Document:

nts_ex41.htm

Exhibit 4.1

 

XFONE, INC.

2004 STOCK OPTION PLAN

This 2004 Stock Option Plan (the "Plan") provides for the grant of options to acquire common shares (the "Common Shares") in the capital of Xfone, Inc., a corporation formed under the laws of the State of Nevada (the "Corporation"). Stock options granted under this Plan will include:

(a) stock options that qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), which will be referred to in this Plan as "Incentive Stock Options";

(b) stock options that do not qualify under Section 422 of the Code, will be referred to in this Plan as "Non-Qualified Stock Options".

(c) stock options that qualify under Section 102 of the Israeli Tax Ordinance (New Version) 1961, as amended and the rules and regulations promulgated thereunder (the "Ordinance"), which will be referred to in this Plan as "Section 102 Options".

Incentive Stock Options, Non-Qualified Stock Options and Section 102 Options granted under this Plan are collectively referred to as "Options".

1. PURPOSE; APPLICABLE LAWS

1. The purpose of this Plan is to retain the services of valued key employees, consultants and of the Corporation and such other persons as the Plan Administrator (as hereinafter defined) shall select in accordance with Section 3 below, and to encourage such persons to acquire a greater proprietary interest in the Corporation, thereby strengthening their incentive to achieve the objectives of the shareholders of the Corporation, and to serve as an aid and inducement in the hiring of new employees and to provide an equity incentive to consultants and other persons selected by the Plan Administrator.

 

 

2. This Plan shall at all times be subject to all legal requirements relating to the administration of stock option plans, if any, under applicable corporate laws, applicable United States federal and state securities laws, the Code, applicable Israeli tax laws, Israeli securities laws, Israeli corporate laws, Israeli foreign exchange control laws the rules of any applicable stock exchange or stock quotation system, and the rules of any other foreign jurisdiction applicable to Options granted to residents therein (collectively, the "Applicable Laws").

2. ADMINISTRATION

 

1. This Plan shall be administered initially by the board of directors of the Corporation (the "Board"), except that the Board may, in its discretion, establish a committee composed of two (2) or more members of the Board or two (2) or more other persons to administer the Plan, which committee (the "Committee") may be an executive, compensation or other committee, including a separate committee especially created for this purpose. The Board or, if applicable, the Committee is referred to herein as the "Plan Administrator".

 

2. If and so long as the Common Shares is registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the Corporation wishes to grant Incentive Stock Options, then the Board shall consider in selecting the Plan Administrator and the membership of any Committee, with respect to any persons subject or likely to become subject to Section 16 of the Exchange Act, the provisions regarding (a) "outside directors" as contemplated by Section 162(m) of the Code, and (b) "Non-Employee Directors" as contemplated by Rule 16b-3 under the Exchange Act.

 

  

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3. The Committee shall have the powers and authority vested in the Board hereunder (including the power and authority to interpret any provision of the Plan or of any Option). The members of any such Committee shall serve at the pleasure of the Board. A majority of the members of the Committee shall constitute a quorum, and all actions of the Committee shall be taken by a majority of the members present. Any action may be taken by a written instrument signed by all of the members of the Committee and any action so taken shall be fully effective as if it had been taken at a meeting.

 

4. Subject to the provisions of this Plan and any Applicable Laws, and with a view to accomplishing the purpose of the Plan, the Plan Administrator shall have sole authority, in its absolute discretion, to:

 

a. construe and interpret the terms of the Plan and any Option granted pursuant to this Plan;

 

b. define the terms used in the Plan;

 

c. prescribe, amend and rescind the rules and regulations relating to this Plan and various Option Agreements;

 

d. correct any defect, supply any omission or reconcile any inconsistency in this Plan;

 

e. grant Options under this Plan, except grants to directors, the CEO and the CFO of the Corporation, which will be granted by the Board as a whole;

f. determine the individuals to whom Options shall be granted under this Plan and whether the Option is granted as an Incentive Stock Option, Non-Qualified Stock Option, or Section 102(b) Option;

 

g. make an election under Section 102(b)(1) or (2) of the Ordinance;

 

h. determine the time or times at which Options shall be granted under this Plan;

 

i. determine the number of Common Shares subject to each Option, the exercise price of each Option, the duration of each Option and the times at which each Option shall become exercisable;

 

j. determine all other terms and conditions of the Options; and

 

k. make all other determinations and interpretations necessary and advisable for the administration of the Plan.

 

5. All decisions, determinations and interpretations made by the Plan Administrator shall be binding and conclusive on all participants in the Plan and on their legal representatives, heirs and beneficiaries.

