Document:

Unassociated Document

     

    
      Unofficial
        Translation of Blue Square's 2008 Share Option Plan

      

      *
        * * * * *

      

      Blue
        Square - (Israel) Ltd. (the "Company”)

      

      2008
        Share Option Plan 

      

      
        	
                1.

              	
                Purpose
                  of the Plan

              

      

      

      
        	 	
                The
                  Plan is intended to incentivize employees and officers of Blue
                  Square -
                  (Israel) Ltd., and of its Associated Companies (as hereinafter
                  defined)
                  for the purpose of encouraging them to contribute towards the development
                  of its business or the business of Associated Companies and increase
                  those
                  employees’ identification with the Blue Square - Israel Ltd., or with its
                  Affiliates.

              

      

      

      
        	
                2.

              	
                Definitions

              

      

      

      
        	 	
                2.1

              	
                Unless
                  the context otherwise requires, the terms set out below will, in
                  this
                  Plan, bear the meanings set out opposite
                  them:

              

      

      

        
          	 	
                  “Option”
                    - 

                	
                  means
                    an option to purchase one share of the Company, pursuant to the
                    terms of
                    this Plan.

                
	 	 	 
	 	
                  “Exercise
                    Notice” -

                	
                  has
                    the meaning set forth in Section 7.4 hereof.

                
	 	 	 
	 	
                  “Tax
                    Provisions” -

                	
                  means,
                    in connection with the grant of Options, the tax provisions on
                    the capital
                    gain tax track by a trustee under Section 102.

                
	 	 	 
	 	
                  “Company”
                    -

                	
                  means
                    Blue Square- (Israel) Ltd., a company incorporated under the
                    laws of the
                    State of Israel.

                
	 	 	 
	 	
                  “Grant
                    of Options” -

                	
                  means
                    the grant of the Options by the Company to an Offeree by means
                    of a Grant
                    Letter (as those terms are hereinafter defined ). 

                
	 	 	 
	 	
                  “Ordinance”
                    and/or “Income Tax Ordinance” - 

                	
                  means
                    the Income Tax (New Version), 5721-1961, as amended from time
                    to time,
                    including Regulations and/or Rules and/or orders and/or any other
                    provisions that have been ordered or issued by virtue
                    thereof.

                
	 	 	 
	 	
                  “Issue”
                    -

                	
                  means
                    the issue of Options or shares of the Company to the Trustee
                    on behalf of
                    the Offeree. 

                
	 	 	 
	 	
                  “Associated
                    Company” - 

                	
                  means
                    a company that is a subsidiary of, or controlled by, the
                    Company.

                
	 	 	 
	 	
                  “Law”

                	
                  means
                    the laws of the State of Israel as amended from time to time
                    and any other
                    relevant law to which the Company is subject.

                

        

         

        
          
             

          

          
             

            
              

            

          

          
             

          

        

         

        
          	 	
                  “Commencement
                    Date” -

                	
                  means
                    the day on which the Vesting Period (as hereafter defined) of
                    the Options
                    shall start to run.

                
	 	 	 
	 	
                  “Section
                    102 Rules” or the "Rules” -

                	
                  means
                    the Income Tax (Tax Concessions on Employee Share Issues) Rules,
                    5763-2003
                    or any rules in substitution therefor.

                
	 	 	 
	 	
                  “Exercise
                    Price” -

                	
                  means
                    the price that will be fixed by the Plan Manager (as hereinafter
                    defined)
                    pursuant to the provisions contained in Section 7.1 hereof, being
                    the
                    price that the Offeree will be required to pay to the Company
                    in order to
                    exercise one Option for one Exercise Share. It is clarified that
                    the
                    Exercise Price will not actually be paid but serve as a basis
                    for
                    calculating the benefit amount mentioned in Section 7.4
                    hereof.

                
	 	 	 
	 	
                  “Merger”
                    - 

                	
                  means
                    any of the following: (1) the sale of all or most of the Company’s assets;
                    (2) the sale (including a share substitution) of all or most
                    of the issued
                    share capital of the Company; (3) merger, or like transaction,
                    of the
                    Company with or within another corporation.

                
	 	 	 
	 	
                  “Grant
                    Letter” -

                	
                  means
                    a letter from the Company to the Offeree in which the Offeree
                    will be
                    given notice of the decision to allot to him Options pursuant
                    to the terms
                    of this Plan. The Grant Letter will, inter alia, set out the
                    following
                    matters: (1) the Tax Provisions; (2) the Exercise Price; and
                    (3) the
                    number of Options that are being granted to the Offeree.
                    

                
	 	 	 
	 	
                  “Manager”
-
                    and/or the "Plan Manager” - 

                	
                  means
                    the Board of Directors of the Company or a committee of the Board
                    that has
                    been appointed and empowered by the Company’s Board to administer this
                    Plan and/or any part thereof or decide on the making of grants
                    thereunder.

                
	 	 	 
	 	
                  “Share”
                    or “Shares” -

                	
                  means
                    an ordinary NIS 1.00 par value share of the Company.

                
	 	 	 
	 	
                  “Exercise
                    Shares”-

                	
                  means
                    the shares that have been or will be allotted by the Company
                    (including
                    dormant shares within the meaning of that term contained in the
                    Companies
                    Law, 5759-1999) in consequence of an exercise of Options that
                    have been
                    granted to an Offeree, or pursuant to the terms of the Plan.
                    

                
	 	 	 
	 	
                  “Tax
                    Track” -

                	
                  means
                    the capital gain tax track by a trustee, as set out in Section
                    102.
                    

                
	 	 	 
	 	
                  “Offeree”
                    -

                	
                  means
                    an employee or officer of the Company or of an Associated Company
                    to whom
                    Options have been granted pursuant to the terms of this
                    Plan.

                
	 	 	 
	 	
                  “Trustee”
                    -

                	
                  means
                    a trustee who has been appointed by the Company to hold on behalf
                    of
                    Offerees in trust the Options that are granted under this Plan
                    and the
                    Exercise Shares, as appropriate. 

                

        

         

        
          
             

          

          
            2

            
              

            

          

          
             

          

        

         

        
          	 	
                  “Disability”
                    -

                	
                  means
                    any permanent physical or mental impairment or sickness, from
                    which as a
                    result, the Offeree is incapable of continuing his employment
                    at the
                    Company or an Associated Company, all as determined by and at
                    the
                    exclusive discretion of the Company. 

                
	 	 	 
	 	
                  “Termination
                    of Employment for Cause” -

                	
                  means
                    for purposes of this Plan - the termination of the Offeree’s employer -
                    employee relationship with the Company or Associated Company
                    - or basis
                    for determining such employment, which: (1) are in circumstances
                    in which
                    it is possible to deny the Offeree by law, severance pay; or
                    (2) involve
                    dishonesty towards the Company or Associated Company, malice,
                    breach of
                    fiduciary duty, disclosure of confidential information concerning
                    the
                    Company’s or Associated Company’s business, or material breach of the
                    employment agreement.

