Document:

Exhibit 10.1

 

 

FIRST AMENDMENT TO SECURITIES PURCHASE AGREEMENT AND TO UNSECURED NOTE DUE 2006

 

THIS FIRST AMENDMENT TO SECURITIES PURCHASE AGREEMENT AND TO UNSECURED NOTE DUE 2006
 (this “Amendment”), dated as of August 14, 2006, is entered into by and among 
BUTLER INTERNATIONAL, INC., a Maryland corporation, (the “Parent”), 
BUTLER SERVICE GROUP, INC., a New Jersey corporation (“BSG”), BUTLER SERVICES INTERNATIONAL,
INC., a Delaware corporation (“BSI”), BUTLER TELECOM, INC., a Delaware
corporation (“Butler

Telecom”), BUTLER SERVICES, INC., a Delaware corporation (“Butler Services
”), BUTLER UTILITY SERVICE, INC., a Delaware corporation (“Butler Utility
”), BUTLER PUBLISHING, INC., a Delaware corporation (“Butler Publishing” and together with
Parent, BSG, BSI, Butler Telecom, Butler Services, and Butler Utility, are referred to hereinafter each individually as “Company”, and
individually and collectively, jointly and severally, as the “Companies”), and LEVINE LEICHTMAN CAPITAL PARTNERS III,
L.P.,

a California limited partnership (the “Purchaser”). Terms used herein without definition shall have the meanings ascribed to them in, as
applicable, the Securities Purchase Agreement or the Note (each as defined below).

RECITALS

A.           Pursuant to that certain
Securities Purchase Agreement dated as of June 30, 2006 (as amended from time to time, the “Securities Purchase Agreement”), by and among the
Companies, the guarantors named therein and the Purchaser, the Companies have previously issued and sold to the Purchaser their Unsecured Note Due 2006 in the original principal amount of $2,500,000,
dated June 30, 2006 (as amended, modified and supplemented from time to time, the “Note”).

B.           The
Companies have requested that the Purchaser amend the Securities Purchase Agreement and the Note in order to have more time to satisfy the closing conditions set forth in Section 6.2 of the
Securities Purchase Agreement, including issuing the Restated SEC Documents, which the Purchaser is willing to do in consideration of the terms and conditions set forth herein.

C.           The
Companies are entering into this Amendment with the understanding and agreement that, except as specifically provided herein, none of the Purchaser’s rights or remedies as set forth in the
Securities Purchase Agreement, the Note or any other Investment Document is being waived or modified by the terms of this Amendment.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 

 

 

 

	

             
 	

            1.
 	

            Amendments to Securities Purchase Agreement.

 

(a)          Section 1.1 of the
Securities Purchase Agreement is hereby amended by adding the following defined term thereto in its proper alphabetical order:

“ ‘Daily Cash Flow Forecast
’ shall mean a daily cash flow forecast, in form and substance satisfactory to the Purchaser, in its sole discretion, for the period commencing on August 14, 2006 and ending on
August 25, 2006, including, without limitation, detailed information concerning cash collections, cash disbursements and net borrowing availability under the GECC Credit Documents.”

(b)          Section 10.15(e) of
the Securities Purchase Agreement is hereby amended and restated to read in its entirety as follows:

“(e)        Minimum Excess Availability. (i) prior to the Final Closing, the Companies shall not permit their net borrowing availability under the GECC Credit Documents to be less than
$2,000,000 as of August 24, 2006; and (ii) after the Final Closing, the Companies shall not permit Availability (as defined in the Bank Credit Documents), calculated on a monthly basis, to be less
than the greater of (A) $2,500,000 or (B) such amount to be determined in the corresponding financial covenant set forth in the Bank Credit Documents.

2.          
Amendment to Note. Section 2 of the Note is hereby amended and restated to read in its entirety as follows:

“2.          Payment of Principal; Maturity Date. The Companies agree to pay the outstanding principal balance of, and other amounts owing under, this Note as follows: (a) in
the amount of $1,000,000 on August 15, 2006 and (b) in an amount equal to the remaining outstanding principal balance, together with all accrued and unpaid interest on and all other unpaid amounts
owing under this Note on August 25, 2006 (the “Maturity Date”).”

3.          Amendment Fee. In consideration of the agreements set forth herein, the Companies hereby agree, jointly and severally, to pay to Purchaser an amendment fee in immediately
available funds in the amount of $100,000 (the “Amendment Fee”), which fee is non-refundable, fully-earned as of the date of this Amendment
and due and payable on August 15, 2006.

4.          Effectiveness of this Amendment. Purchaser must have received the following items, in form and content acceptable to Purchaser in its sole discretion, before this Amendment is
effective.

(a)          This Amendment and
the attached Acknowledgment, fully executed in a sufficient number of counterparts for distribution to all parties.

	

             
 	

            (b)
 	

              The Daily Cash Flow Forecast.
 

