Document:

S-8 POS

EXHIBIT 4.1  

ESC MEDICAL SYSTEMS
LTD.*  

    
                                        1999 SHARE OPTION PLAN

                                           (as amended May 27, 2003)

ARTICLE I 

Purpose 

This 1999 Share Option Plan (The
“Plan”) is intended to provide incentive compensation to, and to encourage share
ownership by, the directors, officers, employees and certain consultants and dealers of
ESC Medical Systems Ltd. and its subsidiaries (collectively, the “Company”) in
order to align their interests with those of the Company’s shareholders, and to
encourage such parties to remain in their respective capacities with the Company. 

The word “subsidiary”, when
used in the Plan, shall mean any corporation (other than the Company) in an unbroken chain
of corporation beginning with the Company if, at the time of the granting of the option,
each of the corporations (other than the last corporation in the chain) owns stock
possessing 50 percent or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain. 

It is intended that certain options
granted under this Plan will qualify as “incentive stock options” under Section
422 of the United States Internal Revenue Code of 1986, as amended (the “Code”);
provided, however, that incentive stock options shall only be granted to employees of the
Company. 

ARTICLE II 

Administration 

The Plan shall be administered by the
Option Committee or, in the absence thereof, the Compensation Committee of the Board of
Directors (in each case the “Committee”). Subject to the provisions of the Plan
and any applicable law or NASDAQ rule, the Committee shall have sole authority, in its
absolute discretion: (a) to determine which of the eligible employees, directors,
dealers and consultants of the Company and its subsidiaries shall be granted options;
(b) to authorize the granting of both incentive stock options and non-qualified
options; (c) to determine the times when options shall be granted and the number of
shares to be issued or transferred upon the exercise of each options; (d) subject to
the limitations of ARTICLE V, to determine the exercise price of each option;
(e) to determine the time or times at which each option becomes exercisable , the
duration of the exercise period and any other restrictions on the exercise of options
issued hereunder; (f) to prescribe the form or forms of the option agreements under
the Plan (which forms shall be consistent with the terms of the Plan but need not be
identical); (g) to adopt, amend and rescind such rules and regulations as, in its
option, may be advisable in connection with the administration of the Plan. All decisions,
determinations and interpretations of the Committee shall be final and binding o all
optionees. 

* Now LUMENIS LTD. 

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ARTICLE
III  

Shares 

The shares to be optioned under the
Plan shall either be (i) authorized but unissued Ordinary Shares, par value
NIS 0.1 per share, of the Company, or (ii) Ordinary Shares which the Company may
acquire and deposit with General Investec Trust Company Ltd., or any substitute thereof as
Trustee under the Plan (the “Trustee”) and under the terms of a Trust Agreement
as shall be approved and amended from time to time by the Board of the Executive Committee
thereof (together, the “Ordinary Shares”). Under the Plan, the total number of
Ordinary Shares which may be purchased pursuant to options granted hereunder shall not
exceed, in the aggregate, five million (5,00,000) Ordinary Shares, except as such number
of shares shall be adjusted or increased in accordance with the provisions of
ARTICLE X and ARTICLE XIX hereof. 

The number of Ordinary Shares
available for grant of options under the Plan shall be decreased by the sum of the number
of shares with respect to which options have been issued and that are then outstanding and
the number of shares issued upon exercise of options. In the event that any outstanding
option under the Plan for any reason expires, is terminated, or is canceled prior to the
end of the period during which options may be granted, the Ordinary Shares underlying such
option, may again be subjects to an option under the Plan. 

ARTICLE IV 

Eligibility of
Participants 

Subject to ARTICLE VII, officers
and other employees of the Company or of its subsidiaries and directors of the Company or
its subsidiaries shall be eligible to participate in the Plan and receive incentive stock
options or non-qualifying options. 

Directors who are not employees,
future employees, dealers, or consultants of the Company shall also be eligible to
participate in the Plan. 

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ARTICLE V 

Option Price 

In case of each option granted under
the Plan, the option exercise price shall be not less than eighty-five percent (85%) of
the last reported sales price (as expressed in either dollars or shekels adjusted to
increase in Israeli CPI) of the Ordinary Shares on the Nasdaq Stock Market
(“NASDAQ”) (the “Fair Market Price”), on the date of grant. 

ARTICLE VI 

Terms of Options 

The Committee shall determine the
dates after which options may be exercised, in whole or in part. An option is exercisable
in installments, and may be exercisable in whole or in part, with the unexercised portion
of the option remaining exercisable. 

Any other provision of the Plan
notwithstanding and subject to ARTICLE VII, no option shall be exercised after the
tenth anniversary of the date that the option was granted (the “Termination
Date”), and no option granted to an employee of the Company shall be exercisable
before such employee accumulates at least one year of service with the Company. 

With respect to the directors, the
Chief Executive Office (“CEO”) and the officers reporting directly to the CEO of
the Company, the options granted hereunder shall become exercisable with respect to the
entire amount of the Ordinary Shares underlying such options immediately upon a change in
control of the Company, unless the Board of the Committee determined otherwise with
respect to any specific director of officer upon approval of the options granted. A
“Change in Control” means the first to occur of any of the following dates: 

          	 	(i) 	
               An acquisition (other than directly from the Company) of any voting securities
               of the Company by any “Person” (as the term person is used for
               purposes of Section 13(d) or 14(d) of the Exchange Act) immediately after Which
               such Person has “Beneficial Ownership” (within the meaning of Rule
               13d-3 promulgated under the Exchange Act) of 20% or more of the combined voting
               power of the Company’s the outstanding voting securities, unless such
               Person has filed a Schedule 13D within the 12 month period prior to the Plan
               being first approved by the Board of Directors; provided, however, in
               determining whether a Change has occurred, voting securities which are acquired
               in a “Non-Control Acquisition” (as hereinafter defined) shall not
               constitute an acquisition which would cause a Change in Control. A
               “Non-Control Acquisition” shall mean an acquisition by (A) an
               employee benefit plan (or a trust forming a part thereof or a trustee thereof
               acting solely in its capacity as trustee) maintained by (X) the Company or
               (Y) any corporation or other Person of which a majority of its voting power
               or its voting equity securities or equity interest is owned, directly or
               indirectly, by the Company (for purposes of this definition, a
               “Subsidiary”), (B) the Company or its Subsidiaries, or
               (C) any Person who files in connection with such acquisition a Schedule 13D
               which expressly disclaims any intention to seek control of the Company and does
               not expressly reserve the right to seek such control; provided, however, that
               any amendment to such statement of intent which either indicates an intention or
               reserved the right to seek control shall be deemed and “acquisition”
               of the securities of the Company reported in such filing as beneficially owned
               by such Person for purposes of this paragraph (i); 

