Document:

XTL
Biopharmaceuticals LTD.

 

1999
DIRECTORS, CONSULTANTS AND EMPLOYEES SHARE OPTION PLAN

 

 

A. NAME
AND PURPOSE

 

1.    Name:
This
plan, as amended from time to time, shall be known as the “XTL
Biopharmaceuticals Ltd. 1999 Directors, Consultants and Employee Share Option
Plan” (the “Plan”). 

2.    Purpose: The
purpose and intent of the Plan is to provide incentives to the directors,
consultants and employees of XTL Biopharmaceuticals Ltd. (the "Company") and its
subsidiaries by providing them with options to purchase Ordinary Shares, nominal
value 0.02 New Israeli Shekels each (the "Shares"), of the Company.

B.
GENERAL TERMS AND CONDITIONS OF THE PLAN

3.    Administration: 

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

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

3.3    Subject
to the general terms and conditions of this Plan, the Committee shall have the
full authority in its sole and absolute discretion, from time to time and at any
time, to determine (i) the persons ("Grantees") to whom options to purchase
Shares ("Option(s)") shall be granted, (ii) the number of Shares to be
covered by each Option, (iii) the time or times at which the same shall be
granted, (iv) the schedule and conditions on which such Options may be
exercised and on which such Shares shall be paid for, and/or (v) any other
matter which is necessary or desirable for, or incidental to, the administration
of the Plan. 

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

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

4.    Eligible
Grantees: The
Committee, at its discretion, may grant Options to any employee of the Company
(including officers, directors who are employees) or its subsidiaries. Anything
in this Plan to the contrary notwithstanding, all grants of Options to Directors
and Office Holders -"Nosei Misra" - as such term is defined in the
Israeli Companies Ordinance (New Version), 1983, as amended from time to time
(the "Companies Ordinance") - shall be authorized and implemented only in
accordance with the provisions of the Companies Ordinance. The grant of an
Option to a Grantee hereunder, shall neither entitle such Grantee to
participate, nor disqualify him from participating, in any other grant of
options pursuant to this Plan or any other stock option plan of the Company.

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5.    Grant
of Options in Trust: 

 

5.1     Subject
to Section 7.1 hereof, the effective date of the grant of an Option (the "Date
of Grant") shall be the date specified by the Committee in its determination
relating to the award of such Option. The Committee shall promptly give the
Grantee written notice (the “Notice of Grant”) of the grant of an
Option.

 

5.2    Anything
herein to the contrary notwithstanding, all Options granted under the Plan shall
be granted by the Company to a trustee designated by the Board (the "Trustee"),
the Trustee shall hold each such Option in trust (the "Trust") for the benefit
of the Grantee in respect of whom such Option was granted (the "Beneficial
Grantee"), and no Options shall be released from the Trust until the vesting of
such Options pursuant to Section 7.2 hereof (the "Release Date"). From and
after the Release Date, upon the written request of any Beneficial Grantee, the
Trustee shall release from the Trust the Options granted and exercise them on
behalf of such Beneficial Grantee, by executing and delivering to the Company
such instrument(s) as the Company may require, giving due notice of such release
to such Beneficial Grantee, provided, however, that the Trustee shall not so
release and exercise any such Options on behalf of the Beneficial Grantee unless
the latter, prior to, or concurrently with, such release and exercise, provides
the Trustee with evidence, satisfactory in form and substance to the Trustee,
that all taxes and/or compulsory payments, if any, required to be paid upon such
release and exercise have, in fact, been paid.

6.    Reserved
Shares: The
Company has reserved 151,000 authorized but unissued Shares for purposes of the
Plan subject to adjustments as provided in Section 11 hereof. All Shares
under the Plan, in respect of which the right hereunder of a Grantee to purchase
the same shall, for any reason, terminate, expire or otherwise cease to exist,
shall again be available for grant through Options under the Plan.