(c)          Parent’s
consolidated balance sheet as of June 30, 2006 and its consolidated income statement and cash flow statement for each of (i) the one month period ended June 30, 2006 and (ii) the six month period
ended June 30, 2006.

 

2

 

 

(d)          Payment of $20,000
of the fees and expenses of Purchaser incurred as of the date of this Amendment and payable by the Companies under Section 8.5 of the Securities Purchase Agreement and/or Section 12 of the Note.

(e)          All accrued and
unpaid interest due under the Note as of the date of this Amendment.

(f)           All other
documents and legal matters in connection with the transactions contemplated by this Amendment shall have been delivered or executed or recorded, as required by Purchaser.

5.          Representations and Warranties. Each Company hereby represents and warrants as follows:

(a)          Authority
. Each Company has the requisite corporate power and authority to execute and deliver this Amendment, and to perform its obligations hereunder and under the Investment Documents (as
amended or modified hereby) to which it is a party. The execution, delivery and performance by each Company of this Amendment have been duly approved by all necessary corporate action and no other
corporate proceedings are necessary to consummate such transactions.

(b)          
Enforceability. This Amendment has been duly executed and delivered by each Company. This Amendment and each Investment Document (as amended or modified hereby) is the legal,
valid and binding obligation of each Company, enforceable against such Company in accordance with its terms, and is in full force and effect.

(c)          Due Execution. The execution, delivery and performance of this Amendment are within the power of each Company, have been duly authorized by all necessary corporate action,
have received all necessary governmental approval, if any, and do not contravene any law or any contractual restrictions binding on such Company.

(d)          No Default
. No event has occurred and is continuing that constitutes a Default or an Event of Default.

6.          Choice of Law. The validity of this Amendment, its construction, interpretation and enforcement, the rights of the parties hereunder, shall be determined under, governed by,
and construed in accordance with the internal laws of the State of California governing contracts only to be performed in that State.

7.          Counterparts. This Amendment may be executed in any number of counterparts and by different parties and separate counterparts, each of which when so executed and delivered,
shall be deemed an original, and all of which, when taken together, shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment by
telefacsimile or other similar method of electronic transmission shall be effective as delivery of a manually executed counterpart of this Amendment.

 

3

 

 

	

             
 	

            8.
 	

            Reference
            to and Effect on the Investment Documents.
 

(a)          Upon and after the
effectiveness of this Amendment, each reference in the Securities Purchase Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the
Securities Purchase Agreement, and each reference in the other Investment Documents to “the Securities Purchase Agreement,” “thereof” or words of like import referring to the
Securities Purchase Agreement, shall mean and be a reference to the Securities Purchase Agreement as modified and amended hereby.

(b)          Upon and after the
effectiveness of this Amendment, each reference in the Note to “this Note”, “hereunder”, “hereof” or words of like import referring to the Note, and each reference in
the other Investment Documents to “the Unsecured Notes”, “an Unsecured Note,” “thereof” or words of like import referring to the Note, shall mean and be a reference to
the Note as modified and amended hereby.

(c)          Except as
specifically amended above, the Securities Purchase Agreement, the Note and all other Investment Documents, are and shall continue to be in full force and effect and are hereby in all respects
ratified and confirmed and shall constitute the legal, valid, binding and enforceable obligations of the Companies to the Purchaser.

(d)          The execution,
delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Purchaser under any of the Investment Documents,
nor constitute a waiver of any provision of any of the Investment Documents.

(e)          To the extent that
any terms and conditions in any of the Investment Documents shall contradict or be in conflict with any terms or conditions of the Securities Purchase Agreement or the Note, after giving effect to
this Amendment, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Securities Purchase Agreement and the Note as modified or
amended hereby.

9.          Ratification. Each Company hereby restates, ratifies and reaffirms each and every term and condition set forth in the Securities Purchase Agreement and the Note, each as
amended hereby, and the other Investment Documents effective as of the date hereof.

10.         Estoppel
. To induce the Purchaser to enter into this Amendment, the Companies each hereby acknowledge and agree that, as of the date hereof, there exists no right of offset, defense,
counterclaim or objection in favor of any Company as against the Purchaser with respect to the Securities Purchase Agreement, the Note or any other Investment Document.

11.         Integration. This Amendment, together with the other Investment Documents, incorporates all negotiations of the parties hereto with respect to the subject matter hereof and is
the final expression and agreement of the parties hereto with respect to the subject matter hereof.

12.         Severability. In case any provision in this Amendment shall be invalid, illegal or unenforceable, such provision shall be severable from the remainder of this Amendment and
the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

[signature pages follow]

 

4

 

 

IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above
written.