                
	 	 	 
	 	
                  “Section
                    102” -

                	
                  means
                    Section 102 of the Ordinance.

                
	 	 	 
	 	
                  “Retirement”
                    -

                	
                  means
                    within the context of the conclusion of the employer - employee
                    relationship, the Offeree’s attaining the retirement age as described by
                    Law.

                
	 	 	 
	 	
                  “Control”
                    or “Controller” -

                	
                  has
                    the meaning of “Controlling Party” defined under Section 102 of the
                    Ordinance.

                
	 	 	 
	 	
                  “Plan”
                    or “Option Plan” -

                	
                  means
                    this Plan, as amended from time to time.

                
	 	 	 
	 	
                  “Vesting
                    Period” -

                	
                  means
                    the period at the end of which the Offeree is entitled to exercise
                    the
                    Options that have been granted to him, subject to the conditions
                    of the
                    Plan.

                
	 	 	 
	 	
                  “Restriction
                    Period” -

                	
                  means
                    the period during which the Options and Exercise Shares will
                    be held by
                    the Trustee for the benefit of the Offeree, or pursuant to the
                    provisions
                    contained in Section 102 and the Tax Track.

                
	 	 	 
	 	
                  “Option
                    Term” -

                	
                  means,
                    in relation to Options that have been granted but not exercised
                    - the
                    periods specified in Section 9
                    hereof.

                

        

      

       

      
        	 	
                2.2

              	
                General

              

      

      

      
        	 	 	
                Without
                  derogating from the interpretation of the definitions set out in
                  Section
                  2.1 above, all expressions used in this Plan relating to an individual
                  will similarly include the plural, and vice versa, and any expression
                  relating to one gender will similarly apply to the other, save
                  where the
                  context indicates otherwise. 

              

      

      

      
        	
                3.

              	
                Shares
                  Designated for the Grant of
                  Options

              

      

      

      
        	 	
                The
                  aggregate number of the Exercise Shares that will be allotted under
                  this
                  Plan and any amendment thereto, will be up to five million Shares
                  that, as
                  of the present date, constitute 11.53% of the Company’s issued share
                  capital on the date of the approval of this Plan by the Company’s Board
                  (not fully diluted). Such number of Shares will be subject to adjustments
                  that will be required in order to implement the provisions of the
                  Plan
                  pursuant to Section 4 hereof.

              

      

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

       

      
        	 	
                In
                  the event of the lapse of an Option that has been granted pursuant
                  to the
                  terms of this Plan (without having been exercised), either as a
                  result of
                  the termination of the Option Period (as defined in Section 9)
                  or as a
                  result of the lapse thereof in respect of any other cause as set
                  out in
                  this Plan, the lapsed Option will revert to the pool of Options
                  that are
                  held by the Trustee employed by the Company, and from which the
                  Company
                  may grant Options to Offerees under the provisions of this Plan.
                  

              

      

      

      
        	
                4.

              	
                Adjustments

              

      

      

      
        	 	
                4.1

              	
                Should
                  the Company distribute bonus shares whose effective date for distribution
                  will fall after the date of the approval of this Plan by the Company’s
                  Board of Directors and after Options under this Plan have been
                  allotted,
                  but prior to the exercise of the Options that are exercisable according
                  to
                  Section 7.2 hereof (but prior to the Offeree’s right to exercise the same
                  having lapsed) the number of shares to which the Offeree is entitled
                  at
                  the time of exercising Options will increase by the number of shares
                  that
                  the Offeree would have been entitled to as bonus shares had he
                  exercised
                  the Options before the effective date for the distribution of the
                  bonus
                  shares. The Exercise Price of each Option will not change as a
                  result of
                  the increase of the number of the Exercise Shares to which the
                  Offeree is
                  entitled following a distribution of bonus
                  shares.

              

      

      

      
        	 	
                4.2

              	
                In
                  the event of a split or consolidation of the Company’s share capital or
                  any other substantially like act pertaining to corporate capital,
                  the
                  Company will effect the changes or adjustments required to prevent
                  a
                  dilution or increase of an Offeree’s rights under the Plan in relation to
                  the number and class of Exercise Shares in respect of unexercised
                  Options
                  that are exercisable according to Section 7.2 hereof by the Offeree
                  and/or
                  in relation to the Exercise Price of each
                  Option.

              

      

      

      
        	 	
                4.3

              	
                The
                  Plan Manager may determine in specific grants that a full or partial
                  adjustment of the Exercise Price will be made in the event of the
                  Company
                  distributing dividend (in cash or in
                  specie)
                  for which the effective date for distribution will fall after the
                  date of
                  the approval of this Plan by the Company’s Board of Directors and after
                  the issue of Options thereunder, but prior to the exercise of Options
                  that
                  are exercisable according to Section 7.2 hereof, and prior to the
                  Offeree’s right to exercise the same having
                  lapsed.

              

      

       

      
        	 	
                4.4

              	
                The
                  Plan Manager may decide that if rights to acquire any securities
                  are
                  offered to the Company’s shareholders by way of a rights issue, the
                  Company will take action to ensure that the rights will be offered
                  on the
                  same terms, mutatis
                  mutandis,
                  as those to the holders of the as yet unexercised Options and prior
                  to the
                  Offeree’s right to exercise the same having lapsed, as if such holders
                  of
                  Options had exercised their options immediately prior to the effective
                  date for determining the right to participate in such rights issue.
                  The
                  number of Exercise Shares will not increase as a result of the
                  issue of
                  such rights issue. In the alternative, the Plan Manager may decide
                  that
                  the Exercise Price of each option will be adjusted to the extent
                  of the
                  value of the benefit to the shareholder resulting from the rights
                  issue,
                  if and to the extent such benefit
                  exists.

              

      

      

      
        	 	
                4.5

              	
                In
                  any event where, as a result of the adjustments specified in this
                  Section,
                  the Company will be required to allot fractional shares, the Company
                  will
                  not allot such fractional shares and the number of shares that
                  will be
                  allotted to the Offeree will be rounded up to the nearest complete
                  share.
                  