               

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          	 	(ii) 	
               The individuals who, as of the beginning of any two year period, are members of
               the Board (the “Incumbent Board”), ceasing for any reason, during such
               two year period, to constitute at least a majority of the members of the Board;
               provided, however, that if the election, or nomination for election by the
               Company’s common stockholders, of any new director was approved by a vote
               of at least two-thirds of the Incumbent Board, such new director shall, for
               purposes of the Agreement, be considered a member of the Incumbent Board;
               provided further, however, that no individual shall be considered a member of
               the Incumbent Board if such individual initially assumed office as a result of
               either an actual or threatened “Election Contest” (as described in
               Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened
               solicitation of proxies or consents by or on behalf of a Person other than the
               Board (a “Proxy Contest”) including by reason of any agreement
               intended to avoid or settle any Election Contest or Proxy Contest; or 

               

          	 	(iii) 	
               Approval by stock holders of the Company of: 

               

               	 	(A) 	
                    A merger, consolidation or reorganization involving the Company, unless such
                    merger, consolidation or reorganization is a “Non-Control Transaction”
                    i.e., meets any of the requirements described in (a) or (b) below: 

                    

     	 	(a) 	
          the stockholders of the Company, immediately before such merger, consolidation
          or reorganization, own, directly or indirectly immediately following such
          merger, consolidation or reorganization, at least eighty percent (80%) of the
          combined voting power of the outstanding voting securities of the corporation
          resulting from such merger or consolidation or reorganization (the
          “Surviving Corporation”) in substantially the same proportion as their
          ownership of the voting securities immediately before such merger, consolidation
          or reorganization: 

          

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     	 	(b) 	
          the individuals who were members of the Incumbent Board immediately prior to the
          execution of the agreement providing for such merger, consolidation or
          reorganization constitute at least two-thirds of the members of the board of
          directors of the surviving corporation immediately following the consummation of
          such merger; and 

          

	 	(B) 	A
complete liquidation or dissolution of the Company: or  

               	 	(C) 	
                    An agreement for the sale or other disposition of all or substantially all of
                    the assets of the Company to any Person (other than a transfer to a Subsidiary). 

                    

Notwithstanding the foregoing, a
Change in Control shall not be deemed to occur solely because any Person (the
“Subject Person”) acquired Beneficial Ownership of more than the permitted
amount of the outstanding voting securities as a result of the acquisition of voting
securities by the Company which, by reducing the number of voting securities outstanding,
increases the proportional number of shares Beneficially Owned by the Subject Persons,
provided that if a Change in Control would occur (but for the operation of this sentence)
as a result of the acquisition of voting securities by the Company, and after such, a
Beneficial Owner acquires additional voting securities which increase the percentage of
the then outstanding voting securities beneficially owned by the Subject Person, then a
Change in Control shall occur. 

Share options granted hereunder to
employees may provide that if, prior to the Termination Date, an optionee shall cease to
be employed by the Company or a subsidiary thereof (otherwise than by reason of death or
disability), the option will remain exercisable for a period not extending beyond three
months after the date of cessation of employment (unless specifically stated otherwise in
the specific option grant letter) to the extent it was exercisable at the time of
cessation of employment. If, prior to the Termination Date, an employee optionee shall
cease to be employed by the Company or any subsidiary thereof by reason of a disability
within the meaning of Section 22(e)(3) of the Code, options granted hereunder may provide
that they will remain exercisable for a period not extending beyond one year after the
date of cessation of employment to the extent exercisable at the time of cessation of
employment, In no even, however, shall an option be exercisable after the Termination
Date. The option shall expire with respect to all Ordinary Share covered thereby into
which at the time of termination of the option, the option was not exercisable. In the
event of the death of an optionee prior to the Termination Date and while employed by the
Company or a subsidiary thereof or while entitled to exercise an option pursuant to the
preceding sentences of this paragraph, options granted hereunder may provide that they
will remain exercisable until the earlier of (i) the Termination Date, and
(ii) one year from date of death, by the person or persons to whom the
optionee’s rights under the option pass by will or by applicable laws of descent and
distribution and to the extent that the optionee was entitled to exercise it on the date
of death. Options granted to directors may provide (both as to future grants and by
amendment to already outstanding grants) the if, prior to the Termination Date, the
director optionee ceases to serve as a director (for a reason other than removal for
cause) after having served as a director of the Company for at least two years, the option
will remain exercisable after cessation of service as a director to the extent it was
exercisable at the time of cessation of such service, until the Termination Date (or such
earlier expiration date as may be set forth in the option grant or agreement). 

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Notwithstanding the above, if prior
to the Termination Date, an optionee shall cease to be employed by the Company for reasons
which, as determined by the Company in its discretion, amount to bad faith, gross
negligence or fraud, or as a result of the termination of such optionee for cause, any
option or portion of an option not exercised as of the date of cessation of employment
will expire and terminate on such date, unless specifically stated otherwise in the
specific option grant letter. 

ARTICLE VII 

Special Provisions
Applicable to Incentive Stock Options Only 

The aggregate fair market value
(determined at the time the option is granted) of the Ordinary Shares with respect to
which any incentive stock option is granted that is exercisable for the first time by the
optionee during any calendar year, (under this Plan or any other share option plan of the
Company or any parent or subsidiary thereof) shall not exceed $100,000. 

