, generally speaking, low, on average. In addition, the scope of office of the Officers
is divided between the Company and BCOM, as detailed above, and therefore the compensation data presented in this Policy
reflect the said division.

 

     3

     

    

  

		3.	Notwithstanding the foregoing, a non-material change in the Terms of Office and Employment of an
Officer who is subordinate to the Company’s CEO shall not require the approval of the Compensation Committee, if it was approved
by the Company’s CEO and all the following are fulfilled:

 

		3.1	A non-material change in the Terms of Office and Employment of an Officer as stated in section
272(c) of the Law, within a limit of up to 15% per year, relative to the year before, of the Officer’s terms, shall be approved
by the Company’s CEO and by any other organ as obligated by law (according to the minimum required forum).

 

		3.2	The Terms of Office and Employment conform to the Company’s Compensation Policy.

 

		4.2	The Data to be Examined

 

In their examination
and approval of the Terms of Office and Employment of an Officer, and on a case-by-case basis, the Compensation Committee and the
Board of Directors shall address the following matters:

 

		4.2.1	All of the compensation components, including monthly salary, related terms and conditions, employment
termination bonuses (bonus, payment, remuneration, compensation or any other benefit granted to the Officer in connection with
the termination of his position at the Company, including the advance notice period), and also any benefit, payment or payment
undertaking or grant of such benefit, if any, which are granted in respect of such office or employment.

 

		4.2.2	The economic value of the total compensation package, including all the components thereof, whilst
taking into consideration the Company’s business results, and if the compensation package is based on targets - the examination
of these targets.

 

		4.2.3	The compensation components will be challenging, however, they will not encourage the taking of
risks beyond the range of risk desired by the Company, and they shall not cause the Officer to act against the Company’s
interests.

 

		4.2.4	In order to ensure consistency between all of the compensation components set forth in the Policy,
all of the components of the Officer’s compensation package shall be presented to the Company’s organs, during their
discussion of the approval of each of the compensation components for an Officer of the Company. In addition, the ranges of the
salary and the rest of the Terms of Office and Employment of the Company’s Officers shall be determined, inter alia,
in accordance with comparative data for officers of companies with similar characteristics to those of the Company, as set forth
below and insofar as practicable (“Comparative Data for Similar Companies”). The Comparative Data for Similar
Companies will address the entirety of the components of the Terms of Office and Employment, or part thereof, as the case may be,
insofar as practicable and provided that the information is available. The Comparative Data for Similar Companies will be prepared
by the Company internally, or through an external consultant, in the discretion of the Compensation Committee, in accordance with
such methodology as the Company shall deem appropriate and reasonable. In addition, the Comparative Data for Similar Companies
will be prepared whilst relating to the base salary separately, and also, whilst relating to the total compensation, insofar as
relevant, and if such information exists.

 

		4.2.5	The comparison shall be made in relation to the compensation granted to an officer in a similar
position at three public companies and/or private companies, at least, which are comparable, inter alia, in all or some
of the following characteristics:

 

		(a)	Their total assets are similar to the Company’s total assets.

 

		(b)	Their market value is similar to the Company’s market value.

 

		(c)	Their scopes of managed debt are similar to the Company’s scopes of managed debt.

 

		(d)	The companies are committed to the level of reporting of dual-listed companies, in terms of the
degree of detail and liability, i.e., they are subject to the SEC’s rules and regulations.

 

     4

     

    

  

		4.2.6	The Officer’s education, qualifications, expertise, professional experience and his activities
and contribution to the achievement of the Company’s business targets and the Company’s compliance with its work plans
(in his current or previous position), based on data pertaining to the Company’s operating results in various aspects relating
to the Officer’s areas of responsibility and the market conditions existing at the time of and prior to the examination.

 

		4.2.7	The Officer’s position, his areas of responsibility and previous salary agreements signed
with him. In addition, insofar as relevant, comparative data shall be presented regarding former or current officers at the Company
in the same position or in similar positions, in relation to all of the components of the Terms of Office and Employment. In addition,
if relevant, any material changes that have taken place in his powers and in his areas of responsibility during the year, if any
- will be taken into account.

 

		4.2.8	Employment and the salary2 of the rest of the Company’s employees, and in particular,
the ratio to the average salary and to the median salary of such employees, and the effect of the disparities between the said
salary data on the employment relations at the Company. The Compensation Committee and the Board of Directors will examine the
ratio between the Terms of Office and Employment of each Officer and the salary of the rest of the Company’s employees, and
they will note whether, in their opinion, it is a reasonable and appropriate ratio taking into consideration, inter alia,
the Company’s nature, its size, the mix of the personnel employed by the Company, and the area of its business, and they
will check that these ratios will not be detrimental to the employment relations at the Company.