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7.    Grant
of Options:

7.1    The
Committee in its discretion may award to Grantees Options to purchase Shares in
the Company available under the Plan. Options may be granted at any time after
receipt of a pre-ruling from the Income Tax Authorities that the exercise of
Options granted under the Plan will be subject to tax in accordance with the
provisions of Section 102 of the Income Tax Ordinance [New Version]
1961.

7.2    The
Notice of Grant shall state, inter alia, the number of Shares covered thereby,
the schedule pursuant to which such Options shall vest, the Beneficial Grantee
thereof shall be entitled to pay for, and acquire, the Shares, the exercise
price, and such other terms and conditions as the Committee at its discretion
may prescribe, provided that they are consistent with this Plan.

7.3    Without
derogating from the rights and powers of the Committee under Section 7.2
hereof, unless otherwise specified in the Notice of Grant, each Option under the
Plan shall be for a term of ten (10) years. 

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

9.    Exercise
of Options:

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

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

-4-

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

 

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

10.   Termination
of Employment:

10.1   In the
event that a Grantee ceases, for any reason, to be employed by the Companies,
all Options theretofore granted to such Grantee shall terminate as
follows:

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

(b)    If the
Grantee’s termination of employment is for any other reason, such Options (to
the extent exercisable at the time of the Grantee's termination of employment)
shall be exercisable for a period of thirty (30) days following such termination
of employment, and shall thereafter terminate; provided,
however, that if
the Grantee’s dies within such thirty-day period, such Options (to the extent
exercisable at the time of the Grantee's termination of employment) shall be
exercisable by the Grantee's legal representative, estate or other person to
whom the Grantee's rights are transferred by will or by laws of descent or
distribution for a period of six (6) months following the Grantee’s death (but
in no event after the expiration date of such Option), and shall thereafter
terminate.

-5-

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

11.   Adjustment
Upon Changes in Capitalization

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

11.2    In the
event of the proposed dissolution or liquidation of the Company, the Committee
shall notify each Grantee at least fifteen (15) days prior to such proposed
action. To the extent it has not been previously exercised, each Option will
terminate immediately prior to the consummation of such proposed action. In the
event of a consolidation or the merger of the Company with or into another
corporation, each Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation.

 

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12.    Non-Transferability: 

 

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

13.   Terms
and Amendment of the Plan:

13.1    The Plan
was authorized by the Board on June 1, 1999 and shall expire on June 1, 2009
(except as to Options outstanding on that date), but such expiration shall not
affect the instructions contained herein or in any applicable law with respect
to the Options and Shares held in the Trust at such time of
expiration.

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

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

 

-7-

15.   Miscellaneous:

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

15.2   Governing
Law: The Plan
and all instruments issued thereunder or in connection therewith, shall be
governed by, and interpreted in accordance with, the laws of the State of
Israel.

15.3   Application
of Funds: The
proceeds received by the Company from the sale of Shares pursuant to Options
granted under the Plan will be used for general corporate purposes of the
Company.

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

 

15.5   Non-Exclusivity
of the Plan: The
adoption of the Plan by the Board shall not be construed as amending, modifying
or rescinding any previously approved incentive arrangement or as creating any
limitations on the power of the Board to adopt such other incentive arrangements
as it may deem desirable, including, without limitation, the granting of stock
options otherwise than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.

-8-XTL
Biopharmaceuticals LTD.

INTERNATIONAL
EMPLOYEE STOCK OPTION PLAN

A. NAME
AND PURPOSE

1. Name
and Purpose: XTL
Biopharmaceuticals Ltd. sponsors this plan, as amended
from time to
time, which shall be known as the "XTL Biopharmaceuticals Ltd. 1999
International Employee Stock Option Plan" (the "Plan"). The purpose and intent
of the Plan is to provide incentives to officers, employees and consultants of
non-Israeli subsidiaries of XTL Biopharmaceuticals Ltd. (hereinafter, together
with their subsidiaries, the "Companies") by providing them with opportunities
to purchase Common A Shares, nominal value 0.20 New Israeli Shekels each
("Shares"), of the parent company of the Companies, XTL Biopharmaceuticals Ltd.
(the "Parent").