 

3. ELIGIBILITY

1. Incentive Stock Options may be granted to any individual who, at the time such Option is granted, is an employee of the Corporation or any Related Corporation, and not a director. (as hereinafter defined) (an "Employee").

2. Non-Qualified Stock Options may be granted to Employees, and to such other persons who are not Employees as the Plan Administrator shall select, subject to any Applicable Laws.

3. Section 102 Options - See Section 4 below.

 

  

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4. Anything in the Plan to the contrary notwithstanding, all grants of Options to Israel regarding directors and office holders of the Israeli subsidiary, Xfone Communications Ltd., ("Nosei Misra" - as such term is defined in the Companies Law, 1999 - the "Companies Law") shall be authorized and implemented only in accordance with the provisions of the Companies Law, as in effect from time to time.

 

5. Options may be granted in substitution for outstanding Options of another corporation in connection with the merger, consolidation, acquisition of property or stock or other reorganization between such other corporation and the Corporation or any subsidiary of the Corporation. Options also may be granted in exchange for outstanding Options.

6. Any person to whom an Option is granted under this Plan is referred to as an "Optionee". Any person who is the owner of an Option is referred to as a "Holder".

7. As used in this Plan, the term "Related Corporation" shall mean any corporation (other than the Corporation) that is a "Parent Corporation" of the Corporation or "Subsidiary Corporation" of the Corporation, as those terms are defined in Sections 424(e) and 424(f), respectively, of the Code (or any successor provisions) and the regulations thereunder (as amended from time to time).

 

4. DESIGNATION OF OPTIONS PURSUANT TO SECTION 102 (RELEVANT ONLY TO ISRAELI EMPLOYEES)

1. The Corporation will designate Options granted to Employees pursuant to Section 102 as Approved 102 Options (means an Option granted pursuant to Section 102(b) of the Ordinance and held in trust by a Trustee for the benefit of the Optionee).

2. The grant of Approved 102 Options shall be made under this Plan adopted by the Board, and shall be conditioned upon the approval of this Plan by the ITA (Israeli Tax Authorities).

 

3. Approved 102 Options under this plan will be classified as a capital gain option and will qualify under the capital gain tax treatment in accordance with the provisions of Section 102(b)(2) and shall be referred to herein as "CGO".

4. The Corporation's election of the CGO granted to Employees (the "Election"), shall be appropriately filed with the ITA before the Date of Grant of an Approved 102 Option. Such Election shall become effective beginning the first Date of Grant of an Approved 102 Option under this Plan and shall remain in effect until the end of the year following the year during which the Corporation first granted Approved 102 Options. The Election shall obligate the Corporation to grant only the type of Approved 102 Option it has elected, the CGO, and shall apply to all Optionees who were granted Approved 102 Options during the period indicated herein, all in accordance with the provisions of Section 102(g) of the Ordinance.

5. All Approved 102 Options must be held in trust by a Trustee (means any individual appointed by the Corporation to serve as a trustee and approved by the ITA, all in accordance with the provisions of Section 102(a) of the Ordinance.), as described in Section 5 below.

 

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

 

7. With regards to Approved 102 Options, the provisions of the ISOP and/or the Option Agreement shall be subject to the provisions of Section 102 and the Tax Assessing Officer's permit, and the said provisions and permit shall be deemed an integral part of the ISOP and of the Option Agreement. Any provision of Section 102 and/or the said permit which is necessary in order to receive and/or to keep any tax benefit pursuant to Section 102, which is not expressly specified in the ISOP or the Option Agreement, shall be considered binding upon the Corporation and the Optionees.

 

  

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5. TRUSTEE

 

1. Approved 102 Options which shall be granted under the ISOP and/or any Shares allocated or issued upon exercise of such Approved 102 Options and/or other shares received subsequently following any realization of rights, including, without limitation, bonus shares, shall be allocated or issued to the Trustee and held for the benefit of the Optionees for such period of time according to each Optionee's vesting schedule and as required by Section 102 or any regulations, rules or orders or procedures promulgated thereunder (the "Holding Period"). In the case the requirements for Approved 102 Options are not met, then the Approved 102 Options shall be treated as Unapproved 102 Options, all in accordance with the provisions of Section 102 and regulations promulgated thereunder.

 

2. The Optionee will be responsible to immediately settle on its own account all the tax issues and liabilities that are related to the Options or the Common Shares.

 

3. Upon receipt of Approved 102 Option, the Optionee will sign an undertaking to release the Trustee from any liability in respect of any action or decision duly taken and bona fide executed in relation with the Plan, or any Approved 102 Option or Share granted to him thereunder.