 

		4.2.9	As of the date of approval of this Compensation Policy, the current ratio between the base salary
of the various Officers of the Company and the average and median salary of all the Company’s employees, and the ratio
between the Terms of Office and Employment (cost of salary, including bonuses) of each one of the Officers and the cost of the
average salary and the median salary of the rest of the Company’s employees, are as set forth below:

 

	Position	 	 	Ratio of
 Base Salary to Average Salary	 	 	 	Ratio of Base
 Salary to
 Median Salary	 	 	 	Ratio of Cost
 of Salary to Average Cost of Salary	 	 	 	Ratio of Cost
 of Salary to Median Cost of Salary	 
	CEO	 	 	1: 3	 	 	 	1: 6.6	 	 	 	1: 2.8	 	 	 	1: 5.5	 
	CFO	 	 	1: 0.7	 	 	 	1: 1.5	 	 	 	1: 0.75	 	 	 	1:1.5	 

 

In determining
these ratios the Company took into account the salary of the officers.

 

According
to the assessment of the Compensation Committee and the Board of Directors, the above-mentioned ratios are appropriate and reasonable,
taking into consideration the Company’s characteristics, and they will not be detrimental to the employment relations at
the Company, particularly in view of the fact that only five employees are employed at the Company, including the two Officers,
and the position of the other three employees is relatively minor, to a significant extent, to the Officers’ position.

 

Should
the Company deviate from the ratio, in a scope exceeding 40% of the discrepancies described above, then the matter shall be brought
for further discussion by the Compensation Committee and the Board of Directors, and they shall examine whether any changes are
necessary in view of the said deviation, and the Company shall make disclosure to this effect, insofar as the deviation is material.
Any deviation within these limits has been defined by the Company’s organs as reasonable. 

 ____________

	2	“Salary” - as this term is defined in the Companies Law from time to time;
as of the present time - the income in respect of which National Insurance payments are made pursuant to Chapter O of the National
Insurance Law [Consolidated Version], 5755 - 1995.

 

		4.2.10	The ratio between the variable components and the fixed components to be granted to the Officer
shall be determined, in any event, in a manner that will not encourage the taking of unreasonable risks.

 

     5

     

    

  

The desired
ratio between the variable components and the fixed components of the various Officers at the Company for any given year shall
be as set forth below:

 

	Position	 	 	Fixed Components 
 (including related terms) (%)	 	 	 	Variable Components 
 (bonuses and payments based on retention targets) 
 (%)	 
	CEO	 	 	55% - 100%	 	 	 	0% - 45%	 
	CFO	 	 	55% - 100%	 	 	 	0% - 45%	 

 

It should
be emphasized that the intention is to the planned ratio only, assuming receipt of the target bonus, as stated in this Policy.
The actual ratio in any given year between the components of the compensation package may vary, due to underperformance or due
to over performance, which might affect the variable compensation as stated in this Policy. In addition, it should be clarified
that in view of the unique nature of the Company’s operations and the importance of preserving the many permanent work interfaces
at the Company, the Company attaches, as a matter of principle, importance to strengthening the fixed compensation components for
the Officers, and accordingly, the aforesaid ratios have been determined as part of the entirety of the total considerations.

 

Should the
Company deviate from the ratio from the ratio, in a scope exceeding 40% of the discrepancies described above, then the matter shall
be brought for further discussion by the Compensation Committee and the Board of Directors, and they shall examine whether any
changes are necessary in view of the said deviation, and the Company shall make disclosure to this effect, insofar as the deviation
is material. Any deviation within these limits has been defined by the Company’s organs as reasonable.

 

		5.	Salary Component

 

The salary
to which the Officer is entitled is a fixed component which shall be determined, insofar as practicable, by the date of commencement
of his service in the relevant position at the Company, and shall be updated from time to time in accordance with the Compensation
Policy.

 

		5.1	Salary of CEO and Officers (who are not directors)

 

		5.1.1	The amount of the salary of the Company’s CEO and the other Officers shall be determined
in accordance with the relevant considerations and criteria, as enumerated in sections 2, 3 and 4 above, and it shall be approved
by the Company’s competent organs, in accordance with the provisions of the law.

