Document:

exv10w1

 

Exhibit 10.1     

EMPLOYMENT AGREEMENT

(for Donald Wallroth)

     THIS EMPLOYMENT AGREEMENT (this “Agreement”), effective as of August 13, 2007 (the “Effective
Date”), is made by and between Molecular Insight Pharmaceuticals, Inc., a Massachusetts corporation
having its principal place of business at 160 Second Street, Cambridge, Massachusetts 02142 (the
“Employer”), and Donald Wallroth (the “Employee”).

WITNESSETH:

     WHEREAS, the Employer is engaged in the business of developing and marketing imaging
pharmaceuticals which detect human disease; and

     WHEREAS, the Employee possesses the experience necessary in administration and general and
active supervision and direction of the daily operations of a biopharmaceutical business in order
to fulfill the responsibilities as Chief Financial Officer of the Employer; and

     WHEREAS, the Employer desires to employ the Employee, and the Employee desires to be employed
by the Employer, all in accordance with the terms and provisions of this Agreement.

     NOW, THEREFORE, in consideration of the covenants and promises hereinafter contained, and for
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Employer and the Employee represent, covenant and agree as follows:

     1.      Employment. The Employer hereby employs the Employee to serve as Chief Financial
Officer in accordance with the terms and provisions of this Agreement, and the Employee hereby
accepts such employment with the Employer.

     2.      Term. The term of this Agreement shall commence on the Effective Date and shall
continue until this Agreement is terminated as hereinafter provided.

     3.      Compensation. As compensation for all services rendered by the Employee to the
Employer pursuant to this Agreement, the Employer shall pay to the Employee the following amounts
during the term of this Agreement:

               (a)      Base Compensation. The Employer shall pay to the Employee base compensation at no
less than the rate set forth on Schedule A attached hereto and herein incorporated by
reference (the “Base Compensation”). The Base Compensation shall be payable pursuant to the
Employer’s standard payroll practices, except as otherwise noted on Schedule A. The Base
Compensation shall be reviewed by the compensation committee of the Board of the Employer annually
and increases in the Base Compensation, if any, shall be evidenced by the updating and initialing
of Schedule A by both parties hereto.

 

 

               (b)      Incentive Bonus. In addition to the Base Compensation, the Employee shall be
eligible to receive an annual fiscal year incentive bonus with a maximum annual amount equal to
thirty percent (50%) of the then current Base Compensation (the “Incentive Bonus”). Payment of the
Incentive Bonus shall be subject to the discretion of the Board and will be based upon
accomplishment of goals provided to the Employee by the Chief Executive Officer (“CEO”) from time
to time and based upon revenue growth, profitability and achievement of specific corporate
milestones. The Board may elect to award the Incentive Bonus to the Employee in cash or in the
Employer’s capital stock (at its then-current fair market value), but a capital stock bonus
requires the consent of the Employee.

     4.      Vacation and Employee Benefits.

               (a)      Vacation. The Employee shall be entitled to an annual paid vacation equal to four
(4) weeks annually. Vacation shall be taken at such times so as not to interfere with the proper
operation of the Employer’s business.

               (b)      Benefits Generally. The Employee shall be entitled to receive and participate in
such employee benefits as the Employer shall from time to time determine to provide to its
executives generally.

     5.      Stock Incentives.

               (a)      Options. Pursuant to the provisions of the Employer’s 2006 Equity Incentive Plan,
as may be amended from time to time (the “Plan”), and subject to approval of the Employer’s Board
of Directors or its Compensation Committee, the Employee will be granted an option to purchase
200,000 shares of the Employer’s Common Stock (the “Options”) at an exercise price equal to the
fair market value per share on the date of grant (as determined by the Employer’s Board of
Directors or its Compensation Committee pursuant to the Plan), with such Options to be subject
further to the terms and conditions of the Plan and a separate option agreement.

               (b)      Vesting. Of the Options, 150,000 will be subject to the Employer’s four (4) year
vesting schedule with 25% vesting on each anniversary of the Employee’s date of hire or a date
designated by the Employer’s Board of Directors or its Compensation Committee (“Time Options”) and
50,000 will be subject to vesting on the satisfaction of certain performance milestones
(“Performance Options”) to be set forth in the applicable separate option agreement. In the event
of a Change of Control (as defined below), all of the unvested Time Options and Performance Options
shall vest immediately prior to Change in Control, provided that the Employee is still employed by
the Employer on the date of such Change of Control, or is then receiving a Severance Package.

               (c)      Change of Control. Treatment of options on a Change of Control (as defined in the
Plan) will be as set forth in the applicable separate option agreement.

     6.      Description of Duties. During the term of this Agreement, the Employee shall be
the Chief Financial Officer of the Employer and shall:

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               (a)      Devote on a full time basis all necessary time, best efforts, professional skills,
attention and energies to the fulfillment of the duties customarily associated with such position
and the accomplishment of the goals provided by the CEO of the Employer to the Employee from time
to time; and

               (b)      Act in accordance herewith, and in all accounts be responsible and responsive to the Board
of Directors and CEO of Employer.

     7.      General Services. During the term of this Agreement, the Employee shall:

               (a)      Observe the Employer’s policies and standards of conduct, as well as customary standards
of business conduct, including any standards prescribed by law or regulation;

               (b)      Perform his duties hereunder in a manner that preserves and protects the Employer’s
business reputation; and

               (c)      Do all things and render such services as may be necessary or beneficial in carrying out
any of the foregoing.

     8.      Non-Disclosure of Proprietary or Confidential Information and Confidential
Communications. For the purposes of this Section 8, the term “Employer” shall include, and the
protections granted the Employer hereunder shall extend to any other entities now or hereinafter
affiliated, acquired or created by the Employer. The Employee recognizes and acknowledges that the
marketing plans and business strategy, the names and addresses of the Employer’s customers, the
particular needs and application of such customers for diagnostic imaging techniques, the names and
addresses of the Employer’s suppliers, the Employer’s purchasing history with its suppliers, the
names and other pertinent data concerning the persons employed by the Employer’s suppliers who are
responsible for supplying the Employer with products and services, the Employer’s proprietary
computer software programs, trade secrets and any other confidential and proprietary information
concerning the business or affairs of the Employer (including but not limited to marketing and
business plans and strategies, research protocols, procedures data, results, and cost information)
(hereinafter collectively referred to as the Confidential Information) constitute a valuable,
proprietary, special and unique asset of the Employer’s business. The Employee further recognizes
and acknowledges that any communications, whether written, oral or otherwise, that the Employer or
any of the Employer’s employees has with the Employer’s existing or prospective customers and
clients and affiliated research institutions and scientists are extremely confidential (hereinafter
the “Confidential Communications”). The term Confidential Information shall exclude any
information that has been made public through no fault of the Employee.

     The Employee shall not, for any reason whatsoever, during or after the termination of his
employment with the Employer, use, disclose or allow access to, for his own benefit or for that of
another, the Confidential Information or the Confidential Communications (or any part

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thereof) to any person, firm, corporation, association or other entity for any reason or for any
purpose whatsoever.

     In the event of a breach or threatened breach by the Employee of the provisions of this
Section, the Employer shall be entitled to an injunction restraining the Employee from so using,
disclosing or allowing access to, in whole or in part, the Confidential Information and the
Confidential Communications or from rendering any services to any person, firm, corporation,
association or other entity to whom the Confidential Information or the Confidential
Communications, in whole or in part, have been disclosed or are threatened to be disclosed.
Nothing herein shall be construed as prohibiting the Employer from pursuing any other remedies
available to the Employer for such breach or threatened breach, including, but not limited to, the
recovery of damages and reasonable attorneys’ fees from the Employee.

     Upon termination of this Agreement by either party for any reason, the Employee shall return
to the Employer any of the Confidential Information, Confidential Communications, charts, company
literature, reports, Employer credit cards or other proprietary materials of the Employer then in
the Employee’s possession and all other materials of the Employer which the Board of Directors of
the Employer requests the Employee to so return.

     This Section shall in all respects survive any termination of this Agreement and shall remain
in full force and effect thereafter. In the event that any provision of this Section 8 shall
conflict with any term or condition of any other confidentiality agreement between the Employer and
the Employee, then the more restrictive provision shall be deemed to apply in order to accomplish
the purposes of this Section 8 and such other agreements, that being to protect the Employer’s
Confidential Information and Confidential Communications.

     In the event of the Employee’s breach of this Section 8, the Employee shall immediately and
irrevocably forfeit future payments under the Severance Package as hereinafter defined in Section
15. Nothing in this paragraph shall be construed to limit or cap the Employer’s damages in the
event of a breach of this Section 8.