              

      

      

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      

      
        	 	
                4.6

              	
                Merger

              

      

      

      
        	 	 	
                In
                  the event of a Merger transaction, the Plan Manager may, at its
                  exclusive
                  discretion, decide:

              

      

      

      
        	 	
                (a)

              	
                If
                  and how the Vesting Period of Options that have not vested will
                  be
                  accelerated and if Options whose Vesting Period has not been accelerated
                  will be cancelled, sold, redeemed by the Company or
                  substituted;

              

      

      

      
        	 	
                (b)

              	
                If
                  and how Options that have vested (including Options whose Vesting
                  Period
                  has been accelerated as mentioned in Sub-Section (a) of Section
                  4.6 above)
                  will be cancelled, exercised, substituted and/or sold by the Trustee
                  or
                  the Company (as appropriate) on behalf of the Offerees;
                  and

              

      

       

      
        	 	
                (c)

              	
                How
                  the Exercise Shares that are held on behalf of the Offeree by the
                  Trustee
                  will be substituted and/or sold by the Trustee on the Offeree’s
                  behalf.

              

      

      

      
        	 	
                (d)

              	
                To
                  determine any provision and effect any act and/or adjustment in
                  connection
                  with the Options and the terms thereof, to the extent this will,
                  at its
                  discretion, be required.

              

      

      

      
        	
                5.

              	
                Administration
                  of the Plan

              

      

      

      
        	 	
                5.1

              	
                Powers

              

      

      

      
        	 	 	
                Subject
                  to the provisions of the Law, the Company’s documents of incorporation and
                  any other resolution of the Company’s Board of Directors, the Plan Manager
                  will, at its exclusive discretion, be empowered to exercise all
                  the powers
                  and authorities (subject to receiving the approval of the Board
                  of
                  Directors and/or shareholders meeting, if such approvals are required
                  by
                  law), regardless of whether such powers and authorities have been
                  expressly granted by the Plan or are required or desirable for
                  the purpose
                  of administering the Plan, including, but without derogating from
                  the
                  generality of the foregoing,:

              

      

      

      
        	
              	(a)	
                To
                  decide:  

              

      

      

      
        	 	
                (1)

              	
                Who
                  will be the Offerees under the Plan, the number of Options that
                  will be
                  granted to each Offeree and the Exercise Price of the
                  Options;

              

      

      

      
        	 	
                (2)

              	
                The
                  Vesting Period that will apply to the
                  Options;

              

      

      

      
        	 	
                (3)

              	
                The
                  Tax Track that will apply to the Options
                  granted;

              

      

      

      
        	 	
                (4)

              	
                The
                  date and/or dates on which Options will be
                  granted;

              

      

      

      
        	 	
                (5)

              	
                Whether,
                  to what extent and under what circumstances it will be possible
                  to cancel,
                  substitute or waive an Option or vary the terms
                  thereof;

              

      

      

      
        	 	
                (6)

              	
                Any
                  term or condition by which the Option will be granted, in addition
                  to
                  those that are set out in this
                  Plan;

              

      

      

      
        	 	
                (7)

              	
                To
                  take any measure or effect any act that is required or desirable
                  in order
                  to administer and implement the
                  Plan.

              

      

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

       

      
        	 	
                (b)

              	
                To
                  interpret any provision of the Plan and effect any act that is
                  required as
                  a result of such interpretation,
                  including:

              

      

      

      
        	 	
                (1)

              	
                According
                  to Section 16.1, to accelerate the dates on which the Options granted
                  may
                  be exercised;

              

      

      

      
        	 	
                (2)

              	
                Exercise
                  the powers that are conferred upon it pursuant to the provisions
                  of the
                  Plan;

              

      

      

      
        	 	
                (3)

              	
                To
                  the extent necessary - interpret and direct how any of the provisions
                  of
                  the Plan should be performed.

              

      

      

      
        	 	
                (c)

              	
                To
                  vary the terms of, or cancel, the
                  Plan.

              

      

      

      
        	 	
                (d)

              	
                For
                  the avoidance of doubt it is clarified that no interpretation,
                  decision or
                  act of the Plan Manager will deviate from the provisions of the
                  Law, and
                  no waiver or amendment to or of any of the terms of the Plan will
                  materially affect the rights of the Offerees in respect of the
                  Options
                  that have been granted under the Plan, without the prior consent
                  of those
                  Offerees having been granted, save that no consent will be required
                  of any
                  of the Offerees for amendments that have been made pursuant to
                  a power set
                  in this Plan or in the Grant Letter.

              

      

      

      
        	
                6.

              	
                Issue
                  of Options

              

      

      

      
        	 	
                6.1

              	
                Conditions
                  for the Issue of the
                  Options

              

      

      

      
        	 	 	
                Subject
                  to all of the approvals that are required under any law being obtained
                  for
                  the Plan and for performing the grants thereunder, Options may
                  be granted
                  on any date falling after 30 days of the date of the filing of
                  the
                  application to approve the Plan with the tax authorities in Israel.
                  The
                  Options will be allotted to Offerees without consideration, and
                  will not
                  be listed for trading on a stock
                  exchange.

              

      

       

      
        	 	
                6.2

              	
                Grant
                  Date and Issue Date

              

      

      

      
        	 	 	
                The
                  date on which a binding decision of the Company is made to grant
                  to an
                  Offeree Options pursuant to the terms of this Plan will be deemed
                  to be
                  the Grant date for purposes of this
                  Plan.

              

      

      

      
        	 	 	
                The
                  date on which the Company notifies the Trustee that Options pursuant
                  to
                  the provisions of this Plan have been allotted in its name on behalf
                  of
                  the Offerees will be deemed to be the Issue date for purposes of
                  this
                  Plan. 

              

      

       

      
        	
                7.

              	
                Exercise
                  of the Options

              

      

      

      
        	 	
                7.1

              	
                Exercise
                  Price

              

      

      

      
        	 	 	
                Unless
                  otherwise decided by the Plan Manager, the Exercise Price that
                  will be
                  paid to the Company in respect of exercising one Exercise Share
                  resulting
                  from an exercise of one Option, will be set on the Grant date,
                  set out in
                  the Grant Letter, but will in no case be less than the nominal
                  value of
                  the Share.