No incentive stock option may be
granted to an individual who, at the time the option is granted, owns directly, or
indirectly within the meaning of Section 422(bb)(6) of th4e Code. Ordinary Shares
possessing more than 10 percent of the total combined voting power of all classes of stock
of the Company or of any parent or subsidiary thereof, unless (i) such option has an
option price of at least 110 percent of the fair market value of the Ordinary Shares on
the date of the grant of such option and (ii) such option cannot be exercised more
than five years after the date it is granted. 

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ARTICLE VIII  

Exercise of Options 

An optionee may exercise any
exercisable option by signing and returning to the Company at its principal office, a
“Notice of Exercise” in the form prescribed from time to time by the Company
together with payment of the exercise price. Such payment will be made in dollars or
Shekels in accordance with the terms of the related option grant letter. Each Notice of
Exercise shall include an acknowledgment by the optionee, if applicable, that the Company
has not registered the shares issuable upon exercise of the option under the United States
Securities Act of 1933, as amended (the “Securities Act”), or any similar law,
and representation by the optionee that he is acquiring such shares for investment and not
with a view to their distribution or resale as such terms are defined in Rule 144 under
the Securities Act (“Rule 144”). The optionee shall sign and deliver to the
Company, upon its request, a separate investment representation, certificate or such other
document as may be required by the Company’s counsel, to such effect; provide,
however, that such representation, certificate or other document may provide, if
applicable, that the said investment restriction shall not be operative as to the shares
subject to the option which may in the future be registered pursuant to the Securities
Act. Furthermore, the Company may place an appropriate legend on any share certificate
delivered to an optionee to the effect that, among other things deemed to be necessary to
be stated in such legend, such shares were acquired pursuant to such an investment
representation without registration of the shares. 

Payment for Ordinary Shares purchased
upon the exercise of an option granted hereunder shall be made in full upon exercise of
the option, by wire transfer or certified or bank cashier’s check payable to the
order of the Company, or by other means acceptable to the Company. The Ordinary Shares
purchased shall thereupon be promptly delivered; provided, however, that the Company may,
in its discretion, require that an optionee pay to the Company or the Trustee, at the time
of exercise, such amount as the Company deems necessary to satisfy its obligation to
withhold Israeli or United States Federal, state, or local income or other taxes incurred
by reason of the exercise of the transfer of shares thereupon. 

ARTICLE IX  

Non-Transferability of
Option Rights 

No option shall be transferable,
except by will or the laws of descent and distribution. During the lifetime of the
optionee, the option shall be exercisable only by optionee, or by such optionee’s
legal representative. 

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ARTICLE X 

Adjustment for
Recapitalization, Merger, Etc. 

The aggregate number of Ordinary
Shares which may be purchased upon exercise of the options granted hereunder, the number
of Ordinary Shares covered by each outstanding option and the price per share of each such
option shall be appropriately adjusted for any increase or decrease in the number of
outstanding shares of the Company resulting from a stock split or other subdivision or
consolidation of shares or payments of stock dividends or distributions or other increases
o decreases in the number of outstanding Ordinary Shares effected without receipt of
consideration by the Company or in the event of any other extraordinary transaction. 

The foregoing adjustments and the
manner of application of the foregoing provisions shall be determined by the Committee in
its sole discretion. Any such adjustment may provide for the elimination of any fractional
share which might otherwise become issuable upon exercise of an option. 

ARTICLE XI 

No Obligation to
Exercise Option 

The grant of an option pursuant to
the plan shall impose no obligation on the optionee to exercise such option. 

ARTICLE XII 

Use of Proceeds 

The proceeds received from the
issuance of Ordinary Shares upon exercise of options, pursuant to the Plan shall be used
for such purposes as the Company shall determine to be appropriate. 

ARTICLE XIII 

Rights as a Shareholder 

The Company shall not be required to
recognize an optionee as a shareholder with respect to any share issuable or transferable,
as the case may be, upon the exercise of such option by the optionee until such optionee
shall have become the holder of record of such share, and such optionee shall not be
entitled to vote or to any dividends or distributions or other rights in respect of such
share for which the record date is prior to the date on which he shall have become the
holder of record thereof. 

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ARTICLE XIV 

Employment Rights 

Nothing in the Plan or in any option
granted hereunder shall confer on any optionee who is a director, officer or employee of
the Company or any of its subsidiaries any right to interfere in any way with the right of
the Company or any of its subsidiaries to terminate the optionee’s employment at any
time. 

ARTICLE XV 

Compliance with The Law 

The Company shall not be liable for
the non-issuance or non-transfer or any delay in issuance or transfer of any Ordinary
Shares issuable or transferred, as the case may be, upon the exercise of any options
granted under the Plan which results from the inability of the Company to obtain, or from
any delay in obtaining, from any regulatory body having jurisdiction, all requisite
authority to issue or transfer Ordinary Shares of the Company upon exercise of the options
under the Plan or upon the transfer of Ordinary Shares issued upon such exercise, if
counsel for the Company deems such authority necessary for lawful issuance or transfer of
any such shares. Appropriate legends may be placed on the stock certificates evidencing
shares issued upon exercise of options to reflect such transfer restrictions. 

ARTICLE XVI 

Voting of Ordinary
Shares 

Shares held by the Trustee under the
Plan shall be voted in accordance with the instructions of the Board. 

ARTICLE XVII 

Cancellation of Options 

The Committee, in its discretion,
may, with the consent of any optionee, cancel any outstanding option hereunder. 

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In the event that the average of the
Fair Market Price (as calculated in ARTICLE V) of the Company’s Ordinary Shares
for a continuous period of three months is less than seventy-five (75%) of the exercise
price of any option, the Committee may, with the consent of the optionee cancel such
option and grant a new option (which may require extended vesting period) under the Plan
to the optionee. 

ARTICLE XVIII 

Transfer of Shares 

By exercise of an option granted
hereunder, the optionee agrees that any sale, transfer or other disposition of any of the
Ordinary Shares issued upon such exercise shall be made in accordance with the applicable
requirements of Rule 144, including, if applicable, the volume limitations applicable
to “affiliates” of the Company. 