 

		5.1.2	Based on the relevant considerations and criteria, as enumerated in sections 2, 3 and 4 above,
the levels of the base monthly salary have been determined for the Company’s Officers, as set forth below:

 

	Position	 	Maximum (in NIS) (gross) per 
 month, and assuming retention of scopes of office 
 and divisions of office as of the present time	 	 	Maximum (in NIS) (gross, 
 not cost value) per month, assuming full 
 scope of position	 
	CEO	 	 	45,000	 	 	 	55,000	 
	CFO	 	 	25,000	 	 	 	40,000	 

 

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These ranges
shall be examined by the Compensation Committee and the Board of Directors in the course of the annual examination of the Compensation
Policy in accordance with section 11 below, and they shall be updated insofar as necessary, inter alia, in keeping with
the Comparative Data for Similar Companies and in keeping with the Company’s business situation and the personnel employed
at the Company or in accordance with other considerations.

 

Any deviation
beyond the ranges specified above shall be brought for approval by the Company’s competent organs, in accordance with the
provisions of the law.

 

		5.2	Directors’ Fees

 

		5.2.1	Directors of the Company (both external directors and others) shall be paid annual remuneration,
participation remuneration and the reimbursement of expenses in accordance with the provisions determined in the Companies Regulations
(Rules Regarding Remuneration and Expenses for External directors), 5760 - 2000 (hereinafter: the “Remuneration Regulations”),
in accordance with the rank at which the Company is classified pursuant to the said Regulations. The fees to be determined shall
not exceed the maximum remuneration permitted in the Remuneration Regulations3.

 

		5.2.2	Notwithstanding the foregoing, a waiver by a director (who is not an external director) of the
remuneration due to him pursuant to the Remuneration Regulations shall not be deemed to be a deviation from this Policy4.

 

	 	6.	Variable Bonus4

 

Variable
Compensation, Retention:

 

		6.1	In view of the unique nature of the Company’s operations and the importance of retaining
the Company’s Officers, the Company’s Board of Directors and Compensation Committee may set “retention bonuses”
for the Company’s Officers, in a total amount of up to: (a) NIS 500,000 for the Company’s CEO, which shall be accumulated
gradually over a period of up to 5 years; (b) NIS 150,000 for the Company’s CFO, which shall be accumulated gradually over
a period of up to 5 years; and all in view of the reasons specified above. It shall be clarified that in any event, the situation
shall not arise where several retention plans exist, concurrently, for the same Officer.

 

Designated
Annual Bonus:

 

		6.2	So as to create a correlation between the Officers’ variable compensation and the Company’s
results and its performance from a long-term perspective, taking into consideration the Company’s best interests, its situation
and its plans, an annual bonus plan may be devised for the Company’s Officers (except for the directors). The annual bonus
will be contingent upon compliance with targets to be set by the Board of Directors, subsequent to the Compensation Committee’s
recommendation, in accordance with a bonus plan which shall be brought each year, or on a multi-annual basis, for approval by the
Compensation Committee and the Board of Directors. The bonus plan, if any, will be devised in accordance with that stated in this
Compensation Policy, including the threshold conditions and the restrictions specified below, and in accordance with the relevant
considerations and criteria, as enumerated above.

 

		6.3	Should an annual bonus plan be devised, the Company’s Officers (as of the present time, the
CEO and the CFO) shall be entitled to an annual bonus based on measurable quantitative targets, which are contingent upon the achievement
of the Company’s objectives and business targets, from a long-term perspective. The targets shall include, inter alia,
the following components:

 

		6.3.1	Quantitative targets at the level of the Company.

 

		6.3.2	Measurable, personal targets, which shall be set for each Officer personally, in accordance with
his job and the extent of the Officer’s contribution to the Company’s business, and in accordance with the Company’s
strategy and work plan, and from a long-term perspective.

 

		6.3.3	The internal division between the relative weight of the quantitative estimates, based on the Company’s
targets, and the personal quantitative targets, shall be adjusted to suit each Officer separately, in accordance with the characteristics
of his position, the areas of his responsibility, and his degree of influence over the achievement of the Company’s targets
and its profits. A relative weight in the variable bonus component shall be set for each target.

____________ 

		3	As of the present time, the Company pays the directors and external directors compensation equal to the fixed statutory amount
for companies of our size set forth from time to time in the Israeli Companies Regulations (Rules Regarding Compensation and Expenses
of an External director), 5760-2000

 

		4	For officers who are not directors. The Company’s results shall be pursuant to the Company’s audited financial
statements.