	

            COMPANIES:

BUTLER INTERNATIONAL INC.,
 a Maryland corporation

By:    \s\ Edward M. Kopko
                         

Name: Edward M. Kopko

          Title: Chairman and CEO

 
 
	

            BUTLER SERVICE GROUP, INC.,
 a New Jersey
corporation

By:    \s\Edward M. Kopko
                            

Name: Edward M. Kopko

          Title:
            CEO

 

 
 
	

            BUTLER PUBLISHING, INC.,
 a Delaware
corporation

By:    \s\ Edward M. Kopko
                         

Name: Edward M. Kopko

          Title:
            CEO

 
 
	

            BUTLER TELECOM, INC.,
 
a Delaware corporation

By:    \s\ Edward M. Kopko
                         

Name: Edward M. Kopko

          Title:
            CEO

 
 

 

 

  S-1

 

 

 

	

            BUTLER SERVICES, INC.,
 
a Delaware corporation

By:    \s\ Edward M. Kopko
                         

Name: Edward M. Kopko

          Title:
            CEO

 
 
	

            BUTLER UTILITY SERVICE, INC.,
 a Delaware
corporation

By:    \s\ Edward M. Kopko
                         

Name: Edward M. Kopko

          Title:
            CEO

 
 
	

            PURCHASER:

LEVINE LEICHTMAN CAPITAL PARTNERS, INC.,
 a California
corporation

On behalf of LEVINE LEICHTMAN CAPITAL PARTNERS III, L.P.
,
 a California limited partnership

By:    \s\ Steven Hartman
            

Name:  Steven Hartman

Title:  Vice President

 
 
	

             
 

 

 

  S-2

 

 

ACKNOWLEDGEMENT

In connection with the foregoing First Amendment to Securities Purchase Agreement and Unsecured Note
(the “Amendment”), each of the undersigned, being a “Guarantor” under their respective General Continuing Guaranties, dated June 30,
2006 (each a “Guaranty”), in favor of Purchaser (as defined in the Amendment), hereby acknowledges and agrees to the Amendment and confirms
and agrees that its Guaranty is and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects except that, upon the effectiveness of, and on and after the
date of the Amendment, each reference in such Guaranty to the Securities Purchase Agreement or Note (as defined in the Amendment), “thereunder”, “thereof” or words of like import

referring to the Securities Purchase Agreement or Note (as applicable), shall mean and be a reference to the Securities Purchase Agreement or Note (as applicable) as amended or modified by the
Amendment. Although the Purchaser has informed the undersigned of the matters set forth above, and the undersigned have acknowledged the same, each of the undersigned understands and agrees that the
Purchaser has no duty under the Securities Purchase Agreement, Note or any other Investment Document (as defined in the Amendment) to so notify any of the undersigned or to seek such an
acknowledgement, and nothing contained herein is intended to or shall create such a duty as to any transaction hereafter.

	

             
 	

             

\s\ Edward M. Kopko
 EDWARD
            M. KOPKO, an individual

 
 
	

             
 	

            AAC CORP.,
 a Delaware corporation

By:    \s\ Edward M. Kopko
     

Name: Edward M. Kopko

Title: CEO

 
 
	

             
 	

            SYLVAN INSURANCE CO., LTD.,
 a company
organized under the laws of Bermuda

By:    \s\ Edward M. Kopko
     

Name: Edward M. Kopko

Title: CEO

 
 

 

   

 

 

	

             
 	

            DATA PERFORMANCE, INC.,
 a New Jersey
corporation

By:    \s\ Edward M. Kopko
     

          Name:
            

          Title:EXHIBIT 4.1

--------------------------------------------------------------------------------
 THIS IS AN UNOFFICIAL TRANSLATION OF THE 2006 EMPLOYEES DIRECTORS AND OFFICERS
  INCENTIVE PLAN OF ELBIT MEDICAL IMAGING LTD. FROM THE HEBREW LANGUAGE. THIS
  TRANSLATION IS MADE FOR CONVENIENCE PURPOSES ONLY AND THE HEBREW VERSION IS
                        THE BINDING VERSION OF THE PLAN.
--------------------------------------------------------------------------------

                           ELBIT MEDICAL IMAGING LTD.
                                 (THE "COMPANY")

         EMPLOYEES AND OFFICERS INCENTIVE PLAN - CAPITAL GAIN TAX TRACK

 THE PLAN IS EARMARKED FOR THE ALLOCATION OF COMPANY'S NON-NEGOTIABLE OPTIONS,
     EXERCISABLE INTO COMPANY'S ORDINARY SHARES OF NIS 1 PAR VALUE EACH, TO
    EMPLOYEES AND OFFICERS OF THE COMPANY AND/OR COMPANIES BELONGING TO THE
    COMPANY'S GROUP, PURSUANT TO THE TERMS OF SECTION 102 OF THE INCOME TAX
  ORDINANCE [NEW VERSION], 5721-1961 - CAPITAL GAIN TRACK, ALL PURSUANT TO THE
                       TERMS SET OUT IN THIS PLAN BELOW.

1    INTRODUCTION AND DEFINITIONS

     1.1  Any expression in this Plan referring to the singular shall also apply
          to the plural and vice versa and any expression referring to one
          gender shall also apply to the other gender, unless the context
          otherwise requires.