ARTICLE XIX 

Amendment or
Discontinuance of Plan 

Subject to any applicable law and
NASDAQ Rule, the Board or the Committee may, without the consent of the Company’s
shareholders or any optionee under the Plan, at any time terminate the Plan entirely and
at any time or from time to time amend or modify the Plan, provided that no such action
shall adversely affect options granted hereunder prior to such amendment or modification
without consent of any optionee aversely effected and, with respect to incentive stock
options, the Board shall not, without approval of the stockholders, (a) increase the
total number of Ordinary Shares which may be purchased pursuant to incentive stock options
granted under the Plan, except as contemplated in ARTICLE X, or (b) expand the
persons eligible to receive options under the Plan. 

ARTICLE XX 

Taxes 

Each optionee shall be solely liable
for all taxes and other fees resulting from the grant and/or exercise of options granted
under the Plan and disposition of shares acquired pursuant to the exercise of an option. 

Each optionee shall consult with
his/her individual tax advisers to determine the possible tax consequences of the grant
and/or exercise of options granted under the Plan and the disposition of shares acquired
pursuant to the exercise of the option in his/her personal tax circumstances. 

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ARTICLE XXI 

Effectiveness and Term
of Plan 

The Plan was adopted on
November 11, 1999. The Plan will expire and terminate on November 11, 2009. No
option may be granted pursuant to the Plan after the termination of the Plan, however,
options outstanding on that date may still be exercised in accordance with the terms of
their grant. 

ARTICLE XXII 

Governing Law 

The Plan and all instruments issued
hereunder shall be governed by and interpreted in accordance with the laws of the State of
Israel, subject to the provisions of the Code with respect to “incentive stock
options” and subject to the provisions of applicable United States securities laws
with respect to certain terms used herein. 

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EXHIBIT 4.2  

         LUMENIS LTD.

 (Formerly ESC Medical Systems Ltd.)

 2000 SHARE OPTION PLAN

 Amended and Restated on May 9, 2005

 (Subsequently amended on September 30, 2006) 

ARTICLE I  

Purpose 

This 2000 Share Option Plan as
amended and restated on May 9, 2005 (the “Plan”) is intended to
provide incentive compensation to, and to encourage share ownership by, the directors,
officers, employees and certain consultants and dealers (the “Optionees”)
of Lumenis Ltd. (formerly ESC Medical Systems Ltd.) and its subsidiaries (collectively,
the “Company”) in order to align their interests with those of the
Company’s shareholders, and to encourage the sense of proprietorship of such parties,
and to stimulate the active interest of such parties in the development and financial
success of the Company by providing them with opportunities to purchase shares in the
Company, pursuant to the Plan approved by the board of directors of the Company (the
“Board”) and its shareholders, and to encourage such parties to remain in
their respective capacities with the Company. 

The word “employee”,
when used in this Plan, shall have the meaning, with respect to each Optionee, as provided
in the relevant rule or regulation under the jurisdiction where implemented. 

The word
“subsidiary”, when used in the Plan, shall mean any corporation (other
than the Company) in an unbroken chain of corporations beginning with the Company if, at
the time of the granting of the option, each of the corporations (other than the last
corporation in the chain) owns stock possessing 50 percent or more of the total combined
voting power of all classes of stock in one of the other corporations in such chain. 

It is intended that certain options
granted under this Plan will qualify as “incentive stock options” (the
“ISOs”) under Section 422 of the United States Internal Revenue Code
of 1986, as amended (the “Code”); provided, however, that ISOs shall only
be granted to U.S. resident employees of the Company. Options granted to U.S. resident
employees, that do not contain terms that will qualify them as ISOs shall be referred to
herein as Non-Qualified Stock Options (the “NQSOs”). 

Each Option Agreement (as such term
is defined hereunder) between the Company and the U.S. resident Optionee shall state
whether such Option will or will not be treated as an ISO. No IS0 shall be granted unless
such Option, when granted, qualifies as an “incentive stock option” under
Section 422 of the Code. Any IS0 granted under the Plan shall contain such terms and
conditions, consistent with the Plan, as the Company may determine to be necessary to
qualify such Option as an “incentive stock option” under Section 422 of the
Code. 

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Options granted to Israeli Optionees
under the Option Plan may or may not contain such terms as will qualify such options for
the special tax treatment under the “capital gain route”. Section 102(b)(2) of
the Israeli Tax Ordinance (New Version), 5721-1961, as amended (the
“Ordinance”), and the Income Tax Rules (Tax Benefits in Stock Issuances
to Employees) 5763-2003 (the “Rules”)
(“102(b)(2) Options”). 

102 Options, as this term is defined
in the Plan prior to its amendment and restatement, will be subject to the provisions of
Article 102 of the Ordinance and the Income Tax Rules (Tax Benefits in Stock Issuances to
Employees) 5749-1989 as applicable prior to the implementation of Amendment No. 132 to the
Ordinance of January I , 2003. 

The 102(b)(2) Options which shall be
granted to Israeli Optionees as of the date hereof and/or any shares issued upon exercise
of such Options and/or any other shares received subsequently following any realization of
rights resulting from a 102(b)(2) Option or from shares issued upon exercise of a
102(b)(2) Option, shall be issued to a trustee nominated by the Committee, and approved in
accordance with the provisions of Section 102(b)(2) of the Ordinance (the
“Trustee”) and held for the benefit of the Optionees for a period of not
less than two years (24 months) after the current year of grant, and thereafter, the
Trustee will transfer the Options or the Option shares, as the case may be, to the
Optionees and/or to any third party upon his/her demand, subject to any deduction or
withholding required under the Ordinance, the Rules or any other applicable law, provided,
however, that Options granted to Optionees who are employees of any of the Company’s
subsidiaries shall also be subject to a pre-ruling of the tax authorities. Options that do
not contain terms that may qualify them for the special tax treatment under Section
102(b)(2) of the Ordinance, shall be referred to herein as Section 3(I) Options
(“3(I) Options”). 