2. Definitions: 

2.1 "Code"
means the Internal Revenue Code of 1986, as amended.

2.2 "Incentive
Stock Option" means an "incentive stock option" within the meaning of Section
422 of the Code.

2.3 "Nonqualified
Stock Option" means an Option that is not an Incentive Stock
Option.

2.4 "Ten-Percent
Stockholder" means an Eligible Grantee, who, at the time an Incentive Stock
Option is to be granted to such Eligible Grantee, owns (within the meaning of
Section 422(b)(6) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company, a parent
or a subsidiary within the meaning of Sections 424(e) and 424(f), respectively,
of the Code.

 

B.
GENERAL TERMS AND CONDITIONS OF THE PLAN

3. Administration: 

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

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

3.3 Subject
to the general terms and conditions of this Plan, the Committee shall have the
full authority in its sole and absolute discretion, from time to time and at any
time, to determine (i) the persons ("Grantees") to whom options to purchase
Shares ("Option(s)") shall be granted, (ii) the number of Shares to be
covered by each Option, (iii) the time or times at which the same shall be
granted, (iv) the price, vesting schedule and conditions on which such
Options may be exercised and on which such Shares shall be paid for, and/or
(v) interpret or construe the Plan or make determinations with respect to
any other matter which is necessary or desirable for, or incidental to, the
administration of the Plan. In determining the number of Shares covered by the
Option to be granted to each Grantee, the Committee may consider, among other
things, the Grantee's salary and the duration of the Grantee's employment by the
Parent.

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

3.5 The
interpretation and construction by the Committee of any provision of the Plan or
of any Option thereunder shall be final and conclusive unless otherwise
determined by the Board, in which event the Board's determination shall be final
and conclusive.

4. Eligible
Grantees: The
Committee, at its discretion, may grant Options to any officer, director or
consultant of the Parent or its subsidiaries, provided that such person is not
an employee of the Parent resident in Israel, provided, however, that Incentive
Stock Options shall be granted only to employees of the Parent or its
subsidiaries. Anything in this Plan to the contrary notwithstanding, all grants
of Options to Directors and Office Holders -"Nosei Misra" - as such
term is defined in the Israeli Companies Ordinance (New Version), 1983, as
amended from time to time (the "Companies Ordinance") - shall be authorized
and implemented only in accordance with the provisions of the Companies
Ordinance. The grant of an Option to a Grantee hereunder, shall neither entitle
such Grantee to participate, nor disqualify him from participating, in any other
grant of options pursuant to this Plan or any other stock option plan of the
Parent. 

5. Grant
of Options and Issuance of Shares: Subject
to any applicable law, the effective date of the grant of an Option (the "Date
of Grant") shall be the date specified by the Committee in its determination
relating to the award of such Option. The Committee shall promptly give the
Grantee written notice of the grant of an Option, and the Grantee shall execute
an agreement evidencing such grant and the rights and obligations of the Grantee
and the Company with respect to such Option Agreement (the "Option
Agreement").

6. Reserved
Shares: The
Parent has reserved 168,000 authorized but unissued Shares for purposes of the
Plan, and for
other stock
option
plans of
the Parent, subject
to adjustments as provided in Section 11 hereof. All Shares under the Plan,
in respect of which the right hereunder of a Grantee to purchase the same shall,
for any reason, terminate, expire or otherwise cease to exist, shall again be
available for grant through Options under the Plan.

7. Grant
of Options:

7.1 The
Committee in its discretion may award to Grantees Options to purchase Shares in
the Parent available under the Plan. 