 

     7

     

    

 

 

		6.3.4	The evaluation of performance by the Company’s Board of Directors which shall address, inter
alia, the Officer’s contribution and performance, and also criteria which cannot be objectively quantified. The qualitative
indices (the evaluation by the Board of Directors) shall constitute 25%, at the most, of the basis for the annual bonus, which,
in the opinion of the Compensation Committee and the Board of Directors, represents an insubstantial part, as compared with the
total variable components granted to the Officers, or up to three salaries for any Officer, whichever the higher. Notwithstanding
the foregoing, the share of such discretionary components may be at a higher rate, up to the maximum extent permitted by law, as
in effect from time to time, specifically, with respect to officers which are not the CEO.

 

Below are
several examples, in principle, of the above-mentioned targets (without derogating from the right of the Board of Directors to
determine additional targets, in accordance with the criteria as set forth in this Policy):

 

		(a)	A target for the decrease in the Company’s financing expenses, as a percentage of the Company’s
financial debt (effective financing rate), in the year in which the measurement shall be made. The financing expenses mean: the
amount of the Company’s full financing expenses, net. The calculation shall include all of the full financing costs, less
the financing income and the income from securities. The financial debt: the average, gross balance of the Company’s full
financial debt. Notwithstanding the foregoing, the financing expenses shall be in real terms - i.e., net of any index effects;

 

		(b)	A target for the decrease in the Company’s net financial debt, as compared with the Company’s
budget in the relevant year in respect of which the measurement was made. This target is a derivative of the Company’s net
cash flow, plus dividends received by the Company - and net of financing expenses, current expenses, etc.

 

		(c)	The Company’s net profit target in the year in which the measurement was made. The measurement
of this target shall be performed according to the net profit stated in the Company’s consolidated financial statements.

 

		(d)	An improvement in the Company’s rating level; the rating of the companies/ the debt, is vital
for all of the companies’ investors, shareholders and bondholders alike, for the purpose of measuring the Company’s
strength, its financial flexibility and the economic projections regarding the long-term. Generally speaking, a significant part
of the rating is frequently based on the activities directly performed by the Company’s managers directly. The rating companies
examine the manner of management of the Company’s debt, its financial flexibility, its ability to make improvements regarding
financing, its ability to refinance debt, and so forth. All of these activities are activities which are performed by the Company
directly, and by the Company’s managers.

 

		(e)	Meeting the time schedules for the filing of reports, financial statements, success in the annual
audit conducted on companies of the same type as the Company, by the SEC. As far as the Company’s organs are concerned, success
in the periodic audits conducted by the regulator, as aforesaid, is an important index.

 

		(f)	A target for the return on the securities portfolio and the Company’s liquid balances, as
compared with the Company’s budget in the relevant year in respect of which the measurement was made and/or as compared with
the reference indices in the market. This target shall be measured according to the reference index derived from the various stock
exchange indices (the Tel Bond Index, the Tel Aviv Yeter Index, etc.).

 

		(g)	Targets involving an improvement in the prices of the Company’s share or involving the share’s
trading volumes and the identity of its shareholders.

 

		(h)	The return on the Company’s securities portfolio relative to corresponding reference indices,
the performance of managed portfolios maintained by the Company and the performance of indices and relevant ETFs.

 

These targets
shall be set, based on the Company’s strategy, as reflected in its annual budget, as devised and approved each year by the
Board of Directors of the Company (hereinafter: the “Annual Budget”), and they shall be adjusted to the Company’s
performance in the course of the year for which the bonus is being paid.

 

Notwithstanding
the foregoing, the Compensation Committee and the Board of Directors may in individual cases approve at their discretion a discretionary
bonus, subject to a cap of up to three salaries, for individual achievements, for specific achievements in the course of the year
or for the advancement of material/strategic issues and/or delegate their authority, in accordance with the provisions of the law.

 

     8

     

    

  

		6.4	The Board of Directors shall determine the text of the targets in advance, whilst determining the
various components thereof.

 

The Board
of Directors shall have discretion and flexibility in determining the weights and the targets, and they shall be reviewed by it
once a year as aforesaid, in accordance with the recommendations of the Compensation Committee in that regard. For purposes of
this matter, the Compensation Committee and the Board of Directors shall consider the recommendation of the Company’s CEO
regarding the mix of targets and weights for the managers subordinate to him and the recommendation of the Chairman of the Board
of Directors regarding the mix of targets and weights for the CEO. It is further clarified that, to the extent allowed by law,
the Board of Directors upon the recommendation of the Compensation Committee may increase with respect to any of the Company’s
Officers the discretionary component and even determine that this will be the only component for purposes of calculating the performance-dependent
bonus for the relevant Officer, all as aforesaid and subject to any law.

 

		6.5	The Company’s targets, as aforesaid, shall be determined whilst taking the following principles
into consideration:

 

		6.5.1	Compliance with these targets provides an incentive for achieving the Company’s objectives,
targets, business plans and strategies, and for increasing the Company’s future profits.

