Schedule 13D/A

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N43YhKOsKT7KryAH0oRVyHOVTJYL9Q6uwldajnhBeLhuRMlAcwpVGJKPkcMtY8wR GJEIBEiMBUpqEPf4q1lkNw== 0000950123-11-001054.txt : 20110106 0000950123-11-001054.hdr.sgml : 20110106 20110106160539 ACCESSION NUMBER: 0000950123-11-001054 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20110106 DATE AS OF CHANGE: 20110106 GROUP MEMBERS: PHIL FROHLICH GROUP MEMBERS: PRESCOTT GROUP AGGRESSIVE SMALL CAP II, L.P. GROUP MEMBERS: PRESCOTT GROUP AGGRESSIVE SMALL CAP, L.P. GROUP MEMBERS: PRESCOTT GROUP CAPITAL MANAGEMENT, L.L.C. FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: PRESCOTT GROUP CAPITAL MANAGEMENT LLC CENTRAL INDEX KEY: 0001166152 IRS NUMBER: 731554000 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 1924 S UTICA SUITEF 1120 CITY: TULSA STATE: OK ZIP: 74104 BUSINESS PHONE: 9187473412 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BLUEPHOENIX SOLUTIONS LTD CENTRAL INDEX KEY: 0001029581 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING SERVICES [7371] IRS NUMBER: 000000000 STATE OF INCORPORATION: L3 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-52583 FILM NUMBER: 11514349 BUSINESS ADDRESS: STREET 1: 8 MASKIT STREET CITY: HERZLIA STATE: L3 ZIP: 46120 BUSINESS PHONE: 972-9-952-6110 MAIL ADDRESS: STREET 1: 8 MASKIT STREET CITY: HERZLIA STATE: L3 ZIP: 46120 FORMER COMPANY: FORMER CONFORMED NAME: CRYSTAL SYSTEMS SOLUTIONS LTD DATE OF NAME CHANGE: 19961224 SC 13D/A 1 c10680sc13dza.htm SCHEDULE 13D/A Schedule 13D/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D/A

Under the Securities Exchange Act of 1934
(Amendment No. 1 )*

BluePhoenix Solutions Ltd.

(Name of Issuer)

Ordinary shares, NIS 0.01 par value

(Title of Class of Securities)

M20157109

(CUSIP Number)

Phil Frohlich
1924 South Utica, Suite #1120
Tulsa, Oklahoma 74104-6429
(918) 747-3412

(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)

- with copies to -

Eliot D. Raffkind
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue, Suite 4100
Dallas, Texas 75201-4618
(214) 969-2800

December 30, 2010

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. þ

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).