     9.      Covenant Not to Compete; Non-Solicitation of Employees and Customers. For the
purposes of this Section 9, the term “Employer” shall include, and the protections granted the
Employer hereunder shall extend to any other entities now or hereinafter affiliated, acquired or
created by the Employer. The Employee agrees that while employed by the Employer and for a
continuous period of one (1) year following the date of the termination of his employment with the
Employer either voluntarily without “Good Reason” or involuntarily by the Company for “cause” (the
“Restricted Period”), he shall not (without the express prior written consent of the Board of
Directors of the Employer), directly or indirectly, compete with the Employer. In construing the
foregoing prohibition, the Employee shall be deemed to be competing with the Employer if he shall
become self-employed in, or accept employment with, consult with, render services to or become
associated with, own, manage, operate, join, control, or participate in the ownership, management,
operation, or control of, or be connected in any material manner with, or directly or indirectly
enter into the employment of, or make a substantial investment in, any corporation, partnership,
proprietorship or other type of business organization or entity which engages in, any business (a
“Competing Business”) involving the sale, distribution, development

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or research concerning diagnostic imaging of the human cardio-vascular system or other lines of the
Employer which directly and materially competes with the product lines in or with which the
Employer is then currently involved.

     The Employee further agrees that, during his employment with the Employer and during the
Restricted Period, he shall not solicit any of the Employer’s employees, existing customers or
prospective customers (of which the Employee is then currently aware), affiliated research
institutions or scientists, on behalf of himself or any Competing Business.

     This Section 9 shall in all respects survive any termination of this Agreement and shall
remain in full force and effect during the Restricted Period.

     In the event of the Employee’s breach of this Section 9 during the Restricted Period, the
Employee shall immediately and irrevocably forfeit future payments to the Employee under the
Severance Package as hereinafter defined in Section 15.

     10.      Assignment of Rights. Any and all information, data, inventions, discoveries,
materials, notebooks and other work product which the Employee conceives, develops or acquires
during his employment with the Employer, which directly or indirectly relates to work performed for
the Employer, shall be the sole and exclusive property of the Employer. The Employee shall
promptly execute any and all documents necessary and take such further actions as the Employer may
deem necessary to assign any and all of the Employee’s right, title and interest in such property
to the Employer.

     11.      Intellectual Property. For the purposes of this Section 11, the term “Employer”
shall include, and the protections granted the Employer hereunder shall extend to any other
entities now or hereinafter affiliated, acquired or created by the Employer. During the Employee’s
employment at the Employer, the Employee shall promptly assist with and execute any and all
applications, assignments or other documents which an officer or director of the Employer shall
deem necessary or useful in order to obtain and maintain patent, trademark or other intellectual
property protection for the Employer’s products or services. After the termination date of his
employment with the Employer, the Employee shall use reasonable efforts to assist the Employer on
intellectual property matters as they relate to his employment, and the Employer shall reasonably
compensate the Executive for his time and expense.

     12.      Documents, Records, etc. All documents, records, data, apparatus, equipment and
other physical property, whether or not pertaining to Confidential Information, which are furnished
to the Employee by the Employer or are produced by the Employee in connection with the Employee’s
employment will be and remain the sole property of the Employer. The Employee will return to the
Employer all such materials and property as and when requested by the Employer. In any event, and
whether or not the Employer so specifically requests, the Employee will return all such materials
and property immediately upon termination of the Employee’s employment for any reason. The
Employee will not retain any such material or property or any copies thereof after such
termination.

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     13.     Third-Party Agreements and Rights. The Employee hereby confirms that he is not
bound by the terms of any agreement with any previous employer or other party which restricts in
any way the Employee’s use or disclosure of information or the Employee’s engagement in any
business. The Employee represents to the Employer that the Employee’s execution of this Agreement,
the Employee’s employment with the Employer and the performance of the Employee’s proposed duties
for the Employer will not violate any obligations the Employee may have to any such previous
employer or other party. In the Employee’s work for the Employer, the Employee will not disclose
or make use of any information in violation of any agreements with or rights of any such previous
employer or other party, and the Employee will not bring to the premises of the Employer any copies
or other tangible embodiments of nonpublic information belonging to or obtained from any such
previous employer or other party.

     14.     Restricted Activities. During the term of this Agreement, the Employee shall not
engage in any business activities or ventures outside of the business activities of the Employer
without the express prior written consent of the Employer’s Board; provided, however, that nothing
in this Agreement shall be construed as preventing the Employee from:

               (a)      investing the Employee’s assets in any company or other entity in a manner not prohibited
by Section 9 and in such form or manner as shall not require any material activities on the
Employee’s part in connection with the operations or affairs of the companies or other entities in
which such investments are made; or

               (b)      engaging in religious, charitable or other community or non-profit activities that do not
impair the Employee’s ability to fulfill the Employee’s duties and responsibilities under this
Agreement.

     15.     Termination.

               A.      Termination Without Cause.

                         (a)      Notwithstanding anything herein to the contrary, this Agreement may be terminated by
either the Employer or the Employee, at any time, without cause; provided, however, that the party
desirous of terminating this Agreement shall give the other party prior written notice of such
termination. In either event, the Employer may determine the Employee’s final day of employment
hereunder. The date specified in any notice of termination as the Employee’s final day of
employment shall be referred to herein as the Termination Date.

                         (b)      In the event that the Employer (by act of its Board) terminates this Agreement without
cause pursuant to this subsection (A) of Section 15, or the Employee voluntarily resigns for Good
Reason (defined below), then the Employee shall be entitled to receive severance pay equal to the
Base Compensation rate as of the Termination Date in equal monthly installments for a period of
twelve (12) months (the “Post-Termination Period”) which payments shall commence six (6) months
after the Termination Date and continue for the twelve (12) months thereafter (the “Severance
Package”). The Employer also agrees to make available to the Employee, as part of the Severance
Package, continuation of group health plan benefits to the extent authorized by and consistent with
29 U.S.C. § 1161 et seq. (commonly known as

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“COBRA”), and any other benefits the Employee is receiving as of the Termination Date with the cost
of the regular premium for such benefits shared in the same relative proportion by the Employer and
the Employee as in effect on the Termination Date. The Employee acknowledges that receipt of the
Severance Package is conditioned upon the prior execution and delivery of a Separation Agreement
and General Release that contains a general release of claims against the Employer.

                         (c)      For purposes of this Agreement, “Good Reason” shall mean:

                                   (i)      a reduction of the Employee’s Base Compensation or insurance benefits other than a
reduction approved by the Employee in writing; or

                                   (ii)     a significant change in the Employee’s title, responsibilities and/or duties which
constitutes, when compared to the Employee’s title, responsibilities and/or duties as of the
Effective Date, a demotion; or

                                   (iii)    the relocation of the offices at which the Employee is principally employed as of the
Effective Date to a location more than fifty (50) miles from such office, which relocation is not
approved by the Executive.

                         (d)      In the event of the Employee’s voluntary termination, then the Employee shall, at the
request of the Board of the Employer, continue as an employee of the Employer for an additional
thirty (30) day period after the Termination Date for the purpose of assisting the Employer in
locating and training a suitable replacement for the Employee. During such additional period, the
Employee shall be entitled to full compensation and benefits and the Employee shall continue to be
bound by all of the terms contained herein. Any such extended term shall extend the
Post-Termination Period by an equal number of days.

               B.      Termination With Cause.

                         (a)      The Employer (by act of its Board) may terminate this Agreement immediately for “cause” by
giving written notice to the Employee. As used herein, the term “cause” shall mean the Employee’s:
(i) addiction to illegal drugs; (ii) willful failure or refusal to perform his duties hereunder
after written notice from the Board and an opportunity to cure; (iii) knowing acts of dishonesty
which materially adversely affect the Employer; (iv) indictment for a felony or crime involving
moral turpitude, fraud, embezzlement or misrepresentation. In the event that this Agreement is
terminated pursuant to this subsection (B), the Employee forfeits and shall not be entitled to the
Severance Package, or other benefits or bonus of any kind whatsoever for any period after the
Termination Date set forth in the notice given by the Employer to the Employee.

               C.      Disability.

                         (a)      If the Employee shall be disabled so as to be unable to perform the essential functions of
the Employee’s then existing position or positions under this Agreement, the Employer may remove
the Employee from any responsibilities and/or reassign the Employee to another position with the
Employer during the period of such disability. If the period of

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disability extends for more than six (6) months, the Employer may terminate the Employee’s
employment without further liability on the part of the Employer, except that the Employee shall be
entitled to the Severance Package. The Employer may elect, at its sole discretion, to purchase a
disability insurance package for the Employee. In the event that the Employer so elects to
purchase a disability insurance package and the Employee subsequently becomes entitled to payments
of the disability insurance benefit, any payments pursuant to the Severance Package, as defined in
this Section 15, or payments of salary by the Employer will be reduced by the amount of the
disability insurance benefit payments received by the Employee.