     1.2  The terms specified below shall, in this Plan, have the meaning set
          out opposite them unless the context otherwise requires:

          "OPTION" -             Non-negotiable Option, exercisable into
                                 Ordinary Shares of the Company, all pursuant
                                 and subject to the provisions of this Plan;

           THE "ORDINANCE"       The Income Tax Ordinance [New Version],
           AND/OR THE "INCOME    5721-1961, as shall be amended from time to
           TAX ORDINANCE" -      time, including regulations and/or rules
                                 and/or orders and/or any other directives
                                 issued and/or to be issued by virtue thereof;

           THE "COMPANY'S        The Company and companies under its control,
           GROUP" -              directly and/or indirectly;

           THE "102 SECTION
           RULES" OR THE         Income Tax Rules (Tax benefits in Stock
           "RULES" -             Issuance to Employees) 5763-2003;

           "SHARE" -             Ordinary Share of NIS 1 par value of the
                                 Company;

           "GRANTEE" -           Within the meaning of this term in Section 102
                                 of the Ordinance, to whom Options were granted
                                 pursuant to the provisions of this Plan;

<PAGE>

           THE "PLAN" OR THE     This Plan as shall be amended from time to
           "INCENTIVE PLAN"      time;

           THE "EXERCISE
           SHARES" -             As defined in section 11.1 below;

           THE "STOCK
           EXCHANGE" -           Tel Aviv Stock Exchange Ltd.;

           "NASDAQ"              NASDAQ National Market;

           "TRADING DAY" -       A day on which trading takes place on the Stock
                                 Exchange;

2.   CAPITAL GAIN TAX TRACK

     2.1  This Plan shall be subject to, interpreted in accordance with and
          comply with all the requirements of Section 102 of the Ordinance and
          any written approval of the Tax Authorities in Israel.

     2.2  This Plans and the allocations thereunder shall be subject to the
          provisions of Section 102 of the Ordinance - Capital Gains Tax Track,
          as shall be in effect from time to time, and the rules by virtue
          thereof, and the Grantees shall be obligated to act pursuant to the
          provisions of the Ordinance and such rules.

     2.3  The allocation of Options under this Plan shall be effected to an
          employee incentive trust company (hereinafter: the "TRUSTEE"), as
          trustee for each Grantee, or any other trustee to be elected by the
          Company. The trust terms are specified in a trust agreement to be
          signed by and between the Company and the Trustee (hereinafter: the
          "TRUST AGREEMENT"), attached hereto as an appendix.

     2.4  In order for the Grantee to pay the tax rates stipulated for the
          Capital Gains Tax Track, the Grantee may not transfer and/or sell the
          Exercise Shares in the Trustee's possession up to the end of 24 months
          from the date of allocation of the Options to the Trustee for the
          Grantee, or any other term, which shall be approved by the Tax
          Authorities in Israel (hereinafter: the "LOCK-UP PERIOD").

     2.5  In any event of distribution of bonus shares and/or in the event of
          offering of rights by virtue of the Options and/or the Exercise Shares
          (hereinafter: the "ADDITIONAL RIGHTS"), all the Additional Rights
          shall be allocated to the Trustee for the Grantees and shall be held
          by the Trustee up to the end of the Lock-Up Period of the Options in
          respect of which the rights were allocated and the terms of the tax
          track shall apply to such Additional Rights.

     2.6  In the event that the Grantee transfers and/or sells the Exercise
          Shares in the possession of the Trustee prior to the end of the
          Lock-Up Period (hereinafter: the "VIOLATION"), the Grantee shall pay
          all taxes required to be paid in the wake of committing the Violation,
          pursuant to the provisions of section 7 of the Rules, and shall
          indemnify the Company for any expense incurred by the Company due to
          such Violation, including payment of the employer's contribution to
          the National Insurance Institute in the wake of the Violation.

                                        2
<PAGE>

     2.7  To remove any doubts, the provisions of Section 102 of the Ordinance
          are intended to add to any other provision stipulated in this Plan and
          nothing in the provisions of section 102 of the Ordinance shall
          derogate from the provisions of this Plan, including provisions as to
          the Period of Consolidation of Entitlement, as defined in section 7
          below and/or any other provisions limiting the Grantee's option to
          exercise the Options or transfer the Shares from the possession of the
          Trustee.

3.   NUMBER OF OPTIONS TO BE ALLOCATED UNDER THE PLAN

     The total number of Options to be allocated under this Plan shall be one
     million (1,000,000) non-negotiable Options of the Company, exercisable into
     Company Ordinary Shares of NIS 1 par value each, pursuant to the
     specification in this Plan below. The number of the Shares arising from the
     exercise of the Options shall be subject to the exercise formula and to
     adjustments as set out in sections 8.2 and 4 below.

4.   ADJUSTMENTS

     4.1  In the event that the Company distributes a cash dividend, the
          effective date for the distribution thereof, will take place after the
          date of the allocation of the Options to the Trustee for a Grantee,
          but before the exercise or expiry of the Options, the Exercise Price,
          as defined in section 6.4 below, shall be decreased in respect of each
          Option by the amount of the dividend per share, less the tax payable
          thereon.