 

		6.5.2	Compliance with these targets will give rise to an improvement in the Company’s performance
from a long-term perspective.

 

		6.5.3	The Company aspires to reward its Officers, in a fair and appropriate manner, for their contribution
and their achievements, as reflected in the Company’s results and in its long-term business development.

 

		6.5.4	The remuneration based on the Company’s targets is in keeping with the Company’s best
interests, the advancement of its business objectives and its work plan, and there are no concerns that the said targets will create
an incentive for managers to take unnecessary risks.

 

		6.6	Furthermore, in addition to the annual bonus as stated above, the Board of Directors may, subsequent
to the Compensation Committee’s recommendation, decide that the Company shall pay to any of the Officers, including at the
end of a relevant calendar year, but without derogating from the provisions of section 6.8.7 below, a bonus in respect of special
projects or special achievements, as arise from their activities and their contribution to the Company, in accordance with the
Company’s long-term work plan (such as: the achievement of strategic objectives, special issues, special financing agreements
or the signing of material agreements for the Company’s operations, etc.) (hereinafter: the “Special Bonus”).
It should be clarified that in addition to the foregoing, the Special Bonus is subject to the rest of the provisions of this Compensation
Policy, and, inter alia, to the threshold conditions and to the restrictions set forth in section 6.

 

		6.7	It is further clarified that the Compensation Committee and the Board of Directors may approve,
from time to time, the conclusion of management agreements with the controlling shareholders of the Company, directly or indirectly,
subject to individual approvals as determined from time to time by the Company’s organs including the general meeting of
the Company and based on well-ordered comparative data.

 

		6.8	Threshold Conditions for Payment of the Annual Bonus

 

Notwithstanding
that stated in this section 6 above and below, the annual bonus shall not be distributed to any of the Officers of the Company
in any of the events set forth below:

 

		6.8.1	In respect of the achievement of a target which is lower than the minimum rate to be determined
each year for compliance with each one of the targets (the lower limit).

 

		6.8.2	If payment of the bonuses would place the Company in a situation that constitutes cause for immediate
payment of any series of bonds that has been or shall be issued by the Company.

 

		6.8.3	Upon approval of the bonus plan, if approved, the Compensation Committee and the Board of Directors
may determine additional threshold conditions, whether quantitative or otherwise, taking into consideration the Company’s
targets, its strategy and its situation - whereby upon satisfaction of the said conditions, the annual bonus shall not be distributed
to any of the Officers of the Company.

 

     9

     

    

  

		6.9	Restrictions
Regarding the Annual Bonus

 

Furthermore,
the annual bonus, if determined, shall be subject to the restrictions set forth below:

 

		6.9.1	The Officer’s entitlement to those parts of the annual bonus attributed to each one of the
targets to be determined for the Officers, may be determined (a) on an “absolute” basis, i.e., failure to comply with
any target whatsoever shall not entitle the Officer to compensation in respect thereof; or (b) the entitlement may be determined
in accordance with the degree of the Officer’s compliance with the various targets to be determined for him, relative to
the targets as approved in the Company’s budget for the relevant year, in a linear manner, so that precise compliance with
100% of a specific target to be defined for the Officer in the relevant year - shall entitle the said Officer to the full amount
of the bonus in respect of this target, and partial compliance with the said target (whilst “marking” a lower target)
- shall entitle the said Officer to a relative part of the amount of the bonus attributed to this target, all pursuant to the terms
and conditions determined in the bonus plan for the said year. In addition, the rate shall be determined out of the bonus to be
paid in respect of the achievement of the target at the lower limit and also a ceiling for the amount of the bonus (the higher
limit, which constitutes the “excellence” target, beyond the threshold of 100% of the compensation).

 

		6.9.2	The total amount of the annual bonus shall be limited as set forth below:

 

		(a)	CEO - shall not exceed three salaries (including the Special Bonus as set forth in section
6.6 above).

 

		(b)	CFO - shall not exceed two salaries.

 

According
to the assessment of the Compensation Committee and the Board of Directors, the ceiling for the annual bonus reflects targets which
do not create an incentive to take increased risks.

 

		6.9.3	The amount of the annual bonuses for all of the Officers of the Company in respect of a particular
year, as shall be actually distributed, shall not exceed 0.2% of the Company’s income. In the event of a deviation from the
threshold determined - a pari passu distribution shall be implemented.