              

      

      

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      

      
        	 	
                7.2

              	
                Vesting
                  Period - Exercise Dates of the
                  Options

              

      

      

      
        	 	 	
                Unless
                  otherwise decided by the Plan Manager on the Grant date or on any
                  other
                  date, the Options that will be granted to an Offeree on any particular
                  date will vest and be exercisable pursuant to the time schedule
                  set out
                  below on condition that the Offeree will be employed by the Company
                  or
                  Associated Company on the Issue Date and on the Vesting Date. Unless
                  otherwise prescribed by the Plan Manager, for the purpose of this
                  Section,
                  the Commencement Date will be the Issue
                  date:

              

      

      

      
        	 	
                7.2.1

              	
                2/3
                  of the Options will be exercisable at the expiration of two years
                  from the
                  Commencement Date;

              

      

      

      
        	 	
                7.2.2

              	
                1/3
                  of the Options will be exercisable at the expiration of the third
                  year
                  after the Commencement Date, in addition to the Options that will
                  be
                  exercisable according to sub-Section
                  7.2.1;

              

      

       

      
        	 	
                7.2.3

              	
                Receipt
                  of Options according to this Plan and/or the exercise thereof by
                  an
                  Offeree who is an employee of the Company or of an Associated Company
                  is
                  conditional and depends on the Offeree being bound to the Company
                  or to
                  the Associated Company, (as appropriate), by personal contract
                  only,
                  including persons who have become employed under a personal contract
                  pursuant to the special collective agreement existing between the
                  Company
                  and the New General Employees Trade Union and the Workers Committee
                  of
                  Blue Square dated 16th
                  July, 2007 or pursuant to Section 5 of the Addendum to the General
                  Collective Agreement dated 3 February, 1994, and is not subject
                  to the
                  framework collective agreements that apply to the Company’s employees, to
                  the satisfaction of the Plan Manager. Without derogating from the
                  Plan
                  Manager’s power described above, an Offeree who raises claims that the
                  framework of the collective agreements that apply to the Company’s
                  employees for any purpose, applies to him, will be regarded as
                  a person
                  with respect to whom the condition precedent mentioned in this
                  Section
                  will not have been fulfilled and the Options that have been allotted
                  to
                  him will expire, regardless of whether the Company has agreed to
                  such
                  claims by him, or not. 

              

      

      

      
        	 	
                7.3

              	
                Minimum
                  Exercise

              

      

      

      
        	 	 	
                No
                  Offeree may exercise Options having a benefit value lower than
                  100 U.S.
                  Dollars or such other minimum sum that will be determined by the
                  Plan
                  Manager, except where the exercise is for the balance of the Vested
                  Options belonging to the Offeree.

              

      

      

      
        	 	 	
                No
                  Options may be exercised for partial
                  shares.

              

      

      

      
        	 	 	
                The
                  exercise of part of the number of Options that have been granted
                  to an
                  Offeree will not cause the lapse, termination or cancellation of
                  the
                  remaining Options that are held on his behalf by the Trustee, and
                  which
                  have yet to be exercised by him. 

              

      

      

      
        	 	
                7.4

              	
                Method
                  of Exercise 

              

      

      

      
        	 	 	
                Options
                  under this Plan may be exercised upon the following conditions
                  being
                  fulfilled, and in accordance therewith only:

              

      

      

      
        	 	
                (a)

              	
                Exercise
                  of the Options 

              

      

      

      
        	 	 	
                Subject
                  to the provisions of this Plan and to the procedures of the Company,
                  including the enforcement procedure regarding insider information,
                  the
                  Offeree may exercise all or some of the Options during the Option
                  Term (as
                  defined in Section 9 hereof) by sending written notice of exercise
                  signed
                  by the Offeree to the Company’s registered office and the Trustee, such
                  notice to include, inter
                  alia,
                  the Offeree’s name and I.D. number and the number of Options that the
                  Offeree wishes to exercise (the
                  "Exercise Notice”).
                  An Exercise Notice will be delivered to the Company on a trading
                  day (on
                  the Tel Aviv Stock Exchange) only. The Plan Manager may vary the
                  form of
                  the Exercise Notice or the method of its dispatch.
                  

              

      

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

       

      
        	 	
                (b)

              	
                Method
                  of Exercise 

              

      

      
        	 	 	
                The
                  Company will, on the date of receiving the Exercise Notice (and
                  where the
                  Exercise Notice has been received after 13:00, on the trading day
                  next
                  following receipt of the Exercise Notice by the Company) (the
                  "Exercise Day”)
                  allot the Exercise Shares, the number thereof being computed according
                  to
                  the following formula: 

              

      

      

      
        	
                        (A
                  x B)
                  - (A x C)        

              
	
                B

              

      

      

      
        	 	
                Where:

              

      

      
        	 	
                A
                  -
                  

              	
                the
                  number of Options that the Offeree wishes to exercise as determined
                  in the
                  Exercise Notice; 

              

      

      
        	 	
                B
                  -

              	
                the
                  base price in shekels of the Company’s share on the stock exchange, on the
                  Exercise Day; 

              

      

      
        	 	
                C
                  -
                  

              	
                the
                  Exercise Price in shekels for each Option.

              

      

      

      
        	 	 	
                Fractional
                  shares that are equal to or higher than 0.5 will be rounded up,
                  and
                  fractional shares that are lower than 0.5 will be rounded down.
                  

              

      

      

      
        	 	 	
                It
                  is also clarified that the Offeree will in any event pay the nominal
                  value
                  of the Exercise Shares. The Plan Manager may determine how the
                  Offeree
                  will pay such nominal value, including the means of deducting such
                  sum
                  from the Offeree’s salary or by check or cash that will be remitted by the
                  Offeree to the Company. 

              

      

      

      
        	 	 	
                The
                  following are numerical examples for illustration only:
                  

              

      

      

      
        	 	 	
                Assuming
                  the exercise of 100 Options by any Offeree, where the Exercise
                  Price of
                  each Option is NIS.100 and the base price of the Company’s share on the
                  stock exchange on the Exercise Day stands at NIS.120, the number
                  of the
                  Exercise Shares that will be allotted to the Offeree will be 17,
                  and the
                  Offeree will pay for them, NIS.17. 

              

      

      

      
        	 	
                (c)

              	
                Allotment
                  of Shares

              

      

      

      
        	 	 	
                The
                  Company will, on receiving the signed Exercise Notice and payment
                  of the
                  nominal value of the Exercise Shares, allot the Exercise Shares to the
                  Trustee or the Offeree, depending on the appropriate Restriction
                  Period
                  and tax arrangement, as the case may be.

              

      

       

      
        	 	
                (d)

              	
                Exercise
                  Expenses 

              

      

      

      
        	 	 	
                Expenses
                  of the exercise and any commission involved therein, will be borne
                  by the
                  Offeree. 

              

      

      

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      

      
        	
                8.

              	
                Waiver
                  of Options 

              

      

      

      
        	 	
                The
                  Offeree may, on any date prior to the lapse of the Options granted,
                  waive
                  rights to the Options that have been granted to him by giving written
                  notice to the Company’s registered office. The notice of waiver will set
                  out the number of Options that have been granted to the Offeree
                  and which
                  he waives, and be signed by the Offeree.

              

      

      

      
        	 	
                Upon
                  receipt of the notice of waiver by the Company, the Options will
                  lapse and
                  revert to the pool of Options that are held by the Trustee acting
                  for the
                  Company, and from which the Company may grant Options to the Offerees
                  under the terms of this Plan. 