     4.2  In the event that the Company distributes bonus shares, the effective
          date for the distribution of which takes place after the date of the
          allocation of the Options to the Trustee for the Grantee, but before
          the exercise or expiry of the Options, the number of Shares to which
          the Grantee is entitled upon the exercise of the Options shall
          increase by the number of the Shares that the Grantee would have been
          entitled to as bonus shares, had he exercised the Options prior to the
          effective date for the distribution of the bonus shares. The Exercise
          Price of each Option shall not vary as a result of the increase in the
          number of Exercise Shares to which the Grantee is entitled in the wake
          of the distribution of bonus shares.

     4.3  If rights to acquire any securities whatsoever are offered to Company
          shareholders by way of rights, the Company shall act with a view that
          the rights be offered under the same terms, MUTATIS MUTANDIS, also to
          holders of the Options not yet exercised or expired, as though the
          holders of such Options have exercised their Options on the eve of the
          effective date for the right to participate in the said issuance of
          rights. The number of the Exercise Shares shall not increase as a
          result of the said issuance of rights.

     4.4  In any event of division or consolidation of the Company's share
          capital, or any other corporate capitalization event of a
          significantly similar nature, the Company shall effect such changes or
          adjustments as are required to prevent dilution or increase in a
          Grantee's rights, pursuant to the Plan with respect to the number and
          class of the Exercise Shares in relation to the Options not yet
          exercised by the Grantee and/or the Exercise Price of each Option.

                                        3
<PAGE>

     4.5  In any event of a merger, spin-off and/or any other structural change,
          Options which have been granted under this Plan, shall be replaced by,
          or converted to, an alternative option in the Company after such
          structural change, all at the absolute discretion of the Company's
          Board of Directors.

5.   MANAGEMENT OF THE PLAN

     The Company's Board of Directors has the absolute discretion to manage the
     Plan, adopt resolutions with respect to the Plan, interpret same and
     introduce changes therein, as it deems fit, including a change in the
     Exercise Price of all or any of the Options, all subject to the provisions
     of any law. The Company's Board of Directors shall not be obligated to
     treat all Grantees in an equal manner.

6.   ALLOCATION OF OPTIONS

     6.1  Any allocation of Options under the Plan shall only be implemented
          upon fulfillment of all the following conditions:

          A.   The passage of 30 days from the date of submitting the
               application for approval of the Plan to the Tax Authorities in
               Israel, pursuant to the provisions of Section 102 of the
               Ordinance;

          B.   Obtaining all the approvals required for allocation under the
               Plan at the authorized organs of the Company, pursuant to any
               law;

          C.   Obtaining the Stock Exchange's approval for the listing of the
               Exercise Shares for trading on the Stock Exchange;

          D.   Filing an application with NASDAQ for listing the Exercise Shares
               for trading on the NASDAQ;

     6.2  The Options allocation date shall be the date on which the Company
          allocated Options in the name of the Trustee for each Grantee, in
          accordance with the provisions of this Plan.

     6.3  The Options to be allocated to the Trustees for the Grantees under
          this Plan, shall be allocated without consideration.

     6.4  The Exercise Price for any Option to be allocated under this Plan
          shall be the lower of the following: (i) NIS 100; or (ii) the average
          of the closing rates of the Company Share on the Stock Exchange during
          the 30 trading days preceding the Option allocation date (hereinafter:
          the "EXERCISE PRICE").

     6.5  The Options allocated under this Plan may not be transferred to any
          Grantee and/or third party whatsoever, other than transfer by virtue
          of a Last Will and Testament or under law and, in such an event, the
          provisions of Section 102 of the Ordinance and the Rules shall apply
          to the Grantee's heirs and/or transferees.

7.   ENTITLEMENT CONSOLIDATION PERIOD

     7.1  Without derogating from any of the provisions hereunder, the
          entitlement of each Grantee to exercise the Options allocated to the
          Trustee on his behalf shall be consolidated on the following dates
          (hereinafter: "ENTITLEMENT CONSOLIDATION DATES"):

                                        4
<PAGE>

          A.   The Grantee shall be entitled to exercise one third of the number
               of the Options allocated to the Trustee on his behalf, at the end
               of one year from the date of allocation of the Options to the
               Trustee for the Grantee.

          B.   The Grantee shall be entitled to exercise another third of the
               number of the Options allocated to the Trustee on his behalf, at
               the end of two years from the date of allocation of the Options
               to the Trustee for the Grantee.

          C.   The Grantee shall be entitled to exercise the last third of the
               number of the Options allocated to the Trustee on his behalf, at
               the end of three years from the date of allocation of the Options
               to the Trustee for the Grantee.

          At the end of three years from the date of allocation of the Options
          to the Trustee for the Grantee, the Grantee shall be entitled to
          exercise all such Options as have been allocated to the Trustee for
          his benefit, all subject to the provisions of the Plan.