               (b)      If any question shall arise as to whether during any period the Employee is disabled so as
to be unable to perform the essential functions of the Employee’s then existing position or
positions, the Employee may, and at the request of the Employer shall, submit to the Employer a
certification in reasonable detail by a physician selected by the Employer, to whom the Employee or
the Employee’s guardian has no reasonable objection, as to whether the Employee is so disabled or
how long such disability is expected to continue, and such certification shall, for the purposes of
this Agreement, be conclusive of the issue. The Employee shall cooperate with any reasonable
request of the physician in connection with such certification. If such question shall arise and
the Employee shall fail to submit such certification, the Employer’s determination of such issue
shall be binding on the Employee. Nothing in this Section 15(c) shall be construed to waive the
Employee’s rights, if any, under existing law including, without limitation, the Family and Medical
Leave Act of 1993, 29 U.S.C. 2601, et seq. and the Americans with Disabilities Act, 42 U.S.C. 12101
et seq.

     D.      Death or Retirement. The Employee’s employment under this Agreement will be deemed
to have terminated without further liability on the part of the Employer if the Employee dies or
retires.

     E.      Certain Termination Benefits. Unless otherwise specifically provided in this
Agreement or otherwise required by law, all compensation and benefits payable to the Employee under
this Agreement shall terminate on the date of termination of the Employee’s employment under this
Agreement.

     F.      No Right to Continuing Employment. The Employee agrees that nothing contained in
this Agreement shall be construed to give the Employee a right to continuing employment beyond the
Termination Date.

     16.     Litigation and Regulatory Cooperation. During and after the Employee’s
employment, the Employee shall cooperate fully with the Employer in the defense or prosecution of
any claims or actions now in existence or which may be brought in the future against or on behalf
of the Employer which relate to events or occurrences that transpired while the Employee was
employed by the Employer. The Employee’s full cooperation in connection with such claims or
actions shall include, but not be limited to, being available to meet with counsel to prepare for
discovery or trial and to act as a witness on behalf of the Employer at mutually convenient times.
During and after the Employee’s employment, the Employee also shall cooperate fully with the
Employer in connection with any investigation or review of any federal, state or local regulatory
authority as any such investigation or review relates to events or

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occurrences that transpired while the Employee was employed by the Employer. The Employer shall
reimburse the Employee for any reasonable out-of-pocket expenses incurred in connection with the
Employee’s performance of obligations pursuant to this Section 16.

     17.      Injunction. The Employee agrees that it would be difficult to measure any damages
caused to the Employer which might result from any breach by the Employee of the promises set forth
in Section 8, and that in any event money damages would be an inadequate remedy for any such
breach. Accordingly, the Employee agrees that if the Employee breaches, or proposes to breach, any
portion of this Agreement, the Employer shall be entitled, in addition to all other remedies that
it may have, to an injunction or other appropriate preliminary equitable relief to restrain any
such breach without showing or proving any actual damage to the Employer.

     18.      No Assignment. The Employee acknowledges that the services to be rendered by him
pursuant to this Agreement are unique. Accordingly, the Employee shall not assign any of his
rights or delegate any of his duties or obligations under this Agreement.

     19.      Severability. Subject only to the reformation of time, geographical and
occupational limitations as set forth in Section 20 hereof, all of the terms and provisions
contained in this Agreement are severable and, in the event that any portion or provision of this
Agreement (including, without limitation, any portion or provision of any section of this
Agreement) shall to any extent be deemed unenforceable or invalid by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such portion or provision
in circumstances other than those as to which it is so declared unenforceable or invalid, shall not
be affected thereby, and each portion and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.

     20.      Reformation of Time Geographical and Occupational Limitations. In the event that
any provision in this Agreement is held to be unenforceable by a court of competent jurisdiction
because it exceeds the maximum time, geographical or occupational limitations permitted by
applicable law, then such provision(s) shall be and hereby are reformed to the maximum time,
geographical and occupational limitations as may be permitted by applicable law.

     21.      Specific Performance. Both parties recognize that the services to be rendered
under this Agreement by the Employee are special, unique and of an extraordinary character, and
that in the event of breach by the Employee of the terms or conditions of this Agreement to be
performed by him, the Employer shall be entitled, if it so elects, to institute and prosecute
proceedings in any court of competent jurisdiction, either at law or in equity, to obtain damages
for any breach of this Agreement to enforce the specific performance thereof by the Employee, or to
enjoin the Employee from engaging in such activity, but nothing contained herein shall be construed
to prevent such other remedy in the courts, in case of any breach of this Agreement by the
Employee, as the Employer may elect to invoke.

     22.      Massachusetts Law: Choice of Forum. This Agreement shall be governed, construed
and interpreted by, and in accordance with, the laws of the Commonwealth of

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Massachusetts, without reference to its principles of conflicts of laws. Any actions concerning
enforcement of this Agreement or in any way relating to the subject matter of this Agreement shall
be litigated only in Massachusetts state or federal courts of proper jurisdiction and venue. Each
party hereto expressly agrees to submit to such jurisdiction and venue for the purposes of this
Agreement. Notwithstanding the foregoing, the Employer may seek to enforce the Employee’s
covenants described in Sections 6, 7, 8 and 9 hereof in any jurisdiction and venue in which the
Employee then resides, breaches or threatens to breach such covenants.

     23.      Entire Agreement. This Agreement constitutes the entire agreement of the parties
hereto, and replaces all prior agreements, promises, representations and understandings between the
Employer and the Employee whatsoever concerning the limited subject matter hereof (other than the
Stock Plan and any related Stock Option Agreement entered into between the Employer and the
Employee). There are no other agreements, conditions or representations, oral or written, express
or implied, which form the basis for this Agreement.

     24.      Assignment; Successors and Assigns, Etc. Neither the Employer nor the Employee
may make any assignment of this Agreement or any interest herein, by operation of law or otherwise,
without the prior written consent of the other party; provided, however, that the Employer may
assign its rights under this Agreement without the consent of the Employee in the event that the
Employer shall effect a reorganization, consolidate with or merge into any other corporation,
partnership, organization or other entity, or transfer all or substantially all of its properties
or assets to any other corporation, partnership, organization or other entity. This Agreement
shall inure to the benefit of and be binding upon the Employer and the Employee, their respective
successors, executors, administrators, heirs and permitted assigns.

     25.      Modification. No waiver or modification of this Agreement or of any covenant,
condition, or limitation contained herein shall be valid unless in a writing of subsequent date
hereto and duly executed by the party to be charged therewith and no evidence of any waiver or
modification shall be offered or received in evidence in any proceeding, arbitration, or litigation
between the parties hereto arising out of or affecting this Agreement, or the rights or obligations
of the parties hereunder, unless such waiver or modification is in writing, duly executed as
aforesaid. The parties further agree that the provisions of this Section may not be waived except
as herein set forth.

     26.      Section Headings. The section headings contained in this Agreement are for
convenience only, and shall in no manner be construed as part of this Agreement.

     27.      Waiver of Breach. The waiver by either party of a breach or violation of any
provision of this Agreement shall not operate as, or be construed to be, a waiver of any subsequent
breach thereof.

     28.      Notices. Any and all notices required or permitted to be given under this
Agreement shall be sufficient if furnished in writing, sent by certified or registered mail, return
receipt requested to the party’s address set forth in the Prologue of this Agreement, or to such
other address as such party may specify in writing.

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     29.      Counterparts. This Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be taken to be an original; but such counterparts
shall together constitute one and the same document.

     IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year here above
first written.

	 	 	 	 	 
	MOLECULAR INSIGHT PHARMACEUTICALS, INC.

 	 	 
	 
	By:  	/s/ David S. Barlow	 	 
	 	Name:  	David S. Barlow 	 	 
	 	Title:  	Chairman & CEO 	 	 
	 

	 	 	 	 	 
	 	 	 
	/s/ Donald Wallroth	 	 
	Donald Wallroth 	 	 
	 	 	 

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SCHEDULE A

(As Amended from time to time pursuant to Paragraph 3(a))

Base Compensation

	 	 	 	 	 	 	 	 	 
	 
	 	Annual Rate of Base Compensation	 	 	Agreed to by Employee	 	 	Agreed to by Employer	 
	 	$274,992.00 ($11,458.00 semi-monthly)
	 	 	 	 	 	 	 
	 

(Must be initialed by both parties each time amended to be effective.)

Exhibit A —  Incentive Stock Option Grant

12ACTIMIZE LTD.