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

7.3 Options
granted thereunder shall be for such term as the Committee shall determine,
provided that (i) no Incentive Stock Option shall be execrable after the
expiration of ten (10) years from the date it is granted (five (5) years in the
case of an Incentive Stock Option granted to a Ten-Percent Stockholder) and (ii)
no Nonqualified Stock Option shall be exercisable after the expiration of ten
(10) years and one (1) day from the date it is granted. The Committee may,
subsequent to the granting of any Option, extend the term thereof but in no
event shall the term as so extended exceed the maximum term provided for in the
preceding sentence. 

7.4 The
schedule pursuant to which such Options shall vest, and the Grantee shall be
entitled to pay for, and acquire, the Shares, shall be determined by the
Committee at its sole discretion. Unless
the Committee decides otherwise, no Options granted hereunder will be
exercisable prior to (1)
the
registration of the Parent’s Shares for trading on the Tel Aviv Stock Exchange
or on any other exchange, or (2)
the consolidation or the merger of the Parent with or into another corporation,
or the acquisition of all of the Parent's outstanding share capital by a third
party. Vesting
of Options granted hereunder will continue only during periods when the
employer-employee
or other
service-provider relationship exist
between the relevant Company and the Grantee. For the purposes of this paragraph
7.4, the
employer-employee
or other
service-provider relationship will not
be deemed to exist with regard to periods during which the Grantee is on an
unpaid leave of absence from the Company.

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

8.1 In the
case of an Incentive Stock Option granted to any Eligible Grantee other than a
Ten-Percent Stockholder, the per Share exercise price shall be no less than 100%
of the Fair Market Value per Share on the date of the grant.

8.2 In the
case of a Nonqualified Stock Option granted to any Grantee other than a
Ten-Percent Stockholder, the per Share exercise price shall be no less than 85%
of the Fair Market Value per Share on the date of the grant.

8.3 In the
case of an Incentive Stock Option granted to any Ten-Percent Stockholder, the
per Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.

8.4 In no
event shall the exercise price of an Option be less than the nominal value of
the Shares into which such Option is exercisable.

8.5 Subject
to the foregoing, the Committee may reduce the exercise price of any outstanding
Nonqualified Stock Option. In the event of such amendment, the Date of Grant of
such Option shall thereafter be considered to be the date of such amendment;
provided,
however, that
for purposes of vesting, the Option shall continue to be exercisable based on
the terms set forth in the original Option Agreement.

8.6 For the
purposes hereof, "Fair Market Value" means the fair market value of the Shares
as determined by the Committee; provided,
however, that
(A) if the Shares are admitted to trading on a national securities exchange,
Fair Market Value on any date shall be the last sale price reported for the
Shares on such exchange on such date or on the last date preceding such date on
which a sale was reported, (B) if the Shares are admitted to quotation on the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
or other comparable quotation system and have been designated as a National
Market System ("NMS") security, Fair Market Value on any date shall be the last
sale price reported for the Shares on such system on such date or on the last
day preceding such date on which a sale was reported, or (C) if the Shares are
admitted to quotation on NASDAQ and have not been designated as a NMS Security,
Fair Market Value on any date shall be the average of the closing bid and
closing asked prices of the Shares on such system on such date.

 

8.7 Notwithstanding
any other provision of the Plan to the contrary, the aggregate Fair Market Value
(determined as of the date of grant) of the Shares with respect to which
Incentive Stock Options granted to a Grantee by the Parent or any parent or
subsidiary of the Parent are exercisable for the first time shall not exceed
$100,000 in any calendar year; provided,
however, that
any Option designated as an Incentive Stock Option under the Plan or any portion
thereof that exceeds the foregoing limit or that is otherwise disqualified as an
incentive stock option by operation of Section 422(d) or any other provision of
the Code, shall be treated as a Nonqualified Stock Option for purposes of the
Plan.

9. Exercise
of Options:

9.1 Options
shall be exercisable pursuant to the terms under which they were awarded and
subject to the terms and conditions of this Plan and the Option
Agreement.