              

      

      

      
        	
                9.

              	
                Option
                  Term 

              

      

      

      
        	 	
                Unless
                  they have lapsed previously according to the terms of this Plan,
                  all the
                  Options that have been granted but not exercised according to this
                  Plan
                  will lapse and be cancelled at 17:00 (Israel time) at the end of
                  the
                  period prescribed for the exercise thereof in the resolution of
                  the grant,
                  and as set out in the Grant Letter, until the vesting thereof as
                  set out
                  in Section 7.2 above. 

              

      

      

      
        	
                10.

              	
                Termination
                  of Employment 

              

      

      

      
        	 	
                10.1

              	
                Termination
                  of Employment

              

      

       

      
        	 	 	
                If
                  the Offeree ceases to be an employee or officer of the Company
                  or of an
                  Associated Company for any reason (the “Termination
                  of Employment”),
                  except in cases of death, retirement, disability or termination
                  of
                  employment for cause, the Options that have been granted to the
                  Offeree
                  and which have vested but have not yet been exercised by the date
                  of the
                  Termination of Employment (as determined by and at the exclusive
                  discretion of the Company or the Associated Company) (the
                  "Exercisable Options”),
                  may be exercised if they have not previously lapsed, according
                  to the
                  earlier of: (1) 30 days from the date of the Termination of Employment;
                  (2) the date of expiration of the Option Term.

              

      

      

      
        	 	 	
                The
                  remaining Options that have been granted to the Offeree will lapse
                  on the
                  date of the Termination of Employment.

              

      

      

      
        	 	
                10.2

              	
                Termination
                  of Employment for Cause 

              

      

      

      
        	 	 	
                In
                  the event of Termination of Employment for cause, all the Offeree’s rights
                  to exercise the Options that have been granted to him, whether
                  or not the
                  Options have vested by the date of the Termination of Employment,
                  will
                  lapse upon the Company or the Associated Company giving notice
                  of its
                  intention to terminate the working relationship with him.
                  

              

      

      

      
        	 	 	
                If,
                  after Termination of the Employment but before the Options have
                  been
                  exercised, the Plan Manager will determine that the Offeree has
                  acted -
                  either before or after the Termination of the Employment - in a
                  manner
                  that justifies the termination of the employment for cause, then
                  the
                  Offeree’s right to exercise Options that have been granted to him will
                  lapse on that date, whether or not they have vested.
                  

              

      

      

      
        	 	 	
                A
                  determination by the Plan Manager of conduct justifying Termination
                  of
                  Employment for cause will be final in all respects in connection
                  with this
                  Plan. 

              

      

      

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      

      
        	 	
                10.3

              	
                Termination
                  of Employment as a Result of Retirement, Disability or
                  Death 

              

      

      

      
        	 	 	
                In
                  the event of Termination of Employment as a result of retirement,
                  disability or death, the Options that have been granted to the
                  Offeree and
                  which have vested but have yet to be exercised by the date of the
                  Termination of Employment, will be exercisable by the Offeree or
                  his heirs
                  (as the case may be) until the date of the expiration of the Option
                  Term.
                  

              

      

      

      
        	 	 	
                The
                  Offeree (or his heirs, as the case may be) will additionally be
                  entitled
                  to exercise a proportional part of the Options that have not yet
                  vested on
                  the date of the Termination of Employment, as follows:
                  

              

      

      

      
        	 	 	
                Where:
                  

              

      

      

      
        	 	 	
                A
                  -
                  

              	
                Is
                  the period in days that the Offeree worked from the last vesting
                  date of
                  the Options that have already vested until the date of the Termination
                  of
                  Employment.

              

      

      
        	 	 	
                B
                  -
                  

              	
                Means
                  the period of days from the last vesting date of the Options that
                  have
                  already vested until the vesting date of the next portion, during
                  which
                  Termination of the Employment occurred.

              

      

      
        	 	 	
                C
                  -
                  

              	
                Means
                  the number of Options comprised in the next portion, during whose
                  vesting
                  term Termination of the Employment occurred.

              

      

      

      
        	 	 	
                In
                  light of the foregoing, the proportionate part of the Options that
                  have
                  not yet vested and which may be exercised will be:
                  

              

      

      
        

        
          	
                  A

                	
                  x
                    C
                    

                
	
                  B

                

        

      

      

      
        	 	 	
                For
                  example, an Offeree who has been granted 400 Options whose vesting
                  period
                  is as set out below - having 200 Options then will vest and be
                  exercisable
                  at the end of two years after the date of issue, 100 Options will
                  vest and
                  be exercisable at the end of three years from the date of issue,
                  and 100
                  Options will vest and be exercisable at the end of four years from
                  the
                  issue date, and Termination of the Offeree’s Employment occurs after two
                  years and 90 (ninety) days from the Commencement Date, will be
                  entitled to
                  exercise in addition to the 200 Options that have vested and 25
                  additional
                  Options, according to the following calculation:
                  

              

      

      

      
        	
                90

              	
                x
                  100 

              	
                =
                  25

              
	
                365

              

      

      

      
        	 	 	
                The
                  remaining Options that were granted to the Offeree will lapse on
                  the date
                  of the Termination of Employment. 

              

      

      

      
        	 	
                10.4

              	
                Discretion

              

      

      

      
        	 	 	
                The
                  Plan Manager may, at its exclusive discretion, extend the periods
                  prescribed in Sections 10.1 - 10.3 above or enable an Offeree to
                  exercise
                  Options, even if the Vesting Period thereof as prescribed in Section
                  7
                  above, has not yet passed, after Termination of Employment.
                  

              

      

      

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

      

      
        	 	
                10.5

              	
                Change
                  of Workplace or Provision of the
                  Service

              

      

      

      
        	 	 	
                The
                  Offeree’s right to the Options that have been granted to him under the
                  Plan or to exercise the same will not end or lapse merely as a
                  result of
                  the Offeree having gone to work for, or the services that were
                  supplied as
                  an employee or officeholder having passed from the Company to,
                  an
                  Associated Company or vice-versa. 

              

      

      

      
        	
                11.

              	
                Tax
                  Provisions 

              

      

      

      
        	 	
                11.1

              	
                Allotment
                  Track by a Trustee

              

      

      

      
        	 	 	
                The
                  Company will grant Options to Israeli Offerees pursuant to the
                  Capital
                  Gain Tax track by a trustee, as laid down in Section 102 or the
                  102 Rules.
                  

              

      

      

      
        	 	 	
                In
                  accordance with the requirements of Section 102, the Company will
                  appoint
                  a Trustee to hold in trust for the benefit of the Offeree, the
                  Options
                  that will be allotted for the Offerees and the Exercise Shares
                  that will
                  be allotted upon the Options being exercised.