2003 OMNIBUS STOCK OPTION

AND RESTRICTED STOCK  INCENTIVE PLAN

	
                        1.
 	
                        PURPOSE; TYPES OF AWARDS; CONSTRUCTION.
 

Purpose. The purpose of the Actimize Ltd. 2003 Omnibus Stock Option and Restricted Stock Incentive Plan (the “Plan”) is to afford an incentive to employees, officers, Office Holders (as defined below), directors, subcontractors and consultants of Actimize Ltd. (the “Company”), or any Subsidiary (as defined below) of the Company which now exists or hereafter is organized or acquired by the Company, to acquire a proprietary interest in the Company, to continue as employees, officers, Office Holders, directors, Subcontractors or consultants, to increase their efforts on behalf of the Company and to promote the success of the Company’s business. 

Types of Awards. The Plan is intended to enable the Company to issue Awards under varying tax regimes, including without limitation (i) as “incentive stock options” (“Incentive Stock Options”) within the meaning of Section 422 of the United States Internal Revenue Code of 1986, as amended (the “Code”); (ii) “Nonqualified Stock Options” as defined below; (iii) pursuant to the provisions of New Section 102 (“New Section 102” and such options, “New 102 Stock Options”) of the Israeli Income Tax Ordinance (New Version) 1961, as amended, including without limitation the revisions that came into effect on January 1, 2003 and any other future amendments thereof (the “Ordinance”) and any regulations, rules, orders or procedures promulgated thereunder; (iv) pursuant to Section 3(I) of the Ordinance (“3(I) Stock Options”) (all New 102 Stock Options, 3(I) Stock Options, Incentive Stock Options and Non-Qualified Stock Options, as well as options issued under other tax regimes collectively, the “Options”); (v) shares of restricted stock (“Restricted Stock”) under the Plan; and
(vi) other share-based Awards pursuant to Section 12 hereof. Apart from issuance under the relevant tax regimes in the United States of America and the State of Israel, the Plan contemplates issuance to Grantees (as defined below) in other jurisdictions with respect to which the Committee (as defined below) is empowered to make the requisite adjustments in the Plan and set forth the relevant conditions in the Company’s agreement with the Grantee in order to comply with the requirements of the tax regimes in any such jurisdictions. 

The Plan contemplates the issuance of Awards by the Company, both as a private company and as a publicly traded company.

Construction. To the extent any provision herein conflicts with the conditions of any relevant tax law or regulation which are relied upon for tax relief in respect of a particular Option or Share granted to a Grantee, the provisions of such law or regulation shall prevail over those of the Plan and the Committee 

 

 

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(as defined below) is empowered hereunder to interpret and enforce the said prevailing provisions.

	
                        2.
 	
                        DEFINITIONS.
 

As used in this Plan, the following words and phrases shall have the meanings indicated:

	
                         
 	
                        2.1.
 	
                        “Award” shall mean any Share, Option, share of Restricted Stock or any other Share-based award, granted to a Grantee under the Plan.
 

	
                         
 	
                        2.2.
 	
                        “Board” shall mean the Board of Directors of the Company, as appointed from time to time.
 

	
                         
 	
                        2.3.
 	
                        “Committee” shall mean a committee established by the Board to administer the Plan.
 

	
                         
 	
                        2.4.
 	
                        “Companies Law” shall mean the Israel Companies Law-1999, as amended.
 

	
                         
 	
                        2.5.
 	
                        “Date of Grant” shall mean the date specified in the Option Agreement.
 

	
                         
 	
                        2.6.
 	
                        “Disability” shall mean the inability of a Grantee to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 6 months, as determined by a medical doctor satisfactory to the Committee. 
 

	
                         
 	
                        2.7.
 	
                        “Exercise Period” shall mean the period in which the Option shall be exercisable.
 

	
                         
 	
                        2.8.
 	
                        “Exercise Price” shall mean the amount for which one Share covered by an Option may be purchase upon exercise of the Option, as specified in the Notice of Stock Option Grant. 
 

	
                         
 	
                        2.9.
 	
                        “Fair Market Value” per share as of a particular date shall mean (i) the closing sales price per Share on the securities exchange on which the Share is principally traded for the last preceding date on which there was a sale of such Share on such exchange; or (ii) if the Share is listed on the NASDAQ National Market, the last reported price per Share on the NASDAQ National Market on the last preceding date on which there was a sale of such Share on the NASDAQ National Market; or (iii) if the Share is then traded in an over-the-counter market, the average of the closing bid and asked prices for the Share in such over-the-counter market for the last preceding date on which there was a sale of such Share in such market; or (iv) if the Share is not then listed on a securities exchange or market or traded
in an over-the-counter market, such value as the Committee, in its sole 
 

 

 

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discretion, shall determine, which determination shall be conclusive and binding on all parties. Whenever possible, if the Shares are listed on a securities exchange or market or traded in an over-the-counter market, the Fair Market Value shall be based on prices reported in the Wall Street Journal.

	
                         
 	
                        2.10.
 	
                        “Grantee” shall mean a person who receives a grant of Options, Restricted Stock or Shares under the Plan, who at the time of grant is an employee, officer, director, Office Holder, consultant or subcontractor of the Company or any Subsidiary thereof. 
 

	
                         
 	
                        2.11.
 	
                        “Initial Public Offering” or an “IPO” shall mean the initial public offering of the Company’s Shares.
 

	
                         
 	
                        2.12.
 	
                        “Nonqualified Stock Option” shall mean any Option granted to a U.S. resident, which Option is not designated as, or does not meet the conditions for an Incentive Stock Option.
 

	
                         
 	
                        2.13.
 	
                        “Parent” shall mean any company (other than the Company), which now exists or is hereafter organized, in an unbroken chain of companies ending with the Company if, at the time of granting an Award, each of the companies other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other companies in such chain.
 

	
                         
 	
                        2.14.
 	
                        “Retirement” shall mean a Grantee’s retirement pursuant to applicable law or in accordance with the terms of any tax-qualified retirement plan maintained by the Company or any of its Subsidiaries or affiliates in which the Grantee participates.
 

	
                         
 	
                        2.15.
 	
                        “Share” shall mean the Ordinary Shares of the Company, par value of NIS 0.01, as adjusted in accordance with Section 13 of the Plan (if applicable).
 

	
                         
 	
                        2.16.
 	
                        “Subsidiary” shall mean any company (other than the Company), which now exists or is hereafter organized or acquired by the Company, in an unbroken chain of companies beginning with the Company if, at the time of granting an Award, each of the companies other than the last company in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other companies in such chain.
 

	
                         
 	
                        2.17.
 	
                        “Ten Percent Shareholder” shall mean a Grantee who, at the time an Option is granted, owns shares possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary.
 

 

 

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                        2.18.
 	
                        “Trustee” shall mean the trustee appointed by the Committee or the Board, as the case may be, to hold the respective Options, Restricted Stock and/or Shares, if so appointed.
 

	
                        3.
 	
                        ADMINISTRATION.
 

To the extent permitted by law, the Plan shall be administered by the Committee. However, in the event that the Board does not create a committee to administer the Plan, the Plan shall be administered by the Board in its entirety. Furthermore, in the event that an action necessary for the administration of the Plan is required under law to be taken by the Board, then such action shall be so taken by the Board. In any of the above events, all references herein to the Committee shall be construed as references to the Board. 

The Committee shall have the authority in its discretion to administer the Plan and to exercise all the powers and authorities either specifically granted to it under the Plan or necessary or advisable in the administration of the Plan, including, without limitation:

	
                         
 	
                        (i)
 	
                        the authority to grant Options, Shares, Restricted Stock and other Share based Awards to the Grantees; 
 

	
                         
 	
                        (ii)
 	
                        to determine which Options shall constitute Incentive Stock Options, Nonqualified Stock Options, New 102 Stock Options, 3(I) Stock Options or otherwise; 
 

	
                         
 	
                        (iii)
 	
                        to determine the Exercise Price of the Share covered by each Option; 
 

	
                         
 	
                        (iv)
 	
                        to determine the Grantees to whom, and the time or times at which Awards shall be granted; 
 

	
                         
 	
                        (v)
 	
                        to determine the number of Shares to be covered by each Award; 
 

	
                         
 	
                        (vi)
 	
                        to interpret the Plan; 
 

	
                         
 	
                        (vii)
 	
                        to prescribe, amend and rescind rules and regulations relating to the Plan; 
 

	
                         
 	
                        (viii)
 	
                        to determine the terms and provisions of the Option Agreements as defined in Section 6 below (which need not be identical), and to cancel or suspend Awards, as necessary; 
 

	
                         
 	
                        (ix)
 	
                        to determine which route - the capital gains (in Hebrew – “honi”) route or the work income (in Hebrew – “pairoti”) route or any other route available under the New Section 102 shall be adopted for the purpose of New 102 Stock Options;
 

	
                         
 	
                        (x)
 	
                        and to make all other determinations deemed necessary or advisable for the administration of the Plan, including to adjust the terms of the Plan or any Agreement so as to reflect (i) changes in applicable U.S., 
 

 

 

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Israeli or other laws and (ii) the laws of other jurisdictions within, which the Company wishes to grant Awards.