9.2 The
exercise of an Option shall be made by a written notice of exercise (the "Notice
of Exercise") delivered by the Grantee to the Parent at its principal executive
office, specifying the number of Shares to be purchased and accompanied by the
payment therefor, and containing such other terms and conditions as the
Committee shall prescribe from time to time. An Option may be exercised in whole
or in part to the extent exercisable under the Plan and Option
Agreement.

9.3 Anything
herein to the contrary notwithstanding, but without derogating from the
provisions of Section 10 hereof, if any Option has not been exercised and
the Shares covered thereby not paid for within ten (10) years after the Date of
Grant (or any shorter period set forth in the Option Agreement), such Option and
the right to acquire such Shares shall terminate, and all interests and rights
of the Grantee in and to the same shall ipso facto expire.

 

-3-

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

10. Termination
of Employment:

10.1 In the
event that a Grantee ceases, for any reason, to be employed by the Companies,
all Options theretofore granted to such Grantee shall terminate as
follows, subject
to the provisions of 7.4 above and 11.3
below:

(a) All
Options which are not vested and not exercisable at the time of the cessation of
employment shall terminate immediately.

(b) If the
Grantee ceases to be employed by reason of such Grantee's death or "Disability"
(as hereinafter defined), such Options (to the extent exercisable at the time of
the Grantee's cessation of employment) shall be exercisable by the Grantee,
Grantee's legal representative, estate of other person to whom the Grantee's
rights are transferred by will or by laws of descent or distribution at any time
until thirty (30) days after the Initial Public Offering of the Parent’s shares
(“IPO”) (but in no event after the expiration date of such Option), and shall
thereafter terminate. In the
event of Disability,
the Committee will be authorized, at its sole discretion, to decide that the
Grantee is entitled to continue to benefit from the Plan, with or without being
subject to additional terms or restrictions. For
purposes hereof, Disability shall mean a physical or mental impairment
constituting a permanent and total disability within the meaning of
Section 22(e)(3) of the Code.

(c) If the
Grantee ceases to be employed for any other reason, such Options (to the extent
exercisable at the time of the Grantee's cessation of employment) shall be
exercisable at any time until the end of six (6) months from the cessation of
the Employees employment (but in no event after the expiration date of such
Option), and shall thereafter terminate; provided,
however, that if
the Grantee dies within such six (6) months period, such Options (to the extent
exercisable at the time of the Grantee's termination of employment) shall be
exercisable by the Grantee's legal representative, estate or other person to
whom the Grantee's rights are transferred by will or by laws of descent or
distribution at any time until the end of six (6) months from the Employee's
death (but in no event after the expiration date of such Option), and shall
thereafter terminate.

 

(d) Notwithstanding
the aforesaid in Section 10.1(c) above, if the Grantee’s termination of
employment is due to (i) breach of the Grantee’s fiduciary duties towards
any of the Companies, or (ii) breach of the Grantee’s duty of care towards
any of the Companies, or (iii) the Grantee has committed any flagrant
criminal offense, or (iv) the Grantee has committed a fraudulent act
towards any of the Companies, or (v) the Grantee caused intentionally, by
act or omission, any financial damage to any of the Companies, all the Options
whether vested or not shall ipso
facto expire
immediately and be of no legal effect. For the
purposes of this Section 10.1(d), the date of termination of employment
shall be the date on which the termination notice is sent to the Grantee, or the
date on which the resignation notice is sent to the employer, as the case may
be,
regardless of the actual date of cessation of work.

 

(e) Notwithstanding
the aforesaid, if the Grantee ceases to be a full-time employee of any of the
Companies and becomes a part-time employee, such Options (to the extent
exercisable at the time the Grantee ceases to be a full-time employee of any of
the Companies) shall be exercisable for a period of six (6)
months following
such cessation of the full-time employment, and shall thereafter terminate. All
Options that are not vested at the time of cessation of the full-time employment
shall ipso
facto expire
and be of no legal effect.