              

      

      

      
        	 	 	
                The
                  Restriction Period of the Options will be not less than 24 months
                  from the
                  day on which the Options have been allotted to the Trustee on behalf
                  of
                  the Offeree, or for a different period as determined in any amendment
                  to
                  Section 102. 

              

      

      

      
        	 	 	
                Subject
                  to the conditions of Section 102 and the Rules, an Offeree will
                  not be
                  able to receive from the trustee, sell or effect any disposition
                  whatsoever with, the Exercise Shares before the expiration of the
                  Restriction Period. An Offeree selling or transferring from the
                  Trustee
                  the Exercise Shares before the expiration of the Restriction Period
                  (a
                  “Breach”),
                  after having received the Company’s approval to do so, will pay all the
                  taxes that are required to be paid following the Breach according
                  to
                  Section 7 of the Rules. After the expiration of the Restriction
                  Period any
                  sale or disposition of the Exercise Shares will be liable to tax
                  as stated
                  in Section 102 and the Rules. 

              

      

      

      
        	 	 	
                In
                  the event of a distribution of rights, including bonus shares,
                  by virtue
                  of the Options that have been allotted (the “Additional
                  Rights”),
                  all the Additional Rights will be allotted to the Trustee for the
                  benefit
                  of the Offerees and be held by the Trustee until the expiration
                  of the
                  original Restriction Period of the Options in respect of which
                  the Rights
                  have been allotted and the conditions of the Tax Track will apply
                  to such
                  Additional Rights. 

              

      

      

      
        	 	
                11.2

              	
                Cumulative
                  Conditions 

              

      

      

      
        	 	 	
                The
                  Restriction Period is in addition to the Vesting Period specified
                  in
                  Section 7.2 above (or in the Grant Letter). The Restriction Period
                  and the
                  Vesting Period may overlap, but neither of them constitutes a substitute
                  for the other, and each of them constitutes an independent condition
                  of
                  the Options granted. 

              

      

      

      
        	 	
                11.3

              	
                Election
                  of Tax Track

              

      

      

      
        	 	 	
                The
                  election of the Tax Track by the Company will apply to every employee
                  to
                  whom Options have been allotted under this Plan, and to any allotment
                  of
                  Options that will be made in the year following the expiration
                  of the year
                  in which the first allotment will be made, according to this Plan,
                  and
                  thereafter. 

              

      

      

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

      

      
        	 	
                11.4

              	
                Trust
                  Agreement 

              

      

      

      
        	 	 	
                The
                  appropriate terms of the trust that derive from the Tax Track will
                  be set
                  out in a trust agreement that will be signed between the Company
                  and the
                  Trustee (the “Trust
                  Agreement”).

              

      

      

      
        	
                12.

              	
                Holding
                  Period of the Shares in Trust

              

      

      

      
        	 	
                Unless
                  otherwise decided by the Plan Manager, the Exercise Shares and
                  the
                  Additional Rights that have been allotted by the Company to the
                  Trustee
                  will be held by the Trustee for the benefit of the Offeree for
                  a period
                  that will not exceed three years from the date of the expiration
                  of the
                  Option Term. The Plan Manager will instruct the Trustee with respect
                  to
                  the method of transferring the Exercise Shares and the Additional
                  Rights
                  mentioned. 

              

      

      

      
        	
                13.

              	
                Rights
                  as a Shareholder of the Company

              

      

      

      
        	 	
                The
                  shares that will result from an exercise of any Options under this
                  Plan
                  (the
                  "Exercise Shares”)
                  will have equal rights to those of the Company’s Shares in all respects,
                  immediately upon their allotment and be entitled to any dividend
                  or other
                  benefit for which the effective date of the right to receive the
                  same
                  falls on or after the allotment date.

              

      

      

      
        	 	
                As
                  of the date of the approval of this Plan, the Company’s Shares are traded
                  on the Tel Aviv Stock Exchange Ltd., (and are also traded as American
                  Depositary Shares) on the New York Stock Exchange (NYSE). It is
                  hereby
                  clarified that the allotment of the Options and/or the Exercise
                  thereof
                  against shares is subject to the provisions of the Securities Laws
                  in
                  Israel and the United States and the Rules of the respective stock
                  exchanges in Tel Aviv and New York, as existing from time to time.
                  Neither
                  this Plan or the grant of Options for shares of the Company thereunder
                  will create any representation and/or assurance of the Company
                  that the
                  Company’s shares will continue to be traded on any of the stock exchanges
                  mentioned above or on any other exchange. It is hereby clarified
                  that even
                  if the Company’s shares will be traded on the Exercise Date in the United
                  States and/or in any other country (other than Israel) the Company
                  makes
                  no undertaking that the Shares that will result from an exercise
                  of the
                  Options will be listed for trading on the United States and/or
                  in the
                  other country and/or may be sold on a foreign exchange, as stated
                  above.
                  

              

      

      

      
        
          	 	
                  Inthe
                    event of the Offeree being entitled to receive rights and/or
                    bonus shares
                    and/or any other right to the extent it is conferred upon the
                    Offeree by
                    virtue of the Options and/or the Exercise Shares (the
                    "Rights”),
                    and on the effective date for distributing the Rights, the Options
                    and/or
                    Exercise Shares are held by the Trustee, the Rights will be transferred
                    to
                    the Trustee, who will deduct tax at source as required by law
                    (if and to
                    the extent this will apply) and all the Rights will be allotted
                    to the
                    Trustee for the benefit of the Offerees and be held by the Trustee
                    until
                    the expiration of the Restriction Period of the Options in respect
                    of
                    which the Rights were allotted and the conditions of the Tax
                    Track will
                    apply to such additional Rights.

                

        

      

      

      
        	 	
                In
                  the event of the Company distributing dividend in cash and on the
                  effective date for distributing the dividend, the Trustee held
                  Exercise
                  Shares on behalf of any of the Offerees, the Company will remit
                  the
                  dividend amounts to the Trustee in respect of the Exercise Shares
                  that are
                  held by the Trustee, for each Offeree, the Trustee will deduct
                  tax at
                  source as required by law (if and to the extent it is required)
                  and
                  thereafter will remit the dividend amounts (after deduction of
                  tax) to the
                  Offeree. 

              

      

      

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

      

      
        	
                14.

              	
                Absence
                  of Special Rights on Employment

              

      

      

      
        	 	
                This
                  Plan shall not in any way operate to grant any right whatsoever
                  to the
                  Offeree for continued employment or provide services to the Company
                  or to
                  the Associated Company nor will it operate to impede in any way
                  any right
                  of the Company or the Associated Company to terminate the employment
                  or
                  provision of the services by the Offeree or increase or reduce
                  the salary
                  that is given to the Offeree. 