 

		6.9.4	An annual bonus may be given to Officers who have worked or provided services to the Company for
at least 12 (twelve) months prior to the approval of the financial statements for the said year, except in the event that the Officer
resigned or was dismissed due to circumstances which negate the entitlement to receive severance pay. Notwithstanding the foregoing,
in the event of a new officer who has worked for less than 12 months at the Company, the Board of Directors may, at the recommendation
of the Company’s CEO, determine his entitlement to a bonus pro rata to the said Officer’s period of employment
at the Company.

 

		6.9.5	The grant of an annual bonus to the Officers of the Company is subject to the discretion of the
Board of Directors of the Company, which may decide to reduce the amount of the bonus or not to distribute a bonus at all to any
of the Officers of the Company, in a particular year, at any time as it shall choose during the said year, including after termination
thereof, should the Board of Directors find that
there relevant considerations, such as financial or other considerations, which, paying heed to the Company’s situation at
the said time, justify, in the opinion of the Board of Directors, the reduction or cancellation of the bonuses of the Company’s
Officers, even if retroactively

 

		6.9.6	Any Officer entitled to a bonus based on any financial data whatsoever undertakes to reimburse
the Company for any amounts paid to him, if any, based on data which transpired to be erroneous and which were restated in the
Company’s financial statements. Such an Officer shall sign his consent that the Company may offset the amount due to it from
him, from any amount which he is entitled to receive from the Company, subject to the provisions of the law.

 

		6.9.7	The annual bonus, if determined, shall be paid to the Officers once a year, after approval of the
audited financial statements of the relevant year by the Board of Directors of the Company, and in accordance with the Company’s
actual results for the said year, and in the event that data needs to be calculated - in accordance with the financial statements
of the said relevant year.

 

		6.9.8	In special cases, the CEO (or the Board of Directors, in the event of an advance payment to the
CEO) may approve the acceleration of payment on account of the bonus due to any Officer, provided that the advance payment shall
not exceed two salaries. For the sake of caution it is hereby clarified that if, in the said year, it is determined that the said
Officer is not entitled to a bonus or is entitled to a bonus which is lower than the amount of the advance payment, the Company
shall demand that the Officer refund the advance payment made as aforesaid.

 

		6.9.9	In addition to that stated in this section 6 above, the bonus plan may include additional provisions
pursuant to which a mechanism shall be determined for the scheduling or conditioning of part of the payment of the annual bonuses,
based on the achievement of a measurable long-term target/ measurable long-term targets during a period of two or three calendar
years, and also rules for the calculation of the entitlement to the said multi-annual bonus, at the end of the multi-annual period
of measurement. The rules and the conditions for the said multi-annual bonus, if applicable, shall be determined and brought for
approval by the Company’s competent organs, in accordance with the provisions of the law.

 

     10

     

    

  

		7.	Related Terms and Benefits

 

Should an
Officer’s Terms of Office and Employment include provisions regarding the matters set forth below, they shall be determined
in accordance with the relevant considerations and criteria, as enumerated in sections 2, 3 and 4 above, and in accordance with
the terms and conditions set forth below:

 

		7.1	Related Benefits Granted to All The Officers (except for directors)

 

		7.1.1	The Officers employed at the Company are entitled to contributions for managers’ insurance,
disability insurance and a continuing education fund, in keeping with standard practice at the Company.

 

		7.1.2	The Officers employed at the Company are entitled to sick days, vacation days and convalescence
days in keeping with standard practice at the Company for senior employees and in accordance with their length of service at the
Company, and in any event, not less than that set forth in the law, and not more than 28 vacation days per year of work.

 

		7.1.3	The Company may provide any Officer with a car, for the purpose of performing his duties. Should
a company car be provided to the Officer, as aforesaid, the Company shall bear the fixed expenses entailed in use, for the maintenance
of the car, in keeping with the procedures generally applied at the Company. The Officer shall undertake to bear any fines or tickets
in respect of use of the car, if any. The Company may gross up the value of use of the vehicle for tax purposes.

 

		7.1.4	Should the Officer’s Terms of Office and Employment include a cell phone, the Officer shall
be entitled to the reimbursement of cell phone expenses, as per the Company’s decision, and in its sole discretion. The Officer
shall bear the payment of any tax that may be applicable to him due to use of the cell phone. The Company may gross up the value
of use for tax purposes.

 

		7.1.5	Should the Officer’s Terms of Office and Employment include the reimbursement of expenses,
the Officer shall be entitled to the reimbursement of reasonable expenses as incurred by him in the course of performance of his
duties, against presentation of receipts, and in accordance with the Company’s policy.