 

(f) If a
Grantee should retire (as such
term is defined by the Committee at its sole and absolute
discretion) he shall,
subject to the approval of the Committee, continue to enjoy such rights, if any,
under the Plan and on such terms and conditions, with such limitations and
subject to such requirements as the Committee in its discretion may
determine.

10.2 Whether
the cessation of employment of a particular Grantee is for reason of
“Disability” for the purposes of paragraph 10.1(b) hereof or by virtue of
“retirement” for purposes of paragraph 10.1(f) hereof, or is a termination
of employment other than by reason of such Disability or retirement, or is for
reasons as set forth in paragraph 10.1(d) hereof, shall be finally and
conclusively determined by the Committee in its absolute
discretion.

-4-

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

11. Adjustment
Upon Changes in Capitalization

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

11.2 Any such
adjustment in the Shares or other securities subject to outstanding Incentive
Stock Options (including any adjustments in the purchase price) shall be made in
such manner as not to constitute a modification as defined by Section
424 (h) (3) of the Code and only to the extent otherwise permitted by
Sections 422 and 424 of the Code.

 

11.3 In the
event of the proposed dissolution or liquidation of the Parent, the Committee
shall notify each Grantee at least fifteen (15) days prior to such proposed
action. To the extent it has not been previously exercised, each Option will
terminate immediately prior to the consummation of such proposed action.

11.4 If upon
a merger,
consolidation, reorganization, recapitalization or the like with or
into another corporation, the
shares of the Company shall be exchanged for other securities of a successor
corporation or a parent or subsidiary of such successor corporation (the
“Successor Entity”), then,
each
Option shall, at the sole and absolute discretion of the Committee,
either:

 

(a) be
substituted for options to purchase shares of either the Company or Successor
Entity, and
appropriate adjustments shall be made in the purchase price per share to reflect
such exchange;
or

(b)
 be
assumed by the Successor Entity such that the Employee may exercise the Options
for such
number of shares of either
the Company or Successor Entity or
amount of other securities thereof, and appropriate adjustments shall be made in
the purchase price per share to reflect such exchange.

11.5 In the
event of sale of substantially all the assets of the Company, as a result of
which the proceeds to the Company are cash or cash equivalent, the non vested
Options granted to a Grantee, which are to be vested within three (3) months
following such sale, will immediately vest and be exercisable. Following the
completion of such sale, the Company will notify the Grantee, in writing,
twenty-one (21) days prior to the payment of any dividend, and the Grantee will
be entitled to exercise the Options, in order to receive the dividend, at any
time from the receipt of notice from the Company and until seven (7) days prior
to the payment of such dividend.

-5-

 

12. Non-Transferability: 

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

13.
Terms and Amendment of the Plan:

13.1 The Plan
shall expire on June 1, 2009 (except as to Options outstanding on that
date).

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

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

15. Restricted
Stock:

15.1 The
Shares issuable upon exercise of the Options granted herein will be "restricted
securities" under the Securities Act of 1933 and the regulations promulgated
hereunder (the "Act") and may not be resold absent registration under the Act or
an available exemption thereunder. In the event that an owner of Shares issued
pursuant to this Plan effects a sale or transfer of such Shares under an
available exemption under the Act, such owner shall, before effecting such sale
or transfer, (i) notify the Parent in writing of the proposed disposition and
the name of the proposed transferees, (ii) furnish the Parent with an opinion of
counsel satisfactory in form and content to the Parent, and (iii) furnish the
Parent with an agreement in writing from the transferee pursuant to which such
transferee agrees to be bound by the provisions contained herein and in the
Option Agreement, or (iv) the Parent shall have waived, expressly and in
writing, its rights under clauses (i), (ii) and (iii) of this
subsection.