              

      

      

      
        	
                15.

              	
                Restrictions
                  on Transfer of the Options

              

      

      

      
        	 	
                The
                  Options may not be sold, assigned, transferred, charged, attached
                  or
                  disposed of in any other way, save by testamentary disposition
                  or on
                  intestacy. The Trustee will not transfer Options to any third party,
                  (including the Offeree) except pursuant to the instructions that
                  will be
                  received from the Plan Manager. 

              

      

      

      
        	
                16.

              	
                Provisions
                  regarding the Vesting Periods of the Options and Restrictions on
                  the
                  Exercise Shares 

              

      

      

      
        	 	
                16.1

              	
                Acceleration
                  

              

      

      

      
        	 	 	
                The
                  Plan Manager may, at its exclusive discretion, decide that in certain
                  circumstances, that will be set out in the decision, justify acceleration
                  of the Vesting Period of all or any of the Options that have not
                  yet
                  vested, this being in relation to all, some or any of the Offerees.
                  

              

      

      

      
        	 	
                16.2

              	
                Lock-up
                  Period

              

      

      

      
        	 	 	
                In
                  addition to the Restriction Period dictated by Section 102, and
                  in
                  addition to the restrictions imposed by virtue of any other legal
                  provisions, including the Company’s procedures regarding the prohibition
                  of the use of insider information, the Plan Manager may, at the
                  request of
                  the underwriters at the time of the offering of the Company’s securities
                  to the public, decide that the Exercise Shares will be subject
                  to a
                  lock-up period as recommended by the Company’s Board of Directors, during
                  which the Offerees or any of them will not be permitted to sell
                  those
                  Shares. 

              

      

      

      
        	
                17.

              	
                Voting

              

      

      

      
        	 	
                As
                  long as Exercise Shares are held for the benefit of Offerees by
                  the
                  Trustee, the Offeree may vote in respect of those Shares. The Company
                  will
                  send notices of general meetings of the Company to the Trustee
                  and the
                  Trustee will pass such notices to each Offeree under the Plan.
                  An Offeree
                  wishing to attend the general meetings of the Company or exercise
                  his
                  right to vote in respect of the Exercise Shares that are held for
                  his
                  benefit by the Trustee, will turn to the Trustee in writing at
                  least 14
                  days prior to the date of the meeting and the Trustee will forward
                  a power
                  of attorney to the Offeree for attending the general meeting and
                  vote in
                  respect of the Exercise Shares that are held for the benefit of
                  the
                  Offeree by the Trustee, in accordance with the procedure that has
                  been set
                  by the Company for all of its shareholders.

              

      

      

      
        	
                18.

              	
                Taxation
                  

              

      

      

      
        	 	
                This
                  Plan will be subject to, construed in accordance with and fulfil
                  all of
                  the requirements of Section 102, and any written approval from
                  the tax
                  authorities in Israel. All the tax ramifications pursuant to any
                  Law that
                  will result from the grant or allotment of the Options or the Exercise
                  Shares, realization of the Options or holding or sale of the Exercise
                  Shares (or of any other security that will be allotted under the
                  Plan), by
                  or on behalf of the Offeree, will be paid for by the Offeree. The
                  Offeree
                  will indemnify the Company or the Associated Company as appropriate,
                  and
                  absolve them from any responsibility for the payment of any tax
                  or of any
                  penalty, interest or linkage. 

              

      

       

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

       

      
        	
                19.

              	
                Deduction
                  of tax at source 

              

      

      

      
        	 	
                At
                  any time that payment is required from the Offeree or the Company
                  or the
                  Associated Company by means of deduction of tax at source in connection
                  with the Options that are granted to the Offeree or the Exercise
                  Shares,
                  the Company or the Associated Company may demand from the Offeree
                  an
                  amount sufficient to cover any such demand for deduction of tax
                  at source
                  and on any event occurring in which shares or any other asset other
                  than
                  cash is transferred in consequence of an exercise of Options, the
                  Company
                  or the Associated Company will have the right to demand from the
                  Offeree
                  remittance of an amount in cash that is sufficient to fulfil any
                  such
                  demand for deduction of tax at source, and if such sum is not remitted
                  on
                  due date, the Company or the Associated Company will have the right
                  to
                  hold or offset (subject to the Law) the Shares or any other such
                  asset
                  until the transfer of such payment by the Offeree.
                  

              

      

      

      
        	 	
                Before
                  payment of the tax applicable as mentioned in Section 7 of the
                  Rules has
                  been paid, the Options or the Exercise Shares will not be transferrable,
                  assignable, pledgable, attachable or otherwise voluntarily chargeable
                  nor
                  will any power of attorney or deed of transfer be given in respect
                  thereof
                  whether such are of immediate effect or will be of effect at a
                  future
                  date, except for a transfer by testamentary disposition or on intestacy;
                  and on a transfer of the Options or the Exercise Shares by virtue
                  of
                  testamentary disposition or intestacy, the provisions of Section
                  102 and
                  those of the Rules will apply to the heirs or transferees of the
                  Offeree.
                  

              

      

       

      
        	
                20.

              	
                Prohibition
                  against transferring Options

              

      

      

      
        	 	
                The
                  Trustee will not transfer Options to any third party (including
                  the
                  Offeree) except pursuant to instructions that will be received
                  from the
                  Plan Manager. 

              

      

      

      
        	
                21.

              	
                Rights
                  Transferred on Death 

              

      

      

      
        	 	
                A
                  transfer of rights to Options or Exercise Shares pursuant to a
                  will or by
                  operation of law will be valid and binding on the Company only
                  after the
                  following certifications, signed and authenticated by a notary,
                  will have
                  been furnished to the Company: 

              

      

      

      
        	 	
                (a)

              	
                A
                  written transfer request and a copy of the legal document creating
                  or
                  affirming the person’s right to act in relation to the Offeree’s estate
                  and creating or affirming the transferee’s right;
                  

              

      

      

      
        	 	
                (b)

              	
                The
                  written agreement of the transferee to pay any sum in relation
                  to the
                  Options or the Exercise Shares and agreement to pay any payment
                  that is
                  required pursuant to the terms of the Plan and also agreement to
                  abide by
                  all of the terms of the Plan; and 

              

      

      

      
        	 	
                (c)

              	
                Such
                  other evidence as will, in the opinion of the Plan Manager, be
                  required in
                  order to substantiate the right to transfer the Options or the
                  Exercise
                  Shares and effectiveness of the transfer.

              

      

      

      
        	
                22.

              	
                Absence
                  of other rights to the Options

              

      

      

      
        	 	
                Subject
                  to the provisions of the Plan, no person other than the Offeree
                  will have
                  any rights in relation to the Options that have been allotted to
                  the
                  Offeree under the Plan. 