 

4. With respect to any Approved 102 Option, subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, an Optionee shall not be entitled to sell or release from trust any Share received upon the exercise of an Approved 102 Option and/or any share received subsequently following any realization of rights, including without limitation, bonus shares, until the lapse of the Holding Period required under Section 102 of the Ordinance.

 

5. With respect to all Shares (but excluding, for avoidance of any doubt, any unexercised Options) allocated or issued upon the exercise of Options purchased by the Optionee and held by the Optionee or by the Trustee, as the case may be, the Optionee shall be entitled to receive dividends in accordance with the quantity of such Shares, subject to the provisions of the Corporation's incorporation documents (and all amendments thereto) and subject to any applicable taxation on distribution of dividends, and when applicable subject to the provisions of Section 102.

6. STOCK

1. The Plan Administrator is authorized to grant Options to acquire up to a total of 5.5 million Common Shares (five million and five hundred thousand Common Shares). The number of Common Shares with respect to which Options may be granted hereunder is subject to adjustment as set forth in Section 7.1(m) hereof. In the event that any outstanding Option expires or is terminated for any reason, the Common Shares allocable to the unexercised portion of such Option may again be subject to an Option granted to the same Optionee or to a different person eligible under Section 3 of this Plan; provided however, that any cancelled Options will be counted against the maximum number of Common Shares with respect to which Options may be granted to any particular person as set forth in Section 3 hereof.

2. According to Section 4.1, Options will be put aside for the Approved 102 Options (means an Option granted pursuant to Section 102(b) of the Ordinance and held in trust by a Trustee for the benefit of the Optionee).

7. TERMS AND CONDITIONS OF OPTIONS

1. Each Option granted under this Plan shall be evidenced by a written agreement approved by the Plan Administrator (each, an "Option Agreement"). Agreements may contain such provisions, not inconsistent with this Plan or any Applicable Laws, as the Plan Administrator in its discretion may deem advisable. All Options also shall comply with the following requirements:

 

a. Number of Shares and Type of Option.

 

Each Agreement shall state the number of Common Shares to which it pertains and whether the Option is intended to be an Incentive Stock Option, Non-Qualified Stock Option or a Section 102(b) Option; provided that:

 

  

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i. the number of Common Shares that may be reserved pursuant to the exercise of Options granted to any person shall not exceed 5% of the issued and outstanding Common Shares of the Corporation;

 

ii. in the absence of action to the contrary by the Plan Administrator in connection with the grant of an Option, all Options shall be Non-Qualified Stock Options;

 

iii. the aggregate fair market value (determined at the Date of Grant, as defined below) of the Common Shares with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (granted under this Plan and all other Incentive Stock Option plans of the Corporation, a Related Corporation or a predecessor corporation) shall not exceed U.S.$100,000 in fair value, or such other limit as may be prescribed by the Code as it may be amended from time to time (the "Annual Limit"); and

 

iv. any portion of an Option which exceeds the Annual Limit shall not be void but rather shall be a Non-Qualified Stock Option.

b. Date of Grant

 

Each Agreement shall state the date the Plan Administrator has deemed to be the effective date of the Option for purposes of this Plan (the "Date of Grant").

c. Option Price

Each Agreement shall state the price per Common Share at which it is exercisable. The Plan Administrator shall act in good faith to establish the exercise price in accordance with Applicable Laws; provided that:

i. the per share exercise price for an Incentive Stock Option or any Option granted to a "covered employee" as such term is defined for purposes of Section 162(m) of the Code shall not be less than the fair market value per Common Share at the Date of Grant as determined by the Plan Administrator in good faith;

ii. with respect to Incentive Stock Options granted to greater-than-ten percent (>10%) shareholders of the Corporation (as determined with reference to Section 424(d) of the Code), the exercise price per share shall at least one hundred ten percent (110%) above fair market value per Common Share at the Date of Grant as determined by the Plan Administrator in good faith; and

iii. Options granted in substitution for outstanding options of another corporation in connection with the merger, consolidation, acquisition of property or stock or other reorganization involving such other corporation and the Corporation or any subsidiary of the Corporation may be granted with an exercise price equal to the exercise price for the substituted option of the other corporation, subject to any adjustment consistent with the terms of the transaction pursuant to which the substitution is to occur.

iv. solely for the purpose of determining the tax liability pursuant to Section 102(b)(3) of the Ordinance, if at the date of grant the Corporation's shares are listed on any established stock exchange or a national market system or if the Corporation's shares will be registered for trading within ninety (90) days following the date of grant of the CGOs, the fair market value of the Shares at the date of grant shall be determined in accordance with the average value of the Corporation's shares on the thirty (30) trading days preceding the date of grant or on the thirty (30) trading days following the date of registration for trading, as the case may be.