CUSIP No.		M20157109


1	NAMES OF REPORTING PERSONS PRESCOTT GROUP CAPITAL MANAGEMENT, L.L.C.


2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
	(a) o
	(b) o

3	SEC USE ONLY



4	SOURCE OF FUNDS (SEE INSTRUCTIONS)

	WC

5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

	o

6	CITIZENSHIP OR PLACE OF ORGANIZATION

	Oklahoma

		7	SOLE VOTING POWER

NUMBER OF			6,195,064

SHARES		8	SHARED VOTING POWER
BENEFICIALLY
OWNED BY			0

EACH		9	SOLE DISPOSITIVE POWER
REPORTING
PERSON			6,195,064

WITH		10	SHARED DISPOSITIVE POWER

			0

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

	6,195,064

12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

	o

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

	25.7%

14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

	IA

Page 2 of 11


CUSIP No.		M20157109


1	NAMES OF REPORTING PERSONS PRESCOTT GROUP AGGRESSIVE SMALL CAP, L.P.


2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
	(a) o
	(b) o

3	SEC USE ONLY



4	SOURCE OF FUNDS (SEE INSTRUCTIONS)

	WC

5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

	o

6	CITIZENSHIP OR PLACE OF ORGANIZATION

	Oklahoma

		7	SOLE VOTING POWER

NUMBER OF			0

SHARES		8	SHARED VOTING POWER
BENEFICIALLY
OWNED BY			6,181,731

EACH		9	SOLE DISPOSITIVE POWER
REPORTING
PERSON			0

WITH		10	SHARED DISPOSITIVE POWER

			6,181,731

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

	6,181,731

12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

	o

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

	25.6%

14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

	PN

Page 3 of 11


CUSIP No.		M20157109


1	NAMES OF REPORTING PERSONS PRESCOTT GROUP AGGRESSIVE SMALL CAP II, L.P.


2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
	(a) o
	(b) o

3	SEC USE ONLY



4	SOURCE OF FUNDS (SEE INSTRUCTIONS)

	WC

5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

	o

6	CITIZENSHIP OR PLACE OF ORGANIZATION

	Oklahoma

		7	SOLE VOTING POWER

NUMBER OF			0

SHARES		8	SHARED VOTING POWER
BENEFICIALLY
OWNED BY			6,181,731

EACH		9	SOLE DISPOSITIVE POWER
REPORTING
PERSON			0

WITH		10	SHARED DISPOSITIVE POWER

			6,181,731

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

	6,181,731

12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

	o

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

	25.6%

14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

	PN

Page 4 of 11


CUSIP No.		M20157109


1	NAMES OF REPORTING PERSONS PHIL FROHLICH


2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
	(a) o
	(b) o

3	SEC USE ONLY



4	SOURCE OF FUNDS (SEE INSTRUCTIONS)

	PF

5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

	o

6	CITIZENSHIP OR PLACE OF ORGANIZATION

	U.S. CITIZEN

		7	SOLE VOTING POWER

NUMBER OF			6,195,064

SHARES		8	SHARED VOTING POWER
BENEFICIALLY
OWNED BY			0

EACH		9	SOLE DISPOSITIVE POWER
REPORTING
PERSON			6,195,064

WITH		10	SHARED DISPOSITIVE POWER

			0

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

	6,195,064

12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

	o

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

	25.7%

14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

	IN

Page 5 of 11

SCHEDULE 13D/A

This Amendment No. 1 to the Schedule 13D (this “Schedule 13D”) is being filed on behalf of Prescott Group Capital Management, L.L.C., an Oklahoma limited liability company (“Prescott Capital”), Prescott Group Aggressive Small Cap, L.P., an Oklahoma limited partnership (“Prescott Small Cap”), Prescott Group Aggressive Small Cap II, L.P., an Oklahoma limited partnership (“Prescott Small Cap II” and, together with Prescott Small Cap, the “Small Cap Funds”), and Mr. Phil Frohlich, the principal of Prescott Capital, relating to Ordinary shares, NIS 0.01 par value (the “Ordinary Shares”), of BluePhoenix Solutions Ltd., an Israeli company (the “Issuer”).

This Schedule 13D relates to the Ordinary Shares (i) purchased by the Small Cap Funds through the account of Prescott Group Aggressive Small Cap Master Fund, G.P., an Oklahoma general partnership (“Prescott Master Fund”), of which the Small Cap Funds are the general partners and (ii) awarded to Prescott Capital pursuant to the Award Agreement (as defined below). Prescott Capital serves as the general partner of the Small Cap Funds and may direct the Small Cap Funds, the general partners of Prescott Master Fund, to direct the vote and disposition of the 6,181,731 Ordinary Shares held by the Prescott Master Fund. Prescott Capital may also direct the vote and disposition of the 13,333 Ordinary Shares it holds directly. As the principal of Prescott Capital, Mr. Frohlich may direct the vote and disposition of the (i) 6,181,731 Ordinary Shares held by Prescott Master Fund and (ii) 13,333 Ordinary Shares held by Prescott Capital.

The Ordinary Shares held by Prescott Master Fund reported on this Schedule 13D were previously reported on a Schedule 13G/A filed with the Securities Exchange Commission on May 11, 2010 and a Schedule 13D filed with the Securities Exchange Commission on June 2, 2010.


Item 1.		Security and Issuer

Securities acquired: Ordinary shares, NIS 0.01 par value (the “Ordinary Shares”).