The Committee shall have the authority to grant in its discretion to the holder of an outstanding Option, in exchange for the surrender and cancellation of such Option, a new Option having an exercise price lower than provided in the Option so surrendered and canceled and containing such other terms and conditions as the Committee may prescribe in accordance with the provisions of the Plan or to set a new exercise price for the same Option lower than that previously provided in the Option.

All decisions, determination and interpretations of the Committee shall be final and binding on all Grantees of any Awards under this Plan. No member of the Committee shall be liable for any action taken or determination made in good faith with respect to the Plan or any Award granted hereunder.

Each member of the Board and the Committee shall be indemnified and held harmless by the Company against any cost or expense (including fees of counsel) reasonably incurred by him, or liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with the Plan unless arising out of such member’s own fraud or bad faith, to the extent permitted by applicable law. Such indemnification shall be in addition to any rights of indemnification the member may have as director or otherwise under the certificate of incorporation of the Company, any agreement, any vote of share or disinterested directors, or otherwise.

	
                        4.
 	
                        ELIGIBILITY.
 

Options, Restricted Stock and Shares may be granted to employees, officers, Office Holders, directors, subcontractors and consultants of the Company and any Subsidiary, provided, however, that Incentive Stock Options may be granted only to employees of the Company or a Subsidiary. New 102 Stock Options may be granted only to Israeli employees and Office Holders excluding any “Controlling Holders” as such term is defined in the Ordinance. A person who has been granted an Option, Restricted Stock or Share hereunder may be granted additional Options, Restricted Stock or Shares, if the Committee shall so determine. In determining the persons to whom Awards shall be granted and the number of Shares to be covered by each Award, the Committee shall take into account the duties of the respective persons, their present and potential contributions to the success of the Company
and such other factors as the Committee shall deem relevant in connection with accomplishing the purpose of the Plan.

	
                        5.
 	
                        SHARES.
 

The initial number of Shares, NIS 0.01 par value each, reserved for the grant of Awards under the Plan shall be 6,878,300. In addition to the initial number of Shares stated above, any Options which were granted under the Company’s 2000 Plan and 2001 Plan and which have been expired, cancelled or 

 

 

-6-

 

terminated or forfeited for any reason without having been exercised and therefore returned to the “pool” of reserved Shares thereunder, shall automatically, and without any further action on the part of the Company or any Grantee, be transferred to, and enlarge, the “pool” of reserved Shares under this Plan (the “Added Pool”) and shall again be available for grant for the purposes of this Plan (unless this Plan shall have been terminated) or unless the Board determines otherwise. The Board may increase or decrease the number of Shares to be reserved under the Plan. Such Shares may, in whole or in part, be authorized but unissued Shares, or Shares that shall have been or may be reacquired by the Company (to the extent permitted pursuant to the Companies Law) or by a
trustee appointed by the Board under the relevant provisions of the Ordinance, the Companies Law or any equivalent provision. Any of such Shares which may remain unsold and which are not subject to outstanding options at the termination of the Plan shall cease to be reserved for the purpose of the Plan, but until termination of the Plan, the Company shall at all times reserve a sufficient number of Shares to meet the requirements of the Plan. 

If any outstanding Award under the Plan (including the Added Pool) should, for any reason, expire, be canceled or be forfeited without having been exercised in full, the Shares allocable to the unexercised, canceled or terminated portion of such Award shall (unless the Plan shall have been terminated) become available for subsequent grants of Awards under the Plan.

	
                        6.
 	
                        TERMS AND CONDITIONS OF OPTIONS.
 

Each Option granted pursuant to the Plan shall be evidenced by a written agreement between the Company and the Grantee (the “Option Agreement”), in such form and containing such terms and conditions as the Committee shall from time to time approve, which Option Agreement shall comply with and be subject to the following terms and conditions, unless otherwise specifically provided in such Option Agreement. 

	
                         
 	
                        6.1.
 	
                        NUMBER OF SHARES. Each Option Agreement shall state the number of Shares to which the Option relates.
 

	
                         
 	
                        6.2.
 	
                        TYPE OF OPTION. Each Option Agreement shall specifically state the type of Option granted thereunder and whether it constitutes a Incentive Stock Option, Nonqualified Stock Option, New 102 Stock Option, 3(I) Stock Option or otherwise.
 

	
                         
 	
                        6.3.
 	
                        EXERCISE PRICE. Each Option Agreement shall state the Exercise Price, which, in the case of an Incentive Stock Option, shall not be less than one hundred percent (100%) of the Fair Market Value of the shares of Stock covered by the Option on the Date of Grant or such other amount as may be required pursuant to the Code. In the case of a Nonqualified Stock Option granted to any Grantee, the per share exercise price shall be equal to the amount determined by the Committee or the Board, as the case may be. In the case of an Incentive Stock Option granted to any Ten-Percent Shareholder, the 
 

 

 

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Exercise Price shall be no less than 110% of the Fair Market Value of the Shares covered by the Option on the Date of Grant. In no event shall the Exercise Price of an Option be less than the nominal value of the shares for which such Option is exercisable. Subject to Section 3 and to the foregoing, the Committee may reduce the Exercise Price of any outstanding Nonqualified Stock Option. The Exercise Price shall also be subject to adjustment as provided in Section 13 hereof.

 

	
                         
 	
                        6.4.
 	
                        MANNER OF EXERCISE. An Option may be exercised, as to any or all Shares as to which the Option has become exercisable, by written notice delivered in person or by mail to the Secretary of the Company, specifying the number of Shares with respect to which the Option is being exercised, along with payment of the Exercise Price for such Shares in the manner specified in the following sentence. The Exercise Price shall be paid in full with respect to each share, at the time of exercise in cash or in such other manner as the Committee shall determine.
 

	
                         
 	
                        6.5.
 	
                        TERM AND VESTING OF OPTIONS. Each Option Agreement shall provide the vesting schedule for the Option as determined by the Committee, provided that (to the extent permitted under law) the Committee shall have the authority to accelerate the vesting of any outstanding Option at such time and under such circumstances as it, in its sole discretion, deems appropriate. Unless otherwise resolved by the Committee and stated in the Option Agreement and subject to Section 13.2, Options shall vest over a period of forty-eight (48) months and become exercisable under the following schedule: twenty five percent (25%) of the Shares covered by the Option at the end of the first twelve (12) months from the date on which such Option is granted and six and one-quarter percent (6.25%) of the Shares covered by the Option
at the end of each subsequent 3-month period over the course of the following thirty six (36) months; provided, however, that (to the extent permitted under law) the Committee, in its absolute discretion, may, on such terms and conditions as it may determine to be appropriate, accelerate or otherwise change the time at which such Option or any portion thereof may be exercised. The Option Agreement may contain performance goals and measurements as well as other criteria other than the passage of time, and the provisions with respect to any Option need not be the same as the provisions with respect to any other Option. The Exercise Period of an Option will be ten (10) years from the date of the Grant of the Option unless otherwise determined by the Committee (to the extent permitted under law); provided, however, that in the case of an Incentive Stock Option granted to a Ten Percent Shareholder, such Exercise Period shall not exceed five (5) years from the Date of Grant of such Option.
After such five (5) year period, all Awards not exercised shall be deemed null and void. The Exercise Period shall be subject to earlier termination as provided in Sections 6.6 and 6.7 hereof. 
 

 

 

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                        6.6.
 	