 

  

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d. Duration of Options

 

At the time of the grant of the Option, the Plan Administrator shall designate, subject to Section 7.1(g) below, the expiration date of the Option, which date shall not be later than 10 years from the Date of Grant; provided, that the Plan Administrator decided otherwise in specific option agreements or, that the expiration date of any Incentive Stock Option granted to a greater-than-ten percent (>10%) shareholder of the Corporation (as determined with reference to Section 424(d) of the Code) shall not be later than five (5) years from the Date of Grant. In the absence of action to the contrary by the Plan Administrator in connection with the grant of a particular Option, and except in the case of Incentive Stock Options as described above, all Options granted under this Section 7 shall expire 10 years from the Date of Grant.

e. Vesting Schedule

No Option shall be exercisable until it has vested. The vesting schedule for each Option shall be specified by the Plan Administrator at the time of grant of the Option prior to the provision of services with respect to which such Option is granted.;

 

The vesting period for Approved 102 Options (means an Option granted pursuant to Section 102(b) of the Ordinance and held in trust by a Trustee for the benefit of the Optionee will be determined according to Section 4 herein.

f. Acceleration of Vesting

 

The vesting of one or more outstanding Options may be accelerated by the Plan Administrator at such times and in such amounts as it shall determine in its sole discretion.

g. Term of Option

 

i. Vested Options shall terminate, to the extent not previously exercised, upon the occurrence of the first of the following events:

 

A. the expiration of the Option, as designated by the Plan Administrator in accordance with Section 7.1(d) above;

B. the date an Optionee receives a notice of his or her termination of employment or contractual relationship with the Corporation or any Related Corporation for Cause (as hereinafter defined); or

C. the expiration of three (3) months, unless otherwise determined in specific agreements by the Plan Administrator, from the date of an Optionee's termination of employment or contractual relationship with the Corporation or any Related Corporation for any reason whatsoever other than Cause, but not including death or disability, unless, in the case of a Non-Qualified Stock Option, the exercise period is extended by the Plan Administrator until a date not later than the expiration date of the Option;

ii. Notwithstanding Section 7.1(g)(i) above, any vested Options which have been granted to an Optionee in the Optionee's capacity as a director of the Corporation or any Related Corporation shall terminate upon the occurrence of the first of the following events:

 

A. the event specified in Section 7.1(g)(i)A above;

B. the expiration of three (3) months, unless otherwise determined in specific agreements by the Plan Administrator, from the date the Optionee ceases to serve as a director of the Corporation or Related Corporation, as the case may be, unless, in the case of a Non-Qualified Stock Option, the exercise period is extended by the Plan Administrator until a date not later than the expiration date of the Option.

 

  

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iii. Upon the death of an Optionee, any vested option still in force and unexpired may be exercised by the person or persons to whom such Optionee's rights under such Option shall pass by the Optionee's will or by the laws of descent and distribution of the Optionee's domicile at the time of death, within a period of twelve (12) months after the date of such termination.

iv. In the event of the termination and/or resignation of employment or consulting services of an Optionee due to total disability, the Optionee or his guardian or legal representative, shall have the right to exercise any Option which has not been previously exercised or expired and which the Optionee was eligible to exercise as of the first date of total disability, at any time within one year after such termination and/or resignation or separation, unless such Option is earlier terminated pursuant to its terms. All Options that are not exercisable as of the date of the Optionee’s termination and/or resignation or which are not exercised within one year thereafter shall be deemed canceled and terminated as of such applicable date. The term "total disability" shall, for purposes of this Plan, shall be determined by the Plan Administrator in its sole discretion.

v. For purposes of the Plan, unless otherwise defined in the Agreement, termination for "Cause" shall mean such termination is for 'cause' as such term is expressly defined in a then-effective written agreement between the Optionee and the Corporation or any Related Corporation, or in the absence of such then-effective written agreement and in the case of an Employee or an Israeli Employee, termination for the following reasons (i) conviction of any felony involving moral turpitude or affecting the Corporation; (ii) any refusal to carry out a reasonable directive of the chief executive officer, the Board or the Optionee's direct supervisor, which involves the business of the Corporation or its Related Corporation and was capable of being lawfully performed; (iii) embezzlement of funds of the Corporation or its Related Corporation; (iv) any breach of the Optionee's fiduciary duties or duties of care of the Corporation; including without limitation disclosure of confidential information of the Corporation; and (v) any conduct (other than conduct in good faith) reasonably determined by the Board to be materially detrimental to the Corporation.