Issuer:

BluePhoenix Solutions Ltd.
8 Maskit Street
Herzlia 46120, Israel


Item 2.		Identity and Background

(a) This Schedule 13D is jointly filed by Prescott Capital, Prescott Small Cap, Prescott Small Cap II and Mr. Phil Frohlich. Because Mr. Frohlich is the managing member of Prescott Capital, which is the general partner of the Small Cap Funds (with Mr. Frohlich and Prescott Capital hereinafter referred to as the “Controlling Persons”), the Controlling Persons may be deemed, pursuant to Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “Act”), to be the beneficial owners of all of the Ordinary Shares held by the Small Cap Funds, and Mr. Frohlich may be deemed, pursuant to Rule 13d-3 of the Act, to be the beneficial owner of all of the Ordinary Shares held by Prescott Capital. The Reporting Persons (as hereinafter defined) are filing this Schedule 13D jointly, as they may be considered a “group” under Section 13(d)(3) of the Act. However, neither the fact of this filing nor anything contained herein shall be deemed to be an admission by the Reporting Persons that such a group exists.

Page 6 of 11

(b) The principal place of business for each of the Reporting Persons is 1924 South Utica, Suite #1120, Tulsa, Oklahoma 74104.

(c) The principal occupation of Mr. Frohlich is serving as the managing member of Prescott Capital. The principal business of Prescott Capital is acting as the general partner of the Small Cap Funds. The principal business of the Small Cap Funds is investing in securities.

(d) During the last five years, none of the Reporting Persons have been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).

(e) During the last five years, none of the Reporting Persons have been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and, as a result of such proceeding, were or are subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

(f) Prescott Capital and the Small Cap Funds are organized under the laws of the State of Oklahoma. Mr. Frohlich is a citizen of the United States of America.


Item 3.		Source and Amount of Funds

As of January 6, 2011, the Small Cap Funds had invested $19,221,149 (inclusive of brokerage commissions) in Ordinary Shares of the Issuer. The source of these funds was the working capital of the Small Cap Funds.

As of January 6, 2011, Prescott Capital has not invested any funds in the Ordinary Shares of the Issuer, and received the Ordinary Shares that it holds pursuant to the Award Agreement (as defined below).


Item 4.		Purpose of the Transaction

The Small Cap Funds (collectively with Phil Frohlich and Prescott Capital, the “Reporting Persons”) purchased the Ordinary Shares based on the belief that such securities, when purchased, were undervalued and represented an attractive investment opportunity. Although the Reporting Persons have no specific plan or proposal to acquire or dispose of the Ordinary Shares, consistent with their investment purpose, the Reporting Persons at any time and from time to time may acquire additional Ordinary Shares or dispose of any or all of their Ordinary Shares depending upon an ongoing evaluation of the investment in the Ordinary Shares, prevailing market conditions, other investment opportunities, liquidity requirements of the Reporting Persons and/or other investment considerations.

The purpose of the acquisition of the Ordinary Shares was for investment, and the acquisitions of the Ordinary Shares were made in the ordinary course of business and were not made for the purpose of acquiring control of the Issuer.

Page 7 of 11

Also, consistent with the investment purpose, the Reporting Persons may engage in communications with one or more shareholders of the Issuer, one or more officers of the Issuer and/or one or more members of the board of directors of the Issuer and/or one or more representatives or regulators of the Issuer regarding the Issuer, including, but not limited to, its operations. The Reporting Persons may discuss ideas that, if effected, may result in any of the following: the acquisition by persons of additional Common Stock of the Issuer, an extraordinary corporate transaction involving the Issuer and/or changes in the board of directors or management of the Issuer.

In addition, on December 30, 2010, Mr. Eric Green, a Managing Director at Prescott Capital, was elected to the board of directors of the Issuer (the “Board”) after the Issuer agree to place him up for election to such position pursuant to the Issuer’s proxy statement dated November 18, 2010. As part of the standard compensation for new directors, Prescott Capital entered into the Award Agreement pursuant to which it received the right to acquire the Ordinary Shares as described further in Item 6, which is incorporated in this Item 4 by reference.