                        TERMINATION. Except as provided in this Section 6.6 and in Section 6.7 hereof an Option may not be exercised unless the Grantee is then in the service or employ of the Company or a Subsidiary thereof or, in the case of an Incentive Stock Option, a company or a parent or subsidiary company of such company issuing or assuming the Option in a transaction to which Section 424(a) of the Code applies, and unless the Grantee has remained continuously so employed or has continuously performed such services since the Date of Grant of the Option. In the event that the employment or service of a Grantee shall terminate (other than by reason of death, Disability or Retirement), all Options of such Grantee that are vested and exercisable at the time of such termination may, unless earlier terminated in accordance
with their terms, be exercised within a period of three (3) months after the date of such termination (or such different period as the Committee shall prescribe); provided, however, that if the Company (or the Subsidiary, when applicable) shall terminate the Grantee’s employment for Cause (as defined below), all Options theretofore granted to such Grantee (whether vested or not) shall, to the extent not theretofore exercised, terminate on the date of such termination or cessation unless otherwise determined by the Committee. In the case of a Grantee whose principal employer is a Subsidiary, the Grantee’s employment shall be deemed to be terminated for purposes of this Section 6.6 as of the date on which such principal employer ceases to be a Subsidiary. With respect to New 102 Stock Options granted under New Section 102(c), if the Grantee ceases to be employed by the Company or a Subsidiary, the Grantee shall extend to the Company a security or guarantee for the payment of
tax due at the time of sale of Shares, all in accordance with the provisions of Section 102 and the rules, regulation and orders promulgated thereunder. Notwithstanding anything to the contrary, the Committee, in its absolute discretion may, on such terms and conditions as it may determine appropriate, extend the periods for which the Options held by any individual may continue to vest and be exercisable; provided, that such Options may lose their status as Incentive Stock Options under applicable law and be deemed Nonqualified Stock Options in the event that the period of vesting and/or exercisability of any option is extended beyond the later of: (i) three (3) months period after the date of cessation of employment or performance of services; or (ii) the applicable period under Section 6.7 below.
 

For purposes of this Plan, the term “Cause” shall mean any of the following resulting from an act or omission of Grantee: (i) conviction of any felony involving moral turpitude or affecting the Company or any Subsidiary thereof; (ii) any refusal to carry out a reasonable directive of the CEO, Board or the Grantee’s direct supervisor which involves the business of the Company or its Subsidiary or any affiliates and was capable of being lawfully performed; (iii) embezzlement of funds of the Company, its Subsidiary or any of its affiliates; (iv) any breach of the Grantee’s fiduciary duties or duties of care of towards the 

 

 

-9-

 

Company or any Subsidiary thereof; including without limitation disclosure of confidential information of the Company or any Subsidiary thereof; and (v) any conduct (other than conduct in good faith) reasonably determined by the Board to be materially detrimental to the Company or any Subsidiary thereof.

	
                         
 	
                        6.7.
 	
                        DEATH, DISABILITY OR RETIREMENT OF GRANTEE. If a Grantee shall die while employed by, or performing service for, the Company or a Subsidiary, or within the three (3) months period after the date of termination of such Grantee’s employment or service (or within such different period as the Committee may have provided pursuant to Section 6.6 hereof), or if the Grantee’s employment or service shall terminate by reason of Disability, all Options theretofore granted to such Grantee (to the extent otherwise vested and exercisable) may, unless earlier terminated in accordance with their terms, be exercised by the Grantee or by the Grantee’s estate or by a person who acquired the right to exercise such Options by bequest or inheritance or otherwise by result of death or Disability of the Grantee,
at any time within one (1) year after the death or Disability of the Grantee (or such different period as the Committee shall prescribe). In the event that an Option granted hereunder shall be exercised by the legal representatives of a deceased or former Grantee, written notice of such exercise shall be accompanied by a certified copy of letters testamentary or equivalent proof of the right of such legal representative to exercise such Option. In the event that the employment or service of a Grantee shall terminate on account of such Grantee’s Retirement, all Options of such Grantee that are exercisable at the time of such Retirement may, unless earlier terminated in accordance with their terms, be exercised at any time within the three (3) month period after the date of such Retirement (or such different period as the Committee shall prescribe).
 

 

	
                         
 	
                        6.8.
 	
                        VOTING PROXY. The right to vote any Shares acquired hereunder pursuant to an Award of Options, Restricted Stock or Share shall be given by the Grantee or the Grantee’s transferee, pursuant to an irrevocable proxy, to the person or persons designated by the Board. All Awards granted hereunder shall be conditioned upon the execution of such irrevocable proxy. So long as any such shares are held by a Trustee, such shares shall be voted by the Trustee, unless the Trustee is directed otherwise by the Board, in the same proportion as the result of the shareholder vote in respect of which the votes held by the Trustee are being cast. Notwithstanding the foregoing, the provisions of this Section 6.8 or of any irrevocable proxy granted pursuant hereto shall be of no force or effect upon the consummation of
the Company’s Initial Public Offering or the consummation of a Merger/Sale (as defined below). 
 

 

 

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                        6.9.
 	
                        OTHER PROVISIONS. The Option Agreements evidencing Awards under the Plan shall contain such other terms and conditions not inconsistent with the Plan as the Committee may determine.
 

 

	
                        7.
 	
                        NONQUALIFIED STOCK OPTIONS.
 

Options granted pursuant to this Section 7 are intended to constitute Nonqualified Stock Options and shall be subject to the general terms and conditions specified in Section 6 hereof and other provisions of the Plan, except for said provisions of the Plan applying to Options under a different tax law or regulation.

 

	
                        8.
 	
                        INCENTIVE STOCK OPTIONS.
 

Options granted pursuant to this Section 8 are intended to constitute Incentive Stock Options and shall be granted subject to both the following special terms and conditions and the general terms and conditions specified in Section 6 hereof and other provisions of the Plan, except for said provisions of the Plan applying to Options under a different tax law or regulation:

	
                         
 	
                        8.1.
 	
                        VALUE OF SHARES. The aggregate Fair Market Value (determined as of the date the Incentive Stock Option is granted) of the Shares with respect to which Incentive Stock Options granted under this Plan and all other option plans of any Subsidiary become exercisable for the first time by each Grantee during any calendar year shall not exceed one hundred thousand United States dollars ($100,000) with respect to such Grantee. To the extent that the aggregate Fair Market Value of Shares with respect to which the Incentive Stock Options are exercisable for the first time by any Grantee during any calendar years exceeds one hundred thousand United States dollars ($100,000), such Options shall be treated as Non-Qualified Stock Options. The foregoing shall be applied by taking options into account in the order in
which they were granted, with the Fair Market Value of any Share to be determined at the time of the grant of the Option. In the event the foregoing results in the portion of an Incentive Stock Option exceeding the one hundred thousand United States dollars ($100,000) limitation, only such excess shall be treated as a Non-Qualified Stock Option.
 

	
                         
 	
                        8.2.
 	
                        TEN PERCENT SHAREHOLDER. In the case of an Incentive Stock Option granted to a Ten Percent Shareholder, (i) the Exercise Price shall not be less than one hundred and ten percent (110%) of the Fair Market Value of the shares of Stock on the Date of Grant of such Incentive Stock Option, and (ii) the Exercise Period shall not exceed five (5) years from the Date of Grant of such Incentive Stock Option.
 

	
                        9.
 	
                        NEW 102 STOCK OPTIONS.
 

Options granted pursuant to this Section 9 are intended to constitute New 102 Stock Options and subject to New Section 102 of the Ordinance and the rules 

 

 

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and regulations promulgated thereunder, as amended, the general terms and conditions specified in Section 6 hereof and other provisions of the Plan, except for said provisions of the Plan applying to Options under a different tax law or regulation, shall apply.

To the extent required by the Ordinance or the Income Tax Commissioner of the State of Israel, the New 102 Stock Options which shall be granted pursuant to the Plan shall be issued to a Trustee nominated by the Committee and approved by the tax authorities in accordance with the provisions of the Ordinance and the New 102 Stock Options and the Shares issued upon the exercise of such Option shall be held for the benefit of the Grantee for such period of time as may be required by the Ordinance or any other applicable law or regulation.

Notwithstanding anything to the contrary, the Trustee of the New 102 Stock Options shall not release any New 102 Options which were not already exercised into Shares by the Grantee or release any Shares issued upon exercise of New 102 Stock Options prior to the full payment of the Grantee’s tax liabilities arising from New 102 Stock Options which were granted to the Grantee and/or any Shares issued upon exercise of such Options.

During the holding period with the Trustee as set forth in New Section 102 and as long as the applicable tax has not been paid, neither the Options nor the Shares, as the case may be, may be sold, transferred, assigned, pledged or mortgaged (other than through a transfer by will or by operation of law), nor may they be the subject of an attachment, power of attorney or transfer deed (other than a power of attorney for the purpose of participation in general meetings of shareholders) unless New Section 102 and/or the regulations, rules, orders or procedures promulgated thereunder allow otherwise.

As a condition precedent to the grant of a New Section 102 Option, the Grantee will sign an undertaking under the option agreement to release the Trustee from any liability in respect of any action or decision duly taken and bona fide executed in relation with the Plan, or any Option or Share granted to the Grantee thereunder. 

	
                        10.
 	
                        3(I) STOCK OPTIONS.
 