     7.2  The Grantee's entitlement to exercise the Options, on the Entitlement
          Consolidation Dates, as set forth in section 7.1 above, shall be
          subject to the Grantee's continued employment or office at any company
          of the Company's Group, all in accordance with the provisions of
          section 12 below.

8.   EXERCISE OF OPTIONS

     8.1  Subject to the provisions of this Plan, the Grantee may exercise all
          or any of the Options, during the Option Term, as defined in section 9
          below, by means of sending a written exercise notice, signed by the
          Grantee, to the Company's registered office and to the Trustee,
          specifying, INTER ALIA, the Grantee's name and identification card no.
          as well as the number of Options which the Grantee wishes to exercise
          (hereinafter: the "EXERCISE NOTICE"). An Exercise Notice shall be
          delivered to the Company only on trading days.

     8.2  On the date of receipt by the Company of the Exercise Notice (and
          where the Exercise Notice is received after the hour 13:00, on the
          trading day subsequent to receipt of the Exercise Notice by the
          Company) (hereinafter: the "EXERCISE DAY"), the Company shall allocate
          the Exercise Shares, the number of Exercise Shares being calculated in
          accordance with the following formula:

                                (A x B) - (A x C)
                             -----------------------
                                        B

          A =  The number of Options which the Grantee wishes to exercise that
               is specified in the Exercise Notice;

          B =  The opening price in NIS of the Company Share on the Stock
               Exchange on the Exercise Day, provided that if the opening price
               exceeds 166% of the Exercise Price, the opening price shall be
               set as 166% of the Exercise Price;

          C =  Exercise Price in NIS per Option;

                                        5
<PAGE>

          Fractions of Shares shall be rounded up for any fraction of a Share
          that is equal to or exceeds 0.5, and rounded down for any fraction of
          a Share that is lower than 0.5.

          Following are numerical examples for illustration purposes only:
          Assuming exercise of 100 Options by any Grantee, while the Exercise
          Price per Option amounts to NIS 100 and the opening price of the bank
          share on the Stock Exchange on the Exercise Day amounts to NIS 120,
          then the number of Exercise Shares to be allocated to the Grantee is
          17 Shares.

          Following are numerical examples for illustration purposes only:
          Assuming exercise of 100 Options by any Grantee, while the Exercise
          Price per Options amounts to NIS 100 and the opening price of the bank
          share on the Stock Exchange on the Exercise Day amounts to NIS 200,
          then the number of Exercise Shares to be allocated to the Grantee is
          40 Shares.

     8.3  A Grantee may not exercise Options at a total Exercise Price lower
          than NIS 1,000, other than where the exercise is exercise of the
          balance of the Options allocated for the benefit of the Grantee and
          for which the Entitlement Exercise Period therefor has been
          consolidated.

     8.4  At any allocation of Exercise Shares, the Company shall convert, into
          share capital, the par value of the Exercise Shares to be allocated to
          share capital out of profits within the meaning of Section 302(b) of
          the Companies Law, from the premium on Shares or from any other source
          included in its equity in its financial statements, all in accordance
          with and subject to the provisions of Section 304 of the Companies
          Law.

     8.5  At the request of underwriters, on public offering of Company
          securities, the Company's Board of Directors may resolve that the
          Exercise Shares may not be sold for a period not exceeding 180 days,
          or for such longer period as shall be recommended by the Company's
          Board of Directors.

9.   OPTION TERM

     Unless otherwise determined by the Company's Board of Directors, all the
     Options allocated to the Trustee for a Grantee under this Plan, but which
     have not been exercised, shall expire and be cancelled at 17:00, Israel
     time, at the end of five (5) years from the date of the allocation thereof
     to the Trustee for such Grantee (hereinafter: the "OPTION TERM"), unless
     they have expired theretofore, pursuant to the provisions of section 10
     below.

10.  EXPIRY OF OPTIONS

     10.1 The Options allocated under this Plan shall expire on each of the
          following occurrences:

          A.   Exercised Options shall expire on the date of allocation of the
               Exercise Shares therefor;

          B.   Options shall expire and shall not be exercisable at the end of
               the Option Term;

          C.   Options that the Grantee's entitlement to exercise has been
               cancelled under section 12 below, shall expire and shall confer
               no rights on such Grantee;

                                        6
<PAGE>

     10.2 Options that the Grantee's entitlement to exercise has been cancelled
          pursuant to the provisions of section 12 below, shall return to the
          pool of Options held by a trustee and the Company may re-grant such
          Options in the future to Grantees, pursuant to the provisions of this
          Plan.

11.  EXERCISE SHARES

     11.1 The Shares arising from the exercise of any Options under this Plan
          (hereinafter: "EXERCISE SHARES") shall have equal rights to those of
          Company Shares, in all respects, immediately upon the allocation
          thereof and shall be entitled to any dividend or other benefit, the
          effective date for the right to receive them takes place on or
          subsequent to the date of allocation thereof.