The Company’s election of the
type of 102 options granted to Israeli Optionees (the “Election”), shall
be appropriately filed with the Israeli Tax Authorities at least 30 days prior to the date
of grant of 102(b)(2) options. The Election shall obligate the Company to grant only the
type of 102 options it has elected to grant, and shall apply to all Israeli Optionees who
were granted approved 102(b)(2) Options until the end of the year following the year
during which the Company first granted 102(b)(2) options, all in accordance with the
provisions of section 102(g) of the Ordinance. For the avoidance of doubt, the Company has
elected the type of 102 options to be granted as the 102(b)(2) options (the capital gain
route) and such Election shall not prevent the Company from granting unapproved 102
options simultaneously. 

With respect to any 102(b)(2)
Options, subject to the provisions of section 102 and any rules or regulation or orders or
procedures promulgated thereunder, an Israeli Optionee shall not be entitled to sell or
release from trust any share received upon the exercise of a 102(b)(2) options and/or any
share received subsequently following any realization of rights, including without
imitation, bonus shares until the lapse of the holding period required under section 102
of the Ordinance. 

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Options granted to Optionees who are
both, residents and ordinarily residents in the United Kingdom under the Plan may or may
not contain such terms as will qualify such options for the special tax treatment under
the Income and Corporation Taxes Act, 1988, provided, however, that approved options can
only be granted to UK resident employees. 

Options granted to Optionees who are
residents of the Netherlands, under the Plan may or may not contain such terms as will
qualify such options for the special tax treatment under the Dutch Personal Income Tax Act
(PITA) and the Wage Tax Act (WTA), provided, however, that options under the Dutch special
tax regime can only be granted to Dutch resident employees. 

For the purposes of the grant of 102
options and 102(b)(2) options under this Plan the Company has appointed a Trustee under
the Plan and pursuant to the terms of a trust agreement as shall be approved and amended
from time to time by the Board or the executive committee thereof. 

All options granted hereunder,
whether together or separately, shall be collectively referred to hereinafter as the
“Options”. 

ARTICLE II  

Administration 

The Plan shall be administered by the
Compensation Committee of the Board (the “Committee”). Notwithstanding
the above, the Board shall automatically have a residual authority if no Committee shall
be constituted or if such Committee shall cease to operate for any reason whatsoever. 

Subject to the provisions of the
Plan, any NASDAQ Stock Market (“NASDAQ”) rule and any applicable law, the
Committee shall have sole authority, in its absolute discretion: (a) to determine
which of the eligible employees, directors, dealers and consultants of the Company and its
subsidiaries shall be granted Options; (b) to designate an Option as a 102(b)(2)
Option for Israeli Optionees, as ISOs or as NQSOs for U.S. Optionees, as approved options
and/or unapproved options (for UK Optionees), as options under the special tax regime for
the residents of the Netherlands, and to authorize the granting of such Options;
(c) to determine the times when Options shall be granted and the number of shares to
be issued or transferred upon the exercise of each Option; (d) to determine the
exercise price of each Option; (e) to determine the time or times at which each
Option becomes exercisable, the duration of the exercise period and any other restrictions
on the exercise of Options issued hereunder; (f) to prescribe the form or forms and
terms of the Option Agreements under the Plan (which forms shall be consistent with the
terms of the Plan but need not be identical); (g) to determine other jurisdictions in
which the Plan shall be applicable; (h) to adopt, amend and rescind such rules and
regulations as, in its opinion, may be advisable in connection with the administration of
the Plan; (i) to accelerate the right of an Optionee, in whole or in part, to any
previously granted Option, in the event of a public offering, merger, acquisition,
transfer of assets and/or liquidation. 

All decisions, determinations and
interpretations of the Committee shall be final and binding on all Optionees. 

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ARTICLE III  

Shares 

The shares to be optioned under the
Plan shall be either (i) authorized but unissued Ordinary Shares, par value
NIS 0.1 per share, of the Company, or (ii) Ordinary Shares which the Company may
acquire and deposit with General Investec Trust Company, Ltd., or any substitute thereof
as Trustee under the Plan and under the terms of a Trust Agreement as shall be approved
and amended from time to time by the Board or the Executive Committee thereof (together,
the “Ordinary Shares”). 

Under the Plan, the total number of
Ordinary Shares which may be purchased pursuant to options granted hereunder shall not
exceed, in the aggregate, eleven million five hundred thousand (11,500,000) Ordinary
Shares of which 6,000,000 shall be reserved for ISOs. The Ordinary Shares shall be
adjusted or increased in accordance with the provisions of Article X and
Article XIX hereof. 

The number of Ordinary Shares
available for grant of Options under the Plan shall be decreased by the sum of the number
of shares with respect to which Options have been issued and that are then outstanding and
the number of shares issued upon exercise of Options. In the event that any outstanding
Option under the Plan for any reason expires, is terminated, or is canceled prior to the
end of the period during which options may be granted, the Ordinary Shares underlying such
option may again be subject to an Option under the Plan. 

Each Option granted pursuant to the
Plan, shall be evidenced by a written agreement between the Company and the Optionee (the
“Option Agreement”). Each Option Agreement shall state a number of the
Shares to which the Option relates and the type of Option granted thereunder (whether a
102(b)(2) Option, 3(i) Option, an ISO, an NQSO, an approved or unapproved option for UK
Optionees, Options under special tax regime and Options that are not subject to special
tax regime for Optionees in the Netherlands or any other kinds of Option suitable under
the Plan). Options may be granted at any time after this Plan has been approved by the
Company, subject to any further approval or consent required under Section 102(b)(2) of
the Ordinance or the Rules, in case of 102(b)(2) Options, or of the U.S. Treasury, in case
of ISOs and other applicable law, the Inland Revenue in the case of UK, and the tax
inspector in the Netherlands, except that any and all Options shall be effective upon
their grant provided that all required approvals shall have been received in respect of
the grant of such Option, as required under the relevant rules and regulations, and the
Optionee has signed and delivered to the Company a notice and undertaking as required
under such rules. 