Unless accelerated in accordance with Section 7.1(f) above, unvested Options shall terminate immediately upon termination of employment or contractual relationship of an Optionee with the Corporation or a Related Corporation, or termination of an Optionee's services as a director of the Corporation or a Related Corporation, for any reason whatsoever, including death or disability.

vi. For purposes of this Plan, transfer of employment between or among the Corporation and/or any Related Corporation shall not be deemed to constitute a termination of employment with the Corporation or any Related Corporation. Employment shall be deemed to continue while the Optionee is on military leave, sick leave or other bona fide leave of absence (as determined by the Plan Administrator). The foregoing notwithstanding, employment shall not be deemed to continue beyond the first ninety (90) days of such leave, unless otherwise determined in specific agreements by the Plan Administrator and unless the Optionee's re-employment rights are guaranteed by statute or by contract.

h. Exercise of Option

i. Options shall be exercisable, in full or in part, at any time after vesting, until termination. If less than all of the Common Shares included in the vested portion of any Option are purchased, the remainder may be purchased at any subsequent time prior to the expiration of the Option term. Only whole Common Shares may be issued pursuant to an Option, and to the extent that an Option covers less than one (1) Common Share, it is unexercisable.

 

ii. Options or portions thereof may be exercised by giving written notice to the Corporation, which notice shall specify the number of Common Shares to be purchased, and be accompanied by payment in the amount of the aggregate exercise price for the Common Shares so purchased, which payment shall be in the form specified in Section 7.1(i) below. The Corporation shall not be obligated to issue, transfer or deliver a certificate representing Common Shares to the Holder of any Option, until provision has been made by the Holder, to the satisfaction of the Corporation, for the payment of the aggregate exercise price for all Common Shares for which the Option shall have been exercised and for satisfaction of any tax withholding obligations associated with such exercise. During the lifetime of an Optionee, Options are exercisable only by the Optionee.

 

  

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iii. For Israeli Employees the above mentioned in section h(ii) is subject to section 102 and the trust mechanism as defined in section 5 of this Plan.

With respect to Unapproved 102 Option, if the Optionee ceases to be employed by the Corporation or any Corporation Related, the Optionee shall extend to the Corporation and/or its Corporation Related a security or guarantee for the payment of tax due at the time of sale of Shares, all in accordance with the provisions of Section 102 and the rules, regulation or orders promulgated thereunder.

i. Payment upon Exercise of Option

 

Upon the exercise of any Option, the aggregate exercise price shall be paid to the Corporation in cash or by certified or cashier's check. In addition, if pre-approved in writing by the Plan Administrator who may arbitrarily withhold consent, the Holder may pay for all or any portion of the aggregate exercise price by complying with one or more of the following alternatives:

i. by delivering to the Corporation Common Shares previously held by such Holder, or by the Corporation withholding Common Shares otherwise deliverable pursuant to exercise of the Option, which Common Shares received or withheld shall have a fair market value at the date of exercise (as determined by the Plan Administrator) equal to the aggregate exercise price to be paid by the Optionee upon such exercise;

 

ii. by delivering a properly executed exercise notice together with irrevocable instructions to a broker promptly to sell or margin a sufficient portion of the Common Shares and deliver directly to the Corporation the amount of sale or margin loan proceeds to pay the exercise price; or

iii. by complying with any other payment mechanism approved by the Plan Administrator at the time of exercise.

j. No Rights as a Shareholder; Voting Proxy

 

i. A Holder shall have no rights as a shareholder of the Corporation with respect to any Common Shares covered by an Option until such Holder becomes a record holder of such Common Shares, irrespective of whether such Holder has given notice of exercise. Subject to the provisions of Section 7.1(m) hereof, no rights shall accrue to a Holder and no adjustments shall be made on account of dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights declared on, or created in, the Common Shares for which the record date is prior to the date the Holder becomes a record holder of the Common Shares covered by the Option, irrespective of whether such Holder has given notice of exercise.

ii. The right to vote any Common Share acquired hereunder pursuant to an award of the Options, shall be given by the Optionee or the Optionee's transferee, pursuant to an irrevocable proxy, to the person or persons designated by the Board of Directors of Xfone, Inc. All awards of options granted hereunder shall be conditioned upon the execution of such irrevocable proxy. So long as Common Shares are held by a Trustee and unless the Trustee shall be directed otherwise by the Board of Director, such shares shall be voted by the Trustee in accordance with the directions of the Board of Directors.

k. Non-transferability of Options

 

Options granted under this Plan and the rights and privileges conferred by this Plan may not be transferred, assigned, pledged or hypothecated in any manner (whether by operation of law or otherwise) other than by will, by applicable laws of descent and distribution, and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of any Option or of any right or privilege conferred by this Plan contrary to the provisions hereof, or upon the sale, levy or any attachment or similar process upon the rights and privileges conferred by this Plan, such Option shall thereupon terminate and become null and void.