     11.2 Subject to the receipt of a demand from Income Tax for the purpose of
          recognizing the Plan as a plan under the Capital Gain Tax Track, each
          Grantee undertakes to sell the Exercise Shares up to the end of 10
          days from the date of allocation thereof.

     11.3 In any event where the Grantee is entitled to receive rights and/or
          bonus shares and/or any other right conferred on a Grantee by virtue
          of the Options and/or the Exercise Shares (hereinafter: the "RIGHTS")
          and on the effective date for distribution of the rights, should the
          Options and/or the Exercise Shares have been held by the Trustee, the
          rights shall be transferred to the Trustee, who shall withhold tax
          under any law, if and insofar as applicable, and the provisions of
          section 2.5 above shall apply to any such distribution and/or
          allocation.

     11.4 In any event that the Company distributes a cash dividend where, on
          the effective date for the distribution of the dividend, the Trustee
          holds Exercise Shares for any of the Grantees, the Company shall
          transfer to the Trustee amounts of dividend for the Exercise Shares
          held by the Trustee as aforesaid for each Grantee, the Trustee shall
          withhold tax under law, if and insofar as required, and shall
          subsequently transfer the dividend amounts (after the tax withholding)
          to the Grantee.

12.  TERMINATION OF EMPLOYMENT OR OFFICE

     12.1 Other than the exclusions set forth in sections 12.2 and 12.3 below,
          in the event that prior to the end of the Entitlement Consolidation
          Period:

          A.   The employer-employee relationship between a Grantee and the
               Company at which he is employed on the date of this Plan is
               terminated on the Grantee's initiative, other than in the event
               of deterioration in the terms of his employment or the seniority
               of his position; or

          B.   A Grantee serving as a director in the Company ceases to serve as
               director in the Company on his initiative, or, in the event of
               termination of the office of an outside director under law;

          The Grantee's entitlement to Options, that the entitlement to be
          granted them has not yet been consolidated up to such date, shall
          expire. The Grantee shall be entitled to Options that the Entitlement
          Period therefor has been consolidated, on the date of termination of
          employment or office, as the case may be, and such Options shall
          continue to be subject to the provisions of this Plan.

                                        7
<PAGE>

     12.2 Notwithstanding the contents of section 12.1 above, in the event of:

          A.   Total work disability, as defined below, of the Grantee; or

          B.   The Grantee's demise (Heaven forbid);

          the Grantee or his heirs, in the event of demise, shall be entitled to
          exercise all the Options allocated to the trustee for the Grantee,
          immediately after the occurrence of the event as set out in subsection
          (a) or (b) above, irrespective of the termination or non-termination
          of the Entitlement Consolidation Period, applicable to the Grantee,
          subject to the provisions of Section 102 of the Ordinance with respect
          to Capital Gain Tax Track and the Rules, the Entitlement Consolidation
          Period, as set forth in section 7 above, and the other provisions of
          this Plan.

          For the purpose of this section 12.2, "TOTAL WORK DISABILITY" shall be
          deemed as a stable physical and/or mental condition, lasting at least
          six (6) months, caused in consequence of an illness or accident, that
          prevents any engagement on the part of the Grantee in a profession
          and/or engagement suitable to his former level of education,
          experience and skills, as shall be determined at the absolute
          conclusive discretion of the Company's Board of Directors.

     12.3 Notwithstanding the contents of sections 12.1 and 12.2 above, where,
          prior to the end of the Entitlement Consolidation Period, the
          employer-employee relationship between a Grantee and the company at
          which he is employed on the date of this Plan, is terminated on the
          initiative of the employing company under circumstances which do not
          confer on the Grantee the right to receive severance pay under any
          law, or where a Grantee, serving as director in the Company, ceases to
          serve as director in any company of the Company's Group on the
          initiative of the company belonging to the Company's Group, under
          circumstances where restrictions apply to the office of the director
          under the provisions of any law, as set forth in Sections 226(a) and
          227 of the Companies Law, 5759-1999, the Grantee's entitlement to the
          Options shall expire, irrespective of whether or not his entitlement
          to receive them has been consolidated on such date.

     12.4 In the event that the Grantee has moved to work at another company of
          the Company's Group, the Grantee's employment term at the other
          company as aforesaid shall be deemed, for this purpose, as the
          employment term at the company at which he was employed on the date of
          this Plan, all subject to obtaining appropriate approvals from the Tax
          Authorities, if and insofar as required.

     12.5 For the purpose of this section 12, retirement to pension under the
          provisions of any law or agreement shall not be deemed as termination
          of employer-employee relationship, subject to obtaining appropriate
          approvals from the Tax Authorities, if and to the extent required.