 

		7.1.6	Should the Officer’s Terms of Office and Employment include per diem expenses for
trips overseas, the Company shall bear the payment of the per diem expenses for the Officer during the period of his stay
overseas for work purposes, in keeping with the Company’s procedures.

 

		7.1.7	The Company’s Officers may be entitled, in accordance with and subject to their personal
terms of employment, to the payment of full severance pay at the time of the termination of the employer - employee relationship
for any reason whatsoever, including following resignation, except in the event of dismissal under “grave circumstances”
as defined below, or to the payment of severance pay pursuant to the provisions of section 14 of the Severance Pay Law, 5723 -
1963.

 

		7.1.8	Subject to the approval of the Compensation Committee, the Company may grant the Company’s
Officers additional benefits at a rate not exceeding 10% of the monthly cost of the fixed component of the relevant Officer of
the Company (on an annual scope).

 

		7.2	Insurance, Release and Indemnity

 

		7.2.1.	The Company has insurance to cover the liability of officers and directors who are serving and/or
shall serve at the Company from time to time, including directors who have control, or a relative thereof, and also letters of
release from liability and an undertaking to indemnify officers and directors of the Company (who are not controlling shareholders,
or a relative thereof).

 

		7.2.2	The Compensation Committee and the Board of Directors may authorize Management to approve any renewal,
extension contracts or replacements of insurance policies to cover the liability of officers and directors, such as the controlling
shareholder and his relatives, who serve or will serve as officers of our company or its subsidiaries from time to time, without
the approval of the shareholders, provided that (i) the liability coverage does not exceed $35,000,000 (for each claim and in the
aggregate) and the aggregate annual premium does not exceed $500,000, the side “A” directors and officers liability
coverage does not exceed $25,000,000 (for each claim and in the aggregate) and its aggregate annual premium does not exceed $250,000;
and (ii) the insurance is on market terms and shall not have a material impact on our profitability, assets or liabilities.”
Side “A” coverage is only for the benefit of the Company’s directors and executive officers and only in situations
where coverage under the General Policy has been exhausted or is otherwise insufficient or unavailable.

 

		7.2.3	Subject to the approval of the Compensation Committee (and, if required by law, by the Board) the
Company shall be entitled to purchase a “run off” Insurance Policy of up to seven (7) years, with the existing insurance
carrier or any other insurance company, including but not limited to in case of a merger, consolidation or insolvency claims involving
the Company, a change of control in the Company, sale of all or most of the Company’s assets, or any other circumstances
determined by the Compensation Committee, which policy shall comply with the following:

 

		•	The liability coverage shall not exceed a per-occurrence limit and an aggregate limit (for one year period) of $35 million
in addition to reasonable litigation expenses;

 

		•	The total premium shall not exceed 450% of the annual premium the Company paid for the previous applicable year;

 

		•	The amount of the participation fee which shall be determined in any policy purchased as stated shall not deviate from that
customary in the market for insurance policies of the type and the scope and at the time of the engagement in the policy;

 

		•	The purchase of such Insurance Policy shall be approved by the Compensation Committee (and, if required by law, by the Board)
which shall determine that the Insurance Policy reflects the current market conditions and that it shall not materially affect
the Company’s profitability, assets or liabilities.

 

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		7.2.4	The Company may release the Company’s Officers, in advance, from liability for breach of
the duty of care to the Company, in accordance with any law, including any Officer of the Company who is the controlling shareholder
or a relative thereof, subject to the receipt of approvals in accordance with any law. Such a release shall not apply to a resolution
or transaction in which the controlling shareholder or any Officer of the Company (including an Officer other than the one to whom
the release is granted) has a personal interest. Such limitation on the release regarding resolutions or transactions in which
the controlling shareholder or any Officer of the Company has a personal interest shall be included in the Company’s Articles
of Association and in the indemnity/release letters or agreements provided to all Officers.

 

		8.	Terms of Termination of Office

 

		8.1	An Officer shall be entitled to advance notice at the time of termination of employment, as shall
be determined in the employment agreement or in the agreement for the provision of services between the Company and the Officer,
in accordance with that set forth below (in such a manner that shall not be less than the minimum required by law):

 

	Position	 	Maximum Period
	CEO	 	Up to 6 months
	CFO	 	Up to 4 months

 

		8.2	The advance notice period shall be determined in accordance with the relevant considerations and
criteria, as enumerated in sections 2, 3 and 4 above, and it shall be approved by the Company’s competent organs, in accordance
with the provisions of the law.

 

		8.3	The Officers employed at the Company may be entitled to receive the full benefits pursuant to the
employment agreement or the redemption thereof, as if they had continued to be employed at the Company, even if the advance notice
period (or part thereof) is redeemed.