 

  

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l. Securities Regulation and Tax Withholding

i. Common Shares shall not be issued with respect to an Option unless the exercise of such Option and the issuance and delivery of such Common Shares shall comply with all Applicable Laws, and such issuance shall be further subject to the approval of counsel for the Corporation with respect to such compliance, including the availability of an exemption from prospectus and registration requirements for the issuance and sale of such Common Shares. The inability of the Corporation to obtain from any regulatory body the authority deemed by the Corporation to be necessary for the lawful issuance and sale of any Common Shares under this Plan, or the unavailability of an exemption from prospectus and registration requirements for the issuance and sale of any Common Shares under this Plan, shall relieve the Corporation of any liability with respect to the non-issuance or sale of such Common Shares.

 

ii. As a condition to the exercise of an Option, the Plan Administrator may require the Holder to represent and warrant in writing at the time of such exercise that the Common Shares are being purchased only for investment and without any then-present intention to sell or distribute such Common Shares. If necessary under Applicable Laws, the Plan Administrator may cause a stop-transfer order against such Common Shares to be placed on the stock books and records of the Corporation, and a legend indicating that the Common Shares may not be pledged, sold or otherwise transferred unless an opinion of counsel is provided stating that such transfer is not in violation of any Applicable Laws, may be stamped on the certificates representing such Common Shares in order to assure an exemption from registration. The Plan Administrator also may require such other documentation as may from time to time be necessary to comply with applicable securities laws. THE CORPORATION HAS NO OBLIGATION TO UNDERTAKE REGISTRATION OF OPTIONS OR THE COMMON SHARES ISSUABLE UPON THE EXERCISE OF OPTIONS.

iii. The Optionee shall be fully and solely responsible for any local, state, federal and/or any other tax resulting from the grant of the Options and/or from exercise of such options. The Corporation shall have the right to withhold from such Optionee such withholding taxes as may be required by law, or to otherwise require the Optionee to pay such withholding taxes. If the Optionee shall fail to make such tax payments as are required, the Corporation or its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind, including a payment of Common Shares, otherwise due to such Optionee or to take such other action as may be necessary to satisfy such withholding obligations.

iv. The issuance, transfer or delivery of certificates representing Common Shares pursuant to the exercise of Options may be delayed, at the discretion of the Plan Administrator, until the Plan Administrator is satisfied that the applicable requirements of all Applicable Laws and the withholding provisions of the Code have been met and that the Holder has paid or otherwise satisfied any withholding tax obligation as described in Section 7.1(l)(iii) above.

 

m. Adjustments Upon Changes In Capitalization

i. The aggregate number and class of shares for which Options may be granted under this Plan, the number and class of shares covered by each outstanding Option, and the exercise price per share thereof (but not the total price), and each such Option, shall all be proportionately adjusted for any increase or decrease in the number of issued Common Shares of the Corporation resulting from:

 

A. a subdivision or consolidation of Common Shares or any like capital adjustment, or

 

B. the issuance of any Common Shares, or securities exchangeable for or convertible into Common Shares, to the holders of all or substantially all of the outstanding Common Shares by way of a stock dividend (other than the issue of Common Shares, or securities exchangeable for or convertible into Common Shares, to holders of Common Shares pursuant to their exercise of options to receive dividends in the form of Common Shares, or securities convertible into Common Shares, in lieu of dividends paid in the ordinary course on the Common Shares).

 

  

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ii. Except as provided in Section 7.1(m)(iii) hereof, upon a merger (other than a merger of the Corporation in which the holders of Common Shares immediately prior to the merger have the same proportionate ownership of common shares in the surviving corporation immediately after the merger), consolidation, acquisition of property or stock, separation, reorganization (other than a mere re-incorporation or the creation of a holding Corporation) or liquidation of the Corporation, as a result of which the shareholders of the Corporation, receive cash, shares or other property in exchange for or in connection with their Common Shares, any Option granted hereunder shall terminate, but the Holder shall have the right to exercise such Holder's Option immediately prior to any such merger, consolidation, acquisition of property or shares, separation, reorganization or liquidation, and to be treated as a shareholder of record for the purposes thereof, to the extent the vesting requirements set forth in the Option Agreement have been satisfied.