Options granted pursuant to this Section 10 are intended to constitute 3(I) Stock Options and shall be subject to the general terms and conditions specified in Section 6 hereof and other provisions of the Plan, except for said provisions of the Plan applying to Options under a different tax law or regulation.

3(I) Stock Options may be granted to non-employees, including consultants, service providers and “Controlling Holders” as such term is defined in the Ordinance).

The 3(I) Stock Options which shall be granted pursuant to the Plan may be issued to a Trustee nominated by the Committee. If the Committee has 

 

 

-12-

 

nominated such a Trustee, he shall hold the 3(I) Stock Options, on behalf of the Grantee, until such time the Grantee wish to sell the Shares issued to him upon exercise of the 3(I) Stock Options.

The Trustee shall not transfer, the 3(I) Stock Options or any Shares issued upon the exercise of such Options, to the Grantee unless all payments due in connection with such Options or Shares have been paid in full. 

Upon receipt of the 3(I) Stock Options, the Grantee will sign an undertaking to release the Trustee from any liability in respect of any action or decision duly taken and bona fide executed in relation with the Plan, or any Option or Share granted to the Grantee thereunder. 

	
                        11.
 	
                        RESTRICTED STOCK.
 

The Committee may award shares of Restricted Stock to any eligible employee, director or consultant of the Company or of any Subsidiary thereof, including under New Section 102 of the Ordinance (provided that Restricted Stock granted under New Section 102 may only be granted to Israeli employees and Office Holders excluding any “Controlling Holders” as such term is defined in the Ordinance). Each Award of Restricted Stock under the Plan shall be evidenced by a written agreement between the Company and the Grantee (the “Restricted Stock Agreement”), in such form as the Committee shall from time to time approve, which Restricted Stock Agreement shall comply with and be subject to the following terms and conditions, unless otherwise specifically provided in such Agreement:

	
                         
 	
                        11.1.
 	
                        NUMBER OF SHARES. Each Restricted Stock Agreement shall state the number of shares of Restricted Stock to be subject to an Award.
 

	
                         
 	
                        11.2.
 	
                        RESTRICTIONS. Shares of Restricted Stock may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, except by will or the laws of descent and distribution, for such period as the Committee shall determine from the date on which the Award is granted (the “Restricted Period”). The Committee may also impose such additional or alternative restrictions and conditions on the shares of Restricted Stock as it deems appropriate including the satisfaction of performance criteria. Such performance criteria may include, but are not limited to, sales, earnings before interest and taxes, return on investment, earnings per share, any combination of the foregoing or rate of growth of any of the
foregoing, as determined by the Committee. Certificates for Shares issued pursuant to Restricted Stock Awards shall bear an appropriate legend referring to such restrictions, and any attempt to dispose of any such shares in contravention of such restrictions shall be null and void and without effect. During the Restricted Period, such certificates shall be held in escrow by an escrow agent appointed by the Committee, or, if a Restricted Stock Award is made pursuant to New Section 102, by the Trustee. In determining the Restricted Period of an Award the 
 

 

 

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Committee may provide that the foregoing restrictions shall lapse with respect to specified percentages of the awarded shares on successive anniversaries of the date of such Award. To the extent required by the Ordinance or the Income Tax Commissioner of the State of Israel, the Restricted Stock issued pursuant to New Section 102 of the Ordinance shall be issued to the Trustee in accordance with the provisions of the Ordinance and the Restricted Stock shall be held for the benefit of the Grantee for such period of time as may be required by the Ordinance. Grantee hereby acknowledges that he or she has been informed that, an election may be filed by Grantee with the United States Internal Revenue Service, within 30 days of the purchase of the Shares of Restricted Stock, electing pursuant to Section 83(b) of the Code to be taxed on any difference between the purchase price of the
Shares of Restricted Stock and their Fair Market Value on the date of purchase.

	
                         
 	
                        11.3.
 	
                        ADJUSTMENT OF PERFORMANCE GOALS. The Committee may adjust performance goals to take into account changes in law and accounting and tax rules and to make such adjustments as the Committee deems necessary or appropriate to reflect the inclusion or the exclusion of the impact of extraordinary or unusual items, events or circumstances. The Committee also may adjust the performance goals by reducing the amount to be received by any Grantee pursuant to an Award if and to the extent that the Committee deems it appropriate.
 

	
                         
 	
                        11.4.
 	
                        FORFEITURE. Subject to such exceptions as may be determined by the Committee, if the Grantee’s continuous employment or director or consultant relationship with the Company or any Subsidiary shall terminate for any reason prior to the expiration of the Restricted Period of an Award, any shares remaining subject to restrictions (after taking into account the provisions of Section 11.6) shall thereupon be forfeited by the Grantee and transferred to, and reacquired by, the Company or a Subsidiary at no cost to the Company or Subsidiary, subject to all applicable law.
 

	
                         
 	
                        11.5.
 	
                        OWNERSHIP. During the Restricted Period the Grantee shall possess all incidents of ownership of such Shares, subject to Section 6.8 and Section 11.2, including the right to receive dividends with respect to such Shares and to vote such Shares.
 

	
                         
 	
                        11.6.
 	
                        ACCELERATED LAPSE OF RESTRICTIONS. Upon the occurrence of any of the events listed in Sections 13.2 and 13.3 and subject to Section 13.4, all restrictions then outstanding with respect to shares of Restricted Stock awarded hereunder shall automatically expire and be of no further force and effect. The Committee shall have the authority (and the Agreement may so provide) to cancel all or any portion of any outstanding restrictions prior to the expiration of the Restricted Period with respect to any or all of the shares of 
 

 

 

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Restricted Stock awarded on such terms and conditions as the Committee shall deem appropriate.

	
                        12.
 	
                        OTHER SHARE OR SHARE-BASED AWARDS.
 

The Committee may grant other Awards under the Plan pursuant to which Shares (which may, but need not, be Shares of Restricted Stock pursuant to Section 9 hereof), cash or a combination thereof, are or may in the future be acquired or received, or Awards denominated in stock units, including units valued on the basis of measures other than market value. The Committee may also grant stock appreciation rights without the grant of an accompanying option, which rights shall permit the Grantees to receive, at the time of any exercise of such rights, cash equal to the amount by which the Fair Market Value of all Shares in respect to which the right was granted exceeds the exercise price thereof. The Committee may and it is hereby deemed to be an Award under the terms of the Plan grant to Grantees (including employees) the opportunity to purchase Shares of the Company in connection
with any public offerings of the Company’s securities. Such other Share based Awards may be granted alone, in addition to, or in tandem with any Award of any type granted under the Plan and must be consistent with the purposes of the Plan.

	
                        13.
 	
                        EFFECT OF CERTAIN CHANGES.
 

	
                         
 	
                        13.1.
 	
                        GENERAL. In the event of a subdivision of the outstanding share capital of the Company, any declaration and payment of a stock dividend (distribution of bonus shares), a recapitalization, a reorganization (which may include a combination or exchange of shares), a consolidation, a stock split, a spin-off or other corporate divestiture or division, a reclassification or other similar occurrence, the Committee shall make appropriate adjustments in one or more of (i) the number of Shares available for Awards, (ii) the number of such Shares covered by outstanding Awards, and (iii) the exercise price per share covered by the Option Awards; provided, however, that the aggregate exercise price for all Option Awards shall not change and that any fractional shares resulting from such adjustment shall be rounded
down to the nearest whole share.
 

	
                         
 	
                        13.2.
 	
                        MERGER AND SALE OF COMPANY. In the event of (i) a sale of all or substantially all of the assets of the Company; or (ii) a sale (including an exchange) of all of the shares of capital stock of the Company; or (iii) a merger, consolidation, amalgamation or like transaction of the Company with or into another corporation; or (iv) a scheme of arrangement for the purpose of effecting such sale, merger or amalgamation (all such transactions being herein referred to as a “Merger/Sale”), then, without the Grantee’s consent and action 
 

	
                         
 	
                        13.2.1.
 	
                        the Committee in its sole discretion will use its efforts to cause that any Award then outstanding shall be assumed or an equivalent Award shall be substituted by such successor corporation (the “Successor Corporation”) or, in such 
 

 

 

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event that such transaction is effected through a subsidiary, the parent of such Successor Corporation, under substantially the same terms as the Award; and

	
                         
 	
                        13.2.2.
 	
                        in such case that such Successor Corporation or other entity does not agree to assume the Award or to substitute an equivalent Award and, if the Award is an Option (“Option Award”), then the Committee may (but shall not be obligated to), in lieu of such assumption or substitution of the Option Award and in its sole discretion, either (i) provide in each Grantee’s Option Agreement for the Grantee to have the right to exercise the Option as to all or part of the Shares, including Shares covered by the Option Agreement which would not otherwise be exercisable, under such terms and conditions as the Committee shall determine; or (ii) provide for the cancellation of each outstanding Option Award at the closing of such Merger/Sale, against payment to the Grantee of
an amount in cash equal to (a) the fair market value of each share of Stock covered by the Option Award as reflected under the terms of the Merger/Sale, minus (b) the Exercise Price of each share of Stock covered by the Option Award.
 