ARTICLE IV  

Eligibility of
Participants 

Subject to ART1CLE VII, office
holders and other employees of the Company or of its subsidiaries and directors of the
Company or its subsidiaries shall be eligible to participate in the Plan. Directors who
are not employees, future employees, dealers, or consultants of the Company shall also be
eligible to participate in the Plan. 

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To the extent applicable and anything
in the Plan to the contrary notwithstanding, all grants of Options to directors and office
holders (“Nosei Misra” – as such term is defined in
the Companies Law, 5750-1999 (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, or Executive Officers, as such term is defined under the SEC
rules and regulations. 

ARTICLE V  

Option Price 

Unless the Committee determines
otherwise. the option exercise price shall he the last reported sales price of the
Ordinary Shares on the NASDAQ (the “Fair Market Price”), on the date of
grant. 

ARTICLE VI  

Terms of Options 

The Committee shall determine the
dates after which Options may be exercised, in whole or in part. An Option is exercisable
in installments, and may be exercisable in whole or in part, with the unexercised portion
of the Option remaining exercisable. 

Any other provision of the Plan
notwithstanding and subject to Article VII, no Option shall be exercised after the tenth
anniversary of the date that the Option was granted (the “Termination
Date”). 

With respect to the directors, Chief
Executive Officer (“CEO”) and the officers reporting directly to the CEO
of the Company, the Options granted hereunder shall become exercisable with respect to the
entire amount of the Ordinary Shares underlying such Options immediately upon a Change in
Control of the Company, unless the Board or the Committee determined otherwise with
respect to any specific director or officer upon approval of the Options granted. A
“Change in Control” means the first to occur of any of the following
dates: 

     	(i)	
          An acquisition (other than directly from the Company) of any voting securities
          of the Company by any “Person” (as the term person is used for
          purposes of Section 13(d) or 14(d) of the Exchange Act) immediately after which
          such Person has “Beneficial Ownership” (within the meaning of Rule
          13d-3 promulgated under the Exchange Act) of 20% or more of the combined voting
          power or the Company’s then outstanding Voting Securities, unless such
          Person has filed a Schedule 13D within the 12-month period prior to the Plan
          being first approved by the Board; provided, however, in determining whether a
          Change in Control has occurred, Voting Securities which are acquired in a
          “Non-Control Acquisition” (as hereinafter defined) shall not
          constitute an acquisition which would cause a Change in Control. A
          “Non-Control Acquisition” shall mean an acquisition by
          (A) an employee benefit plan (or a trust forming a part thereof or a
          trustee thereof acting solely in its capacity as trustee) maintained by
          (X) the Company or (Y) any corporation or other Person of which a
          majority of its voting power or its voting equity securities or equity interest
          is owned, directly or indirectly by the Company (for purposes of this
          definition, a “Subsidiary”), (B) the Company or its Subsidiaries,
          or (C) any Person who files in connection with such acquisition a
          Schedule 13D which expressly disclaims any intention to seek control of the
          Company and does not expressly reserve the right to seek such control; provided,
          however, that any amendment to such statement of intent which either indicates
          an intention or reserves the right to seek control shall be deemed an
          “acquisition” of the securities of the Company reported in such filing
          as beneficially owned by such Person for purposes of this paragraph (i); 

          

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     	(ii)	
          The individuals who, as of the beginning of any two year period, are members of
          the Board (the “Incumbent Board”), ceasing for any reason,
          during such two year period, to constitute at least a majority or the members of
          the Board; provided, however, that if the election, or nomination for election
          by the Company’s common stockholders, of any new director was approved by a
          vote of at least two-thirds of the Incumbent Board, such new director shall, for
          purposes of the Agreement, be considered a member of the Incumbent Board; or 

          

     	(iii)	
          The consummation of any of the following transactions as entered into by the
          Company: 

          

          	 	(A) 	
               A merger, consolidation or reorganization involving the Company, unless such
               merger, consolidation or reorganization is a “Non-Control
               Transaction” i.e., meets any of the requirements described in (i) or
               (ii) below: 

               

               	 	(i) 	
                    the stockholders of the Company, immediately before such merger, consolidation
                    or reorganization, own, directly or indirectly immediately following such
                    merger, consolidation or reorganization, at least eighty percent (80%) of the
                    combined voting power of the outstanding voting securities of the corporation
                    resulting from such merger or consolidation or reorganization (the
                    “Surviving Corporation”) in substantially the same
                    proportion as their ownership of the Voting Securities immediately before such
                    merger, consolidation or reorganization; or 

                    

               	 	(ii) 	
                    the individuals who were members of the Incumbent Board immediately prior to the
                    execution of the agreement providing for such merger, consolidation or
                    reorganization constitute at least two-thirds of the members of the board of
                    directors of the surviving corporation immediately following the consummation of
                    such merger, consolidation or reorganization; 

                    

	 	(B) 	A
complete liquidation or dissolution of the Company; or 

          	 	(C) 	
               An agreement for the sale or other disposition of all or substantially all of
               the assets of the Company to any Person (other than a transfer to a Subsidiary). 

               

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Notwithstanding the foregoing, a
Change in Control shall not be deemed to occur solely because any Person (the
“Subject Person”) acquired Beneficial Ownership of more than the
permitted amount of the outstanding Voting Securities as a result of the acquisition of
Voting Securities by the Company which, by reducing the number of Voting Securities
outstanding, increases the proportional number of shares Beneficially Owned by the Subject
Persons, provided that if a Change in Control would occur (but for the operation of this
sentence) as a result of the acquisition of Voting Securities by the Company, and after
such, a Beneficial Owner acquires additional Voting Securities which increase the
percentage of the then outstanding Voting Securities beneficially owned by the Subject
Person, then a Change in Control shall occur. 