-6-

15.2 The
Shares issuable upon exercise of the Options granted herein, once any such
Option is exercised and the Shares issued, will be subject to a lock-up for 180
days (or for such longer period as may be requested by the Parent's underwriter
or underwriters) following the date immediately subsequent to the first date of
the effectiveness of the first underwritten public offering of any of the
Parent's securities. In connection with any subsequent underwritten public
offering of the Parent's securities, the Shares issuable upon exercise of the
Options granted herein, once any such Option is exercised and the Shares issued,
will be subject to a lock-up for 120 days (or such longer period as may be
requested by the Parent's underwriter or underwriters) following the date
immediately subsequent to the first date of the effectiveness of such public
offering. During such periods, if the owner of the option Shares is not
participating in such public offering, the owner of the option Shares will not
be allowed to sell or transfer, or offer to sell or transfer, any Shares without
the prior written consent of the Parent's underwriter or
underwriters.

 

16. Miscellaneous:

16.1 Continuance
of Employment: Neither
the Plan nor the grant of an Option thereunder shall impose any obligation on
the Parent to continue the employment of any Grantee, and nothing in the Plan or
in any Option granted pursuant thereto shall confer upon any Grantee any right
to continue in the employ of the Parent, or restrict the right of the Parent to
terminate such employment at any time.

 

16.2 Governing
Law; Regulations and Approvals:

16.2.1 The Plan
and all instruments issued thereunder or in connection therewith, shall be
governed by, and interpreted in accordance with, the laws of the State of
Israel.

16.2.2 The
obligation of the Parent to sell or deliver Shares with respect to Options
granted under the Plan shall be subject to all applicable laws, rules and
regulations and the obtaining of all such approvals by governmental agencies as
may be deemed necessary or appropriate by the Committee.

16.2.3 Subject
to Section 9, the Board may make such changes as may be necessary or appropriate
to comply with the rules and regulations of any government authority or to
obtain for Optionees granted Incentive Stock Options the tax benefits under the
applicable provisions of the Code and regulations promulgated
thereunder.

16.2.4 Each
Option is subject to the requirement that, if at any time the Committee
determines, in its absolute discretion, that the listing, registration or
qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any state or federal law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of, or in
connection with, the grant of an Option or the issuance of Shares, no Options
shall be granted or payment made or Shares issued, in whole or in part, unless
listing, registration, qualification, consent or approval has been effected or
obtained free of any conditions that are not acceptable to the
Committee.

16.3 Application
of Funds: The
proceeds received by the Parent from the sale of Shares pursuant to Options
granted under the Plan will be used for general corporate purposes of the
Parent.

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

 

16.5 Non-Exclusivity
of the Plan: The
adoption of the Plan by the Board shall not be construed as amending, modifying
or rescinding any previously approved incentive arrangement or as creating any
limitations on the power of the Board to adopt such other incentive arrangements
as it may deem desirable, including, without limitation, the granting of stock
options otherwise than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.

16.6 Withholding
of Taxes: The
Parent shall have the right to deduct from any payment of cash to any Optionee
an amount equal to the income taxes and other amounts required by law to be
withheld with respect to any Option. Notwithstanding anything to the contrary
contained herein, if an Optionee is entitled to receive Shares upon exercise of
an Option, the Parent shall have the right to require such Optionee, prior to
the delivery of such Shares, to pay to the Parent the amount of any income taxes
and other amounts that the Parent is required by law to withhold. With respect
to any Incentive Stock Options granted under this Plan, if the Optionee makes a
disposition, within the meaning of Section 424(c) of the Code and regulations
promulgated thereunder, of any Share or Shares issued to such Optionee pursuant
to such Optionee's exercise of the Incentive Stock Option, and such disposition
occurs within the two-year period commencing on the day after the date of grant
of such Option or within the one-year period commencing on the day after the
date of issuance of the Share or Shares to the Optionee pursuant to the exercise
of such Option, such Optionee shall, within ten (10) days of such disposition,
notify the Parent thereof and thereafter immediately deliver to the Parent any
amount of income taxes and other amounts that the Parent informs the Optionee
the Parent is required to withhold.

 

-7-

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