 

iii. If the shareholders of the Corporation receive shares in the capital of another corporation ("Exchange Shares") in exchange for their Common Shares in any transaction involving a merger (other than a merger of the Corporation in which the holders of Common Shares immediately prior to the merger have the same proportionate ownership of Common Shares in the surviving corporation immediately after the merger), consolidation, acquisition of property or shares, separation or reorganization (other than a mere re-incorporation or the creation of a holding Corporation), all Options granted hereunder shall be converted into options to purchase Exchange Shares unless the Corporation and the corporation issuing the Exchange Shares, in their sole discretion, determine that any or all such Options granted hereunder shall not be converted into options to purchase Exchange Shares but instead shall terminate in accordance with, and subject to the Holder's right to exercise the Holder's Options pursuant to, the provisions of Section 7.1(m)(ii). The amount and price of converted options shall be determined by adjusting the amount and price of the Options granted hereunder in the same proportion as used for determining the number of Exchange Shares the holders of the Common Shares receive in such merger, consolidation, acquisition or property or stock, separation or reorganization. Unless accelerated by the Board, the vesting schedule set forth in the Option Agreement shall continue to apply to the options granted for the Exchange Shares.

iv. In the event of any adjustment in the number of Common Shares covered by any Option, any fractional shares resulting from such adjustment shall be disregarded and each such Option shall cover only the number of full shares resulting from such adjustment.

v. All adjustments pursuant to Section 7.1(m) shall be made by the Plan Administrator, and its determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive.

vi. The grant of an Option shall not affect in any way the right or power of the Corporation to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge, consolidate or dissolve, to liquidate or to sell or transfer all or any part of its business or assets.

n. Other Provisions

The Option Agreement evidencing the awards under the Plan shall contain such other terms and conditions not inconsistent with the Plan as the Plan Administrator may determine.

 

8. EFFECTIVE DATE; AMENDMENT; SHAREHOLDER APPROVAL

 

1. Options may be granted by the Plan Administrator from time to time on or after the date on which this Plan is adopted by the Board (the "Effective Date"). In case of the Israeli Optionees, Options will be granted 30 days following the date in which the relevant forms will be submitted to the tax authorities.

 

2. Unless sooner terminated by the Board, this Plan shall terminate on the tenth anniversary of the Effective Date. No Option may be granted after such termination or during any suspension of this Plan.

3. Any Incentive Stock Options granted by the Plan Administrator prior to the ratification of this Plan by the shareholders of the Corporation shall be granted subject to approval of this Plan by the holders of a majority of the Corporation's outstanding voting shares, voting either in person or by proxy at a duly held shareholders' meeting within twelve (12) months before or after the Effective Date. If such shareholder approval is sought and not obtained, all Incentive Stock Options granted prior thereto and thereafter shall be considered Non-Qualified Stock Options and any Options granted to Covered Employees will not be eligible for the exclusion set forth in Section 162(m) of the Code with respect to the deductibility by the Corporation of certain compensation.

 

  

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9. NO OBLIGATIONS TO EXERCISE OPTION

The grant of an Option shall impose no obligation upon the Optionee to exercise such Option.

10. NO RIGHT TO OPTIONS OR TO EMPLOYMENT

Whether or not any Options are to be granted under this Plan shall be exclusively within the discretion of the Plan Administrator, and nothing contained in this Plan shall be construed as giving any person any right to participate under this Plan. The grant of an Option shall in no way constitute any form of agreement or understanding binding on the Corporation or any Related Corporation, express or implied, that the Corporation or any Related Corporation will employ or contract with an Optionee for any length of time, nor shall it interfere in any way with the Corporation's or, where applicable, a Related Corporation's right to terminate Optionee's employment at any time, which right is hereby reserved.

11. APPLICATION OF FUNDS

The proceeds received by the Corporation from the sale of Common Shares issued upon the exercise of Options shall be used for allowed corporate purposes as directed by the Board.

12. INDEMNIFICATION OF PLAN ADMINISTRATOR

 

In addition to all other rights of indemnification they may have as members of the Board, members of the Plan Administrator shall be indemnified by the Corporation for all reasonable expenses and liabilities of any type or nature, including attorneys' fees, incurred in connection with any action, suit or proceeding to which they or any of them are a party by reason of, or in connection with, this Plan or any Option granted under this Plan, and against all amounts paid by them in settlement thereof (provided that such settlement is approved by independent legal counsel selected by the Corporation), except to the extent that such expenses relate to matters for which it is adjudged that such Plan Administrator member is liable for willful misconduct; provided, that within fifteen (15) days after the institution of any such action, suit or proceeding, the Plan Administrator member involved therein shall, in writing, notify the Corporation of such action, suit or proceeding, so that the Corporation may have the opportunity to make appropriate arrangements to prosecute or defend the same.