Share options granted hereunder to
employees may provide that if, prior to the Termination Date, an Optionee shall cease to
be employed or to grant any services, without cause by the Company or a subsidiary thereof
(otherwise than by reason of death or disability), the option will remain exercisable
after the date of cessation of employment (unless specifically stated otherwise in the
specific option grant letter) to the extent it was exercisable at the time of cessation of
employment, provided, however. that non-exercisable options will become void, at the date
of cessation of employment. If, prior to the Termination Date, an Optionee shall cease to
be employed by the Company or any subsidiary thereof by reason of a disability within the
meaning of Section 22(c)(3) of the Code, Options granted hereunder may provide that
they will remain exercisable until the termination of the Plan to the extent
exercisable at the time of cessation of employment. For the purposes hereof,
“cessation of employment” shall mean the date upon notification of
termination of employment has been delivered, by either the Company or the Optionee. In no
event, however, shall an Option be exercisable after the Termination Date. The Option
shall expire with respect to all Ordinary Share covered thereby into which at the time of
termination of the Option, the Option was not exercisable. In the event of the death of an
Optionee prior to the Termination Date and while employed by the Company or a subsidiary
thereof or while entitled to exercise an Option pursuant to the preceding sentences of
this paragraph, Options granted hereunder may provide that they will remain exercisable
until (i) the Termination Date, and (ii) by the person or persons to whom the
Optionee’s rights under the Option pass by will or by applicable laws of descent and
distribution and to the extent that the Optionee was entitled to exercise it on the date
of death. 

Notwithstanding the above, if prior
to the termination date, an Optionee shall cease to be employed by the Company for reasons
which, as determined by the Company in its discretion, amount to bad faith, gross
negligence or fraud, or as a result of the termination of such Optionee for cause, any
Option or portion of an Option not exercised as of the date of cessation of employment
will expire and terminate on such date, unless specifically stated otherwise in the
specific Option Agreement. 

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ARTICLE VII  

Special Tax Provisions 

The aggregate fair market value
(determined at the time the Option is granted) of the Ordinary Shares with respect to
which any IS0 is granted that is exercisable for the first time by the Optionee during any
calendar year, (under this Plan or any other share option plan of the Company or any
parent or subsidiary thereof) shall not exceed $100,000. 

No ISO may be granted to an
individual who, at the time the option is granted, owns directly, or indirectly within the
meaning of Section 422(b)(6) of the Code, Ordinary Shares possessing more than 10 percent
of the total combined voting power of all classes of stock of the Company or of any parent
or subsidiary thereof, unless (i) such option has an option price of at least 110
percent of the fair market value of the Ordinary Shares on the date of the grant of such
option and (ii) such option cannot be exercised more than five years after the date
it is granted. 

The aggregate fair market value
(determined at the time the Option is granted) of the Ordinary Shares with respect to
which any approved option is granted that is exercisable for the first time by the
Optionee during any calendar year, (under this Plan or any other share option plan of the
Company or any parent or subsidiary thereof) shall not exceed $50,000. 

No approved option to UK resident
employees may be granted to an individual who, at the time the option is granted, owns
Ordinary Shares possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company or of any parent or subsidiary thereof. 

ARTICLE VIII  

Exercise of Options 

An Optionee may exercise any
exercisable Option by signing and retuning to the Company at its principal office, a
“Notice of Exercise” in the form prescribed from time to time by the
Company together with payment or the exercise price. Such payment will be made in United
States Dollars, Israeli Shekels, Japanese Yen, British Pounds Sterling, Dutch Guilder or
EURO, in accordance with the terms of the related Option Agreement. The Notice of Exercise
shall specify the number of Shares with respect to which the Option is being exercised.
The Company is obligated to issue Shares upon such Notice of Exercise of an Option granted
under the Plan upon (a) the Company’s completion of any registration or other
qualifications of the Ordinary Shares under any state and/or federal law, rulings or
regulations or (b) representations and undertakings by the Optionee (or his legal
representative, heir or legatee, in the event of the Optionee’s death) to assure that
the sale of the Ordinary Shares complies with any registration exemption requirements
which the Company in its sole discretion shall deem necessary or advisable. Such required
representation is and undertakings may include representations and agreements that such
Optionee (or his legal representative, heir, or legatee): (a) is purchasing the
Ordinary Shares for investment and not with any present intention of selling or otherwise
disposing thereof; and (b) agrees to have placed upon the face and reverse of any
certificates evidencing such Shares a legend setting forth (i) any representations
and undertakings which such Optionee has given to the Company or a reference thereto and
(ii) that, prior to effecting any sale or other disposition of any such Shares, the
Optionee must furnish to the Company an opinion of counsel, satisfactory to the Company,
that such sale or disposition will not violate the applicable requirements of State and
Federal laws and regulatory agencies. 

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Payment for Ordinary Shares purchased
upon the exercise of an Option granted hereunder shall be made in full upon exercise of
the Option, by wire transfer or certified or bank cashiers check payable to the order of
the Company. The Ordinary Shares purchased shall thereupon be promptly delivered;
provided, however, that the Company may, in its discretion, require that an Optionee pay
to the Company or the Trustee, at the time of exercise or grant, as the case may be, such
amount as the Company deems necessary to satisfy its obligation to withhold Israeli,
United States Federal, state, or local income U.K. tax laws and Dutch tax laws or other
taxes incurred by reason of the exercise or the transfer of shares thereupon. 

ARTICLE IX  

Non-Transferability of
Option Rights 

No Option shall be transferable,
except by will or the laws of descent and distribution. During the lifetime of the
Optionee, the Option shall be exercisable only by Optionee or by such Optionee’s
legal representative. 

ARTICLE X  

Adjustment for
Recapitalization, Etc. 

The aggregate number of Ordinary
Shares which may be purchased upon exercise of the Options granted hereunder, the number
of Ordinary Shares covered by each outstanding Option and the price per share of each such
option shall be appropriately adjusted for any increase or decrease in the number of
outstanding shares of the Company resulting from a stock split or other subdivision or
consolidation of shares or payments of stock dividends or distributions or other increases
or decreases in the number of outstanding Ordinary Shares effected without receipt of
consideration by the Company or in the event of any other extraordinary transaction. 