 

		8.4	During the advance notice period, the Officer is required to continue to perform his duties at
the Company (as per the Company’s decision).

 

		8.5	Termination Bonus

 

		8.5.1	In addition to the foregoing, it is proposed to determine that the Company may approve for the
CEO/CFO a termination bonus/ an adjustment bonus in an amount of up to 6 salaries and of up to 3 salaries (respectively), in the
event of dismissal by the Company (except in the event of dismissal under grave circumstances) or in the event of resignation,
respectively. The amount of the termination bonus shall be solely the amount of the component of the Officer’s monthly salary
(exclusive of related benefits, bonus, etc.), multiplied by the number of months granted to the said Officer. This bonus is similar
to the situation that exists at present.

 

		8.5.2	The termination bonuses shall be brought for the approval of the competent organs at the Company,
in accordance with the provisions of the law, prior to the execution of the employment agreement or the agreement for the provision
of services, and the bonuses shall be determined in accordance with the relevant considerations and criteria, as enumerated in
sections 2, 3 and 4 above, and subject to the Officer’s compliance with all of the following terms and conditions:

 

		8.5.2.1	He was employed at the Company or he provided services to the Company for at least three
seven years.

 

	 	8.5.2.2	During the period of his employment, he made a significant contribution to the advancement
of the Company’s business and the maximization of its profits.

 

		8.5.2.3	The circumstances of the termination of the Officer’s employment do not justify the negation
of severance pay.

 

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		9.	Commercial Protections

 

The employment
agreements and the agreements for the provision of services by the Officers shall contain provisions whose purpose is to protect
the Company’s intellectual property rights and also confidentiality and non-competition stipulations, and the wording thereof
shall be adjusted to suit the relevant Officer, in accordance with the sensitivity of his position and his importance to the Company.

 

		10.	Additional General Terms and Conditions

 

		10.1	The Officers who are subject to the Compensation Policy may be employees of the Company or independent
contractors who provide services to the Company. In the event that the Officer provides services to the Company as an independent
contractor, the provisions of the Compensation Policy shall apply to him mutatis mutandis, the compensation for the said
Officer shall be paid against an invoice, and the compensation components shall be normalized, so that from a total economic point
of view, they shall be consistent with that stated in this Policy, provided that this shall not be detrimental to the Company’s
best interests, its situation or its plans.

 

		10.2	The provisions of this Compensation Policy shall not derogate from any provision which exists and/or
provision which shall be determined in any law (including, without derogating from the generality of the foregoing, the provisions
of the Companies Law and/or the regulations and/or orders pursuant thereto), and any concession and/or exemption and/or additional
exercise of discretion to any of the Company’s organs as shall be determined in any such statutory provision, including after
the approval of this Policy, shall apply to the Company and shall be deemed to form part of this Compensation Policy, after the
Compensation Committee or the Board of Directors shall resolve to add them, in whole or in part, to this Policy - without it requiring
the approval of the Company’s shareholders’ meeting.

 

		10.3	The Compensation Committee and the Board of Directors may approve a deviation of up to 5% per calendar
year from any ceiling, restriction or any other provision set forth in this policy document, and such a deviation shall be deemed
to be in compliance with the Compensation Policy.

 

However, non-material
changes in the Terms of Office and Employment of Officers of the Company shall require the prior approval of the Compensation Committee
only, where the latter confirmed that a particular change in the Terms of Office and Employment is non-material. In this regard,
it has been determined that the total of non-material changes in the Terms of Office and Employment of an Officer of the Company
that may be approved by the Compensation Committee in any reporting year may not exceed 5% (in real terms) of the total of the
Terms of Office and Employment of an Officer of the Company that were approved by the Company’s competent organs for that
reporting year.

 

		11.	Validity

 

The Compensation
Policy shall be in full force and effect for three years from the date of approval thereof by the general meeting as aforesaid,
in accordance with the provisions of section 267a(d) of the Law.

 

Notwithstanding
the foregoing, the Board of Directors of the Company shall examine from time to time, and at the latest, each year, the Compensation
Policy and also its consistency with the provisions of the law, insofar as any material change shall take place in the circumstances
which existed at the time of determination hereof or for other reasons. Subject to that stated in section 10.2 above, changes to
the Compensation Policy, if any, shall be approved in accordance with the provisions of the law.

 

In addition,
the Compensation Committee shall examine the application of the Compensation Policy, from time to time; and should the Committee
so deem fit, it shall recommend that the Board of Directors update the Compensation Policy.

 

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