13. AMENDMENT OF PLAN

The Plan Administrator may, at any time, modify, amend or terminate this Plan or modify or amend Options granted under this Plan, including, without limitation, such modifications or amendments as are necessary to maintain compliance with the Applicable Laws. The Plan Administrator may condition the effectiveness of any such amendment on the receipt of shareholder approval at such time and in such manner as the Plan Administrator may consider necessary for the Corporation to comply with or to avail the Corporation and/or the Optionees of the benefits of any securities, tax, market listing or other administrative or regulatory requirements.

Effective Date: March 13, 2006

 

11nts_ex42.htm

 

Exhibit 4.2

Agreement and Release

This Agreement and Release (this “Agreement”) is entered into on November 8th, 2010 to be effective as of October 31, 2010 (the “Effective Date”), between John Burton (“Burton”) and Xfone, Inc. (the “Company”).

RECITALS

WHEREAS, Burton was employed by the Company’s former wholly owned UK subsidiary, Swiftnet Limited (“Swiftnet”), as General Manager, pursuant to a Service Agreement dated July 3, 2006 (the “Service Agreement”), which was amended on January 15, 2009; and

WHEREAS, pursuant to the Service Agreement, on July 3, 2006 Burton was awarded 300,000 options to purchase shares of the Company’s common stock (the “Options”), under the Company’s 2004 Stock Option Plan (the “2004 Plan”) ; and

WHEREAS, pursuant to the 2004 Plan, all vested options terminate on the expiration of three (3) months from the termination of the contractual relationship with the Company; and

WHEREAS, on January 29, 2010, the Company, Abraham Keinan (“Keinan”) and AMIT K LTD (a company owned and controlled by Keinan) (“AMIT”) entered into an agreement pursuant to which, among others, Keinan, through AMIT, purchased Swiftnet from the Company (the “Transaction”); and

WHEREAS, following the consummation of the Transaction on July 29, 2010, the Service Agreement was terminated as of July 31, 2010; and

WHEREAS, the Company acknowledges the dedication of Burton to its former subsidiary and the fact that he has delivered a smooth transfer of ownership to AMIT; and

WHEREAS, the Company wishes, ex gratia and as an act of good will, to accept Burton's request and to amend the terms of the Options as set forth below.

NOW, THEREFORE, based upon the foregoing recitals, in consideration of the mutual terms, covenants and conditions hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by each party, Burton and the Company agree as follows:

 

  

1

  

Section 1

Amendment of Options; Registration

 

1.1  Effective as of the Effective Date, the terms of the Options are amended as follows (the “Amendment”):

 

(i)  The expiration date of all Options is amended to October 31, 2013; and

(ii)  The exercise price of 40,000 of the Options is amended to $1.50.

1.2  Burton expressly acknowledges and confirms that following the Amendment, the Options shall be governed by the below terms and conditions:

 

(i) 40,000 options: Expiration Date - October 31, 2013 and Exercise Price - $1.50.

(ii) 260, 000 options: Expiration Date - October 31, 2013 and Exercise Price - $3.50.

(iii) All 300,000 options are fully vested.

(iv) All other terms and conditions shall be pursuant to the 2004 Plan and any applicable law.

1.3  The Company will register with the SEC the shares of common stock underlying the Options.

Section 2

Release

 

2.1           Burton forever releases and discharges the Company and its respective affiliates (including current subsidiaries), shareholders, directors, officers, employees, agents and attorneys (in their individual and representative capacities) from any and all claims, demands, losses, damages, actions, causes of action, suits, debts, promises, liabilities, obligations, liens, costs, expenses, attorney’s fees, indemnities, subrogations (contractual or equitable) or duties, of any nature, character or description whatsoever which Burton may have arising from or relating to, directly or indirectly, Burton’s employment and discontinuation of employment with Swiftnet (including the Service Agreement) and/or the Options and/or Burton's warrants to purchase shares of the Company's common stock. This Clause does not include 3rd party claims made against Burton as a result of him being a Director of one or more of the Company's subsidiaries..

2.2           The release of claims in Subsection 2.1 includes, but is not limited to, claims at law or equity or sounding in contract (express or implied) or torts arising under federal, state or local laws or the common law prohibiting any form of discrimination.

	BURTON:	 	 	COMPANY:	 
	 	 	 	Xfone, Inc.	 
	 	 	 	 	 
	
/s/ John Burton

	 	 	
/s/ Guy Nissenson

	 
	
John Burton

	 	 	
Guy Nissenson, President and CEO

	 

 

2

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