The foregoing adjustments and the
manner of application of the foregoing provisions shall be determined by the Committee in
its sole discretion. Any such adjustment may provide for the elimination of any fractional
share which might otherwise become issuable upon exercise of an Option. 

ARTICLE XI  

No Obligation to
Exercise Option  

The grant of an Option pursuant to
the Plan shall impose no obligation on the Optionee to exercise such Option. 

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ARTICLE XII  

Use of Proceeds  

The proceeds received from the
issuance of Ordinary Shares upon exercise of Options, pursuant to the Plan shall be used
for such purposes as the Company shall determine to be appropriate. 

ARTICLE XIII  

Rights as a Shareholder 

The Company shall not be required to
recognize an Optionee as a shareholder with respect to any share issuable or transferred,
as the case may be, upon the exercise of such Option by the Optionee until such Optionee
shall have become the holder of record of such share, and such Optionee shall not be
entitled to vote or to any dividends or distributions or other rights in respect of such
share for which the record date is prior to the date on which he shall have become the
holder of record thereof. 

ARTICLE XIV  

Employment Rights 

Neither the Option Plan nor the
Option agreement with the Optionee shall impose any obligation on the Company or a
subsidiary thereof to continue any Optionee in its employ, or the hiring by the Company of
the Optionee’s services, and nothing in the Plan or in any Option granted pursuant
thereto shall confer upon any Optionee any right to continue in the employ or service of
the Company or a subsidiary thereof or restrict the right of the Company or a subsidiary
thereof to terminate such employment or service hiring at any time. 

ARTICLE XV  

Compliance with The Law  

The Company shall not be liable for
the non-issuance or non-transfer or any delay in issuance or transfer of any Ordinary
Shares issuable or transferred, as the case may he, upon the exercise of any Options
granted under the Plan which results from the inability of the Company to obtain, or from
any delay in obtaining, from any regulatory body having jurisdiction, all requisite
authority to issue or transfer Ordinary Shares of the Company upon exercise of the Options
under the Plan or upon the transfer of Ordinary Shares issued upon such exercise, if
counsel for the Company deems such authority necessary for lawful issuance or transfer of
any such shares. Appropriate legends may be placed on the stock certificates evidencing
shares issued upon exercise of Options to reflect such transfer restrictions. 

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ARTICLE XVI  

Voting of Ordinary
Shares 

Optionees shall only be entitled to
all rights of a shareholder in the Company upon the full payment of the exercise price of
the Options granted under this Plan. Shares held by the Trustee under the Plan which have
been fully paid shall be voted in accordance with the instructions in writing of the
Optionees. The provisions of this Article XVI shall not in any way affect the provisions
of Article XIII of this Plan. 

ARTICLE XVII  

Transfer of Shares 

By exercise of an option granted
hereunder, the Optionee agrees that any sale, transfer or other disposition of any of the
Ordinary Shares issued upon such exercise shall be made in accordance with the applicable
requirements of Rule 144, including, if applicable, the volume limitations applicable to
“affiliates” of the Company. 

ARTICLE XVIII  

Amendment or
Discontinuance of Plan 

Subject to any applicable law and
NASDAQ Rule, the Board or the Committee may, without the consent of the Company’s
shareholders or any Optionee under the Plan, at any time terminate the Plan entirely and
at any time or from time to time amend or modify the Plan, including amendments deriving
or needed as result of any legal changes or tax reform that may be enacted in Israel in
the future or any other legal arrangements which may replace the current legal arrangement
under Section 102(b)(2) of the Ordinance, provided that no such action shall adversely
affect Options granted hereunder prior to such amendment or modification without consent
of any Optionee adversely effected and, with respect to ISOs, the Board shall not, without
approval of the stockholders: (a) increase the total number of Ordinary Shares which
may be purchased pursuant to ISOs granted under the Plan, except as contemplated in
ARTICLE X, and (b) expand or change the persons eligible to receive options
under the Plan. 

ARTICLE XIX  

Taxes 

Each Optionee shall be solely liable
for all taxes and other fees resulting from the grant and/or exercise of Options granted
under the Plan and disposition of shares acquired pursuant to the exercise of an Option. 

Each Optionee should consult with
his/her individual tax advisers to determine the possible tax consequences of the grant
and/or exercise of Options granted under the Plan and the disposition of shares acquired
pursuant to the exercise of the Option in his/her personal tax circumstances. 

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The Company and/or the Trustee (where
applicable) shall withhold taxes according to the requirements under the applicable laws,
rules, and regulations, including the withholding of taxes at source. 

Furthermore, the Optionee shall agree
to indemnify the Company and the Trustee (where applicable) any shareholder, director,
manager or other Nosei Misra in the Company, and hold them 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 Optionee. 

The Board, the Committee and/or the
Trustee shall not be required to release any Share certificate, issued upon exercise of an
Option, to an Optionee, until all required payments have been fully made. 

ARTICLE XX  

Effectiveness and Term
of Plan 

The Plan shall become effective upon
shareholder approval and will expire on the tenth anniversary of the date of such
shareholder approval. No Option may be granted pursuant to the Plan after the termination
of the Plan, however, Options outstanding on that date may still be exercised in
accordance with the terms of their grant. 

ARTICLE XXI  

Governing Law and
Other National Regulations 

The Plan and all instruments issued
hereunder shall be governed by and interpreted in accordance with the laws of the State of
Israel, subject to all applicable laws, rules, and regulations, (especially rules of
accounting) whether of the State of Israel, the United States, the United Kingdom or the
Netherlands, or any other State having jurisdiction over the Company and the Optionee,
including the registration of the Shares under the United States Securities Act of 1933,
the Companies Act, 1985 in the UK or the Law for the Supervision of Listed Shares in the
Netherlands, and to such approvals by any governmental agencies or national securities
exchanges as may be required. 

    
                                    AMENDED AND RESTATED ON MAY 9, 2005

                                    SUBSEQUENTLY AMENDED ON SEPTEMBER 30, 2006

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