13.  TAXES AND EXPENSES

     13.1 This Plan shall be subject to, interpreted in accordance with, and
          comply with all the requirements of Section 102 of the Ordinance and
          any written approval of the Tax Authorities in Israel. All tax
          implications under any law (other than Stamp Duty for allocation of
          the Exercise Shares, if and to the extent applicable), arising from
          the allocation of the Options and/or the designation and/or exercise
          and/or holding thereof and/or the sale of the Exercise Shares (or any
          other security to be allocated under the Plan) by or on behalf of the
          Grantee, shall be incurred by the Grantee. The Grantee shall indemnify
          the company of the Company's Group and/or the Trustee and shall hold
          them harmless from any liability for any payment of tax and/or fine
          and/or interest and/or linkage as aforesaid.

                                        8
<PAGE>

     13.2 Whenever a payment is required from the Grantee and/or from a company
          in the Company's Group and/or from the Trustee through tax
          withholding, with respect to the Options allocated to the Trustee for
          the Grantee and/or the Exercise Shares, the company of the Company's
          Group as aforesaid and/or the Trustee, as the case may be, may demand,
          from the Grantee, such sum as is sufficient to cover any demand for
          tax withholding as aforesaid. Whenever Shares or any other asset,
          other than money, are transferred in the wake of the exercise of
          Options as aforesaid, to a company of the Company's Group and/or to
          the Trustee, the Company and/or the Trustee may demand from the
          Grantee to transfer such sum of money as is sufficient to comply with
          any demand for tax withholding, and should such sum not be transferred
          in a timely fashion, such company and/or the Trustee may hold or
          offset (subject to any law) the Shares or any such asset, pending the
          transfer of payment as aforesaid on the part of the Grantee.

     13.3 Prior to the settlement of the tax applicable as aforesaid in Section
          7 of the Rules, the Options or the Exercise Shares may not be
          voluntarily transferred, assigned, pledged, attached or otherwise
          encumbered, and no power of attorney or transfer deed shall be issued
          in connection therewith, either with immediate or future effect, other
          than transfer by virtue of a last will and testament or under law;
          where the Options or the Exercise Shares are transferred pursuant to a
          last will and testament or under law, as aforesaid, the provisions of
          Section 102 of the Ordinance and the provisions of the Rules shall
          apply to the Grantee's heirs or transferees.

     13.4 Expenses incurred with respect to the management and implementation of
          this Plan, including payment of Stamp Duty in connection with the
          allocation of the Exercise Shares, if and to the extent applicable,
          shall be borne by the Company.

14.  RESTRICTIONS ON THE EXERCISE OF THE OPTIONS

     No Grantee may transfer and/or sell the Exercise Shares in any form
     whatsoever, other than after compliance with the restrictions set forth in
     this section 14 below.

     14.1 ISRAELI LAW

          A Grantee serving as director or Chief Executive Officer of the
          Company, or a Grantee who is a controlling shareholder of the Company,
          may not transfer and/or sell the Exercise Shares other than upon
          compliance with the restrictions on re-sale of securities, laid down
          in Section 15.C. of the Securities Law, 5728-1968 (hereinafter: the
          "LAW") as a Grantee under an Offering pursuant to Section 15.A.(a)(1)
          of the Law, such that the offer of the Exercise Shares on the part of
          the Grantee shall not be deemed as being a public offering.

                                        9
<PAGE>

          No other Grantee may transfer and/or sell the Exercise Shares other
          than upon compliance with the restrictions on re-sale of securities,
          laid down in Section 15.C. of the Law, as a Grantee under an Offering
          pursuant to Section 15.A.(a)(1) of the Law, such that the offer of the
          Exercise Shares on the part of the Grantee shall not be deemed as
          being a public offering, or upon the Company's obtaining an exemption
          under Section 15.D. of the Law.

     14.2 LAW IN THE UNITED STATES

          Notwithstanding anything stated in this Plan, a Grantee may not
          exercise Options allocated to a Trustee for his benefit under the
          Plan, so long as no registration statement has been submitted for the
          registration of the Exercise Shares as aforesaid with the Securities
          Authority in the United States.

15.  PERIOD OF HOLDING THE SHARES IN TRUST

     The Exercise Shares and the Additional Rights that were allocated to the
     Trustee by the Company, shall be held by the Trustee for the benefit of the
     Grantee for a period not exceeding 3 years from the date of termination of
     the Option Term.

16.  NO RIGHTS TO OTHERS TO RECEIVE OPTIONS

     Subject to the provisions of the Plan, no other person, save the Grantee,
     shall have any rights whatsoever with respect to the Options allocated to
     the Trustee for a Grantee under the Plan.

17.  PRESERVATION OF REGISTERED CAPITAL

     The Company undertakes to preserve, at all times, a number of Shares in its
     registered capital for Exercise Options to be allocated under this Plan.

18.  APPLICABLE LAW AND JURISDICTION

     This Plan and all accompanying documents that have been delivered or signed
     by any company of the Company's Group with respect to this Plan, shall be
     interpreted in accordance with, and subject to, the laws of the State of
     Israel. The jurisdiction with respect to this Plan and all accompanying
     documents, as aforesaid, shall only be vested in the pertinent courts in
     Tel Aviv Jaffa.

                                       10

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