              

      

      

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

      

      
        	
                23.

              	
                Expenses
                  and Proceeds 

              

      

      

      
        	 	
                Expenses
                  incurred in relation to administering and implementing this Plan
                  will be
                  borne by the Company. The Company may apply any proceeds receivable
                  following the exercise of any Option for its general purposes and
                  other
                  corporate objectives. 

              

      

      

      
        	
                24.

              	
                Required
                  Approvals

              

      

      

      
        	 	
                The
                  Plan is subject to the receipt of all the approvals that are required
                  according to Section 102 and the Law.

              

      

      

      
        	
                25.

              	
                Law
                  

              

      

      

      
        	 	
                This
                  Plan and all the documents incidental thereto that have been delivered
                  or
                  signed by the Company or Associated Company in connection with
                  this Plan
                  will be construed, administered and be subject to the laws of the
                  State of
                  Israel or to such other law that is applicable to the Company.
                  

              

      

      

      
        	
                26.

              	
                Reference
                  to the Offerees 

              

      

      

      
        	 	
                There
                  will be no obligation to treat all of the Offerees in the same
                  way.
                  

              

      

      

      
        	
                27.

              	
                Deviations
                  

              

      

      

      
        	 	
                In
                  the case of any deviation between the terms of this Plan and the
                  Grant
                  Letter, the terms of the Plan will, unless otherwise stated, prevail.
                  

              

      

      

      
        	
                28.

              	
                Undertakings
                  of the Offeree 

              

      

      

      
        	 	
                Upon
                  receiving Options according to the Plan, the Offeree: (1) agrees
                  and
                  acknowledges that he or she has received and read the Plan and
                  the Grant
                  Letter; (2) undertakes to fulfil all of the conditions set out
                  in Section
                  102 (including those pertaining to the Tax Track), the Section
                  102 Rules,
                  the Plan, the Grant Letter and the Deed of Trust; and (3) subject
                  to the
                  terms and conditions of Section 102 and the Rules, the Offeree
                  undertakes
                  not to sell or remove the Exercise Shares from the trust prior
                  to the
                  expiration of the Restriction Period (if and to the extent it exists);
                  (4)
                  agrees and acknowledges that he or she has no claims in relation
                  to the
                  Options that have been allotted to him/her and in relation to the
                  Exercise
                  Shares that will result therefrom, including claims in relation
                  to the
                  value thereof, the rights attaching thereto and that the Options
                  and/or
                  the Shares will be allotted to him or her without any representation
                  on
                  the part of the Company and/or of anyone on its behalf, including
                  in
                  connection with the Company and/or its business and/or activity
                  and/or
                  results. 

              

      

      

      
        	
                29.

              	
                Term
                  of the Plan 

              

      

      

      
        	 	
                The
                  Plan Manager may grant Options under this Plan for a period of
                  three years
                  from the date on which Options are first granted under this Plan.
                  After
                  such period, the Plan will lapse and it will no longer be possible
                  to
                  grant or allot Options thereunder, it being clarified that nothing
                  contained in this Section shall derogate from the Option Term as
                  provided
                  in Section 9 of the Plan. 

              

      

      

      

      END

      

      *
        * * * * *

       

      
        
           

        

        
          15THIRD
      AMENDMENT

    TO

    EMPLOYMENT
      AGREEMENT

     

    This
      Third Amendment to Employment Agreement (the "Amendment") is executed as of
      December 10, 2007, by and between Galaxy Nutritional Foods, Inc., a Delaware
      corporation (the “Corporation”), and Michael E. Broll (the
“Employee”).

    

    WHEREAS,
      the Corporation and the Employee entered into an employment agreement dated
      July
      8, 2004, as amended (the “Employment Agreement”); and,

     

    WHEREAS,
      the Parties desire to amend provisions of the Employment Agreement relating
      to
      certain transactions involving a “Sale of the Corporation” as further described
      herein.

     

    NOW,
      THEREFORE, in consideration of the mutual covenants and promises contained
      herein, the parties agree as follows:

     

    1. 
Section
      7
      of the Employment Agreement is hereby amended to add a new subsection C as
      follows:

     

    “C.
      Termination
      Following a Sale of the Corporation.
      In the
      event of a Sale of the Corporation (as hereinafter defined), then upon ten
      (10)
      days prior notice from the Employee to the Corporation given at anytime within
      6
      months after such Sale of the Corporation, the Employee may terminate his
      employment with the Corporation and, in such event, he shall be entitled to
      receive one year of his base salary (as in effect before the Sale of the
      Corporation), payable at the option of the Corporation in a lump sum or over
      a
      period of one year on the Corporation’s normal payroll dates and subject to
      typical payroll deductions. The term “Sale of the Corporation” shall mean a
      transaction (or series of related transactions) pursuant to which the
      acquiror(s) acquire(s) (i) at least sixty (60%) of the equity securities of
      the
      Company then outstanding (whether by merger, consolidation, sale or transfer
      of
      the Company’s shares of capital stock or otherwise), or (ii) all or
      substantially all of the Company’s assets (whether by way of sale of equity
      securities or assets), other than any transaction (or series of related
      transactions) under either clause (i) or (ii) above in which Frederick Deluca
      and/or his affiliates are the acquiror. In no event shall the Employee be
      entitled to payment under this Section 7.C. if he is then receiving (or entitled
      to receive) payments under Section 7.B. hereof.”

     

    2. 
Section
      9
      of the Employment Agreement is hereby amended to add the following sentence
      to
      the end of the Section: “In addition, nothing herein shall prohibit the Employee
      from serving on the board of directors (or similar managing boards) of other
      companies that are not competitive with the Company and which board service
      is
      approved by the Chairman of the Company.”

     

    3. 
Except
      as
      expressly amended in this Amendment, all terms, covenants and provisions of
      the
      Employment Agreement are and shall remain in full force and effect without
      further modification or amendment. This Amendment shall be deemed incorporated
      into, and made a part of, the Employment Agreement.

     

    [Signatures
      appear on the following page]

    
       

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the parties hereto have executed this Amendment on the date
      set
      forth above.

    
      
        	 	
                “Corporation”

              
	 	
                Galaxy
                  Nutritional Foods, Inc. 

              
	 	 	 
	 	
                By:  

              	
                /s/
                  David H. Lipka

              
	 	
                Print
                  Name: 

              	
                David
                  H. Lipka

              
	 	
                Print
                  Title: 

              	
                Chairman
                  of the Board

              
	 	 	 
	 	
                “Employee”

              	 
	 	 	 
	 	
                /s/
                  Michael E. Broll

              
	 	
                Michael
                  E. Broll

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