	
                         
 	
                        13.2.3.
 	
                        Notwithstanding the foregoing, in the event of a Merger/Sale, the Committee may determine in its sole discretion that upon completion of such Merger/Sale, the terms of any Award be otherwise amended and modified, as the Committee shall deem in good faith to be appropriate, and if an Option Award, that the Option Award shall confer the right to purchase any other security or asset, or any combination thereof, or that its terms be otherwise amended or modified, as the Committee shall deem in good faith to be appropriate.
 

	
                         
 	
                        13.3.
 	
                        RESERVATION OF RIGHTS. Except as expressly provided in this Section 13 or in the Option Agreement, the Grantee of an Award hereunder shall have no rights by reason of any subdivision or consolidation of stock of any class or the payment of any stock dividend (bonus shares) or any other increase or decrease in the number of shares of stock of any class or by reason of any dissolution, liquidation, Merger/Sale, or consolidation, divestiture or spin-off of assets or stock of another company; and any issue by the Company of stock of any class, or securities convertible into shares of stock of any class, shall not effect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Stock subject to an Award. The grant of an Award pursuant to the Plan shall not affect in
any way the right of power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structures or to merge or to consolidate or to dissolve, 
 

 

 

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liquidate or sell, or transfer all or part of its business or assets or engage in any similar transactions.

	
                        14.
 	
                        NONTRANSFERABILITY OF AWARDS; SURVIVING BENEFICIARY.
 

Unless otherwise approved by the Committee, and except for a U.S. resident which its right to transfer an Award granted under this Plan shall be subject to a prior written approval from the Company’s Board or Committee, all other Awards granted under the Plan shall not be transferable otherwise than by will or by the laws of descent and distribution, and Awards may be exercised or otherwise realized, during the lifetime of the Grantee, only by the Grantee or by his guardian or legal representative, to the extent provided for herein. A Grantee may file with the Committee a written designation of a beneficiary on such form as may be prescribed by the Committee and may, from time to time, amend or revoke such designation. If no designated beneficiary survives the Grantee, the executor or administrator of the Grantee’s estate shall be deemed to be the Grantee’s beneficiary.

	
                        15.
 	
                        AGREEMENT BY GRANTEE REGARDING TAXES.
 

If the Committee shall so require, as a condition of exercise of an Option, the release of Shares or Options by the Trustee or the expiration of the Restricted Period (each a “Tax Event”), each Grantee shall agree that, no later than the date of the Tax Event, he will pay to the Company or make arrangements satisfactory to the Committee and the Trustee (if applicable) regarding payment of any applicable taxes of any kind required by law to be withheld or paid upon the Tax Event. To the extent approved by the Committee and permitted by law, a withholding obligation may be satisfied by the withholding or delivery of Shares.

ALL TAX CONSEQUENCES UNDER ANY APPLICABLE LAW WHICH MAY ARISE FROM THE GRANT OF ANY OPTIONS, SHARES, OR RESTRICTED STOCK, OR IN THE CASE OF AN OPTION, FROM ITS EXERCISE, FROM THE SALE OR DISPOSITION OF THE SHARES OR RESTRICTED STOCK OR FROM ANY OTHER ACT OF THE GRANTEE IN CONNECTION WITH THE FOREGOING SHALL BE BORNE SOLELY BY THE GRANTEE, AND THE GRANTEE SHALL INDEMNIFY THE COMPANY AND ANY SUBSIDIARY THEREOF, AND THE TRUSTEE, AND SHALL HOLD THEM HARMLESS AGAINST AND FROM ANY LIABILITY FOR ANY SUCH TAX OR PENALTY, INTEREST OR INDEXATION THEREON OR THEREUPON. 

	
                        16.
 	
                        RIGHTS AS A STOCKHOLDER; VOTING AND DIVIDENDS
 

A Grantee or a transferee of an Award shall have no rights as a shareholder with respect to any Shares covered by the Award until the date of the issuance of a Share certificate to him for such shares, or, in the case of New 102 Stock Options or 3(I) Stock Options (if such 3(I) Stock Options are being held by a Trustee), until the date of the issuance of a Share certificate to the Trustee. No 

 

 

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adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distribution of other rights for which the record date is prior to the date such Stock Certificate is issued, except as provided in Section 13.1 hereof. With respect to all Shares issued upon the exercise of New 102 Stock Options (but excluding, for avoidance of any doubt, any unexercised Options) and held by the Grantee or by the Trustee, as the case may be, the Grantee shall be entitled to receive dividends in accordance with the quantity of such Shares, subject to the provisions of the Company’s Articles of Association (as may be amended from time to time) and subject to any applicable taxation on distribution of dividends, and when applicable subject to the provisions of New Section 102 and the rules, regulations or orders promulgated thereunder. Subject
to Section 6.8 hereof, the Company may restrict or otherwise regulate the voting powers with respect to any Shares held by a Grantee pursuant to this Plan, as long as the Company’s securities are not traded on a securities exchange. All Shares issued by the Company under or in accordance with this Plan shall be subject to all the provisions of the Articles of Association, Memorandum of Association (if any) of the Company or any other governance documents of the Company. 

	
                        17.
 	
                        MARKET STAND-OFF.
 

In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the United States Securities Act of 1933, as amended or equivalent law in another jurisdiction, including the Company’s initial public offering, the Grantee shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to, any Shares acquired under this Plan without the prior written consent of the Company or its underwriters. Such restriction (the “Market Stand-Off”) shall be in
effect for such period of time following the date of the final prospectus for the offering as may be requested by the Company or such underwriters, however in any event, such period shall not exceed 180 days. In the event of a subdivision of the outstanding share capital of the Company, the declaration and payment of a stock dividend (distribution of bonus shares), the declaration and payment of an extraordinary dividend payable in a form other than stock, a recapitalization, a reorganization (which may include a combination or exchange of shares or a similar transaction affecting the Company’s outstanding securities without receipt of consideration), a consolidation, a stock split, a spin-off or other corporate divestiture or division, a reclassification or other similar occurrence, an adjustment in conversion ratio, any new, substituted or additional securities which are by reason of such transaction distributed with respect to any Shares subject to the Market Stand-Off, or
into which such Shares thereby become convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market Stand-Off, the Company may impose stop-transfer instructions with respect to the Shares acquired under this Plan until the end of the applicable stand-off period.

 

 

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                        18.
 	
                        NO RIGHTS TO EMPLOYMENT.
 

Nothing in the Plan or in any Award granted or agreement entered into pursuant hereto shall confer upon any Grantee the right to continue in the employ of, or in a consultant relationship with, the Company or any Subsidiary or to be entitled to any remuneration or benefits not set forth in the Plan or such agreement or to interfere with or limit in any way the right of the Company or any such Subsidiary to terminate such Grantee’s employment. Awards granted under the Plan shall not be affected by any change in duties or position of a Grantee as long as such Grantee continues to be employed by or in a consultant or director relationship with, the Company or any Subsidiary.

	
                        19.
 	
                        APPROVAL.
 

The Plan shall take effect upon its adoption by the Board and shall terminate on the tenth anniversary of such date. Notwithstanding the foregoing, in the event that approval of the Plan by the shareholders of the Company is required under applicable law, in connection with the application of certain tax treatment or pursuant to applicable stock exchange rules or regulations or otherwise, such approval shall be obtained within the time required under the applicable law.

	
                        20.
 	
                        PERIOD DURING WHICH AWARDS MAY BE GRANTED.
 

Awards may be granted pursuant to the Plan from time to time within a period of ten (10) years from the date the Plan is adopted by the Board.

	
                        21.
 	
                        AMENDMENT AND TERMINATION OF THE PLAN.
 

The Board at any time and from time to time may suspend, terminate, modify or amend the Plan; provided, however, that, unless otherwise determined by the Board, an amendment which requires shareholder approval in order for the Plan to continue to comply with any law, regulation or stock exchange requirement shall not be effective unless approved by the requisite vote of stockholders. Except as provided in Section 13.1 hereof, no suspension, termination, modification or amendment of the Plan may adversely affect any Award previously granted, unless the written consent of the Grantee is obtained.

	
                        22.
 	
                        GOVERNING LAW.
 

The Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of Israel. Certain definitions, which refer to laws other than the laws of the State of Israel, shall be construed in accordance with such other laws.

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