Except to the extent the foregoing may be deemed a plan or proposal, the Reporting Persons have no plans or proposals which relate to, or could result in, any of the matters referred to in paragraphs (a) through (j), inclusive, of the instructions to Item 4 of the Schedule 13D. The Reporting Persons may, at any time and from time to time, review or reconsider their position and/or change their purpose and/or formulate plans or proposals with respect thereto.


Item 5.		Interest in Securities of the Issuer

(a) The aggregate percentage of Ordinary Shares reported to be owned by the Small Cap Funds is based upon the sum of (i) 23,691,480 Ordinary Shares outstanding, which is the total number of Ordinary Shares outstanding as of November 16, 2010, as reported in the Issuer’s Form 6-K filed with the Securities and Exchange Commission on November 16, 2010, and (ii) 409,372, the number of Series A warrants exercisable to purchase Ordinary Shares held by Prescott Capital and Mr. Phil Frohlich.

The aggregate percentage of Ordinary Shares reported to be owned by Prescott Capital and Mr. Frohlich is based upon the sum of (i) 23,691,480 Ordinary Shares outstanding, which is the total number of Ordinary Shares outstanding as of November 16, 2010, as reported in the Issuer’s Form 6-K filed with the Securities and Exchange Commission on November 16, 2010, (ii) 409,372, the number of Series A warrants exercisable to purchase Ordinary Shares held by Prescott Capital and Mr. Phil Frohlich and (iii) 13,333, the number of Awards exercisable to purchase Ordinary Shares held by Prescott Capital and Mr. Phil Frohlich.

As of January 6, 2011, the Small Cap Funds beneficially owned 6,181,731 Ordinary Shares, representing approximately 25.6% of the issued and outstanding Ordinary Shares of the Issuer. Such Ordinary Shares consist of (i) 5,772,359 Ordinary Shares and (ii) Series A warrants exercisable to purchase 409,372 Ordinary Shares.

Prescott Capital, as the general partner of the Small Cap Funds, may also be deemed to beneficially own the 6,181,731 Ordinary Shares held by the Small Cap Funds, representing approximately 25.6% of the issued and outstanding Ordinary Shares of the Issuer.

Page 8 of 11

As of January 6, 2011, Prescott Capital beneficially owned 6,195,064 Ordinary Shares, representing approximately 25.7% of the issued and outstanding Ordinary Shares of the Issuer. Such Ordinary Shares consist of (i) 5,772,359 Ordinary Shares, (ii) Series A warrants exercisable to purchase 409,372 Ordinary Shares and (iii) Awards exercisable to purchase 13,333 Ordinary Shares.

In addition, Mr. Frohlich, as managing member of Prescott Capital, the general partner of the Small Cap Funds, may also be deemed to beneficially own the 6,195,064 Ordinary Shares beneficially owned by the Small Cap Funds and Prescott Capital, representing approximately 25.7% of the issued and outstanding Ordinary Shares of the Issuer.

Prescott Capital and Mr. Frohlich disclaim beneficial ownership of the Ordinary Shares held by the Small Cap Funds except to the extent of their pecuniary interest therein. Mr. Frohlich disclaims beneficial ownership of the Ordinary Shares held by Prescott Capital except to the extent of his pecuniary interest therein.

(b) By virtue of his position with Prescott Capital and the Small Cap Funds, Mr. Frohlich has the sole power to vote and dispose of the Ordinary Shares owned by the Small Cap Funds and Prescott Capital reported in this Schedule 13D.

The filing of this Schedule 13D shall not be construed as admission that Prescott Capital or Mr. Frohlich is for the purposes of Section 13(d) or 13(g) of the Act the beneficial owner of any of the 6,181,731 Ordinary Shares owned by the Small Cap Funds. Pursuant to Rule 13d-4, Prescott Capital and Mr. Frohlich disclaim all such beneficial ownership.

(d) No person other than the Reporting Persons is known to have the right to receive, or the power to direct the receipt of dividends from, or proceeds from the sale of, the Ordinary Shares.

(e) Not applicable.

Page 9 of 11


Item 6.		Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer

Prescott Capital has entered into that certain Award Agreement by and between the Issuer and Prescott Capital made as of the 2^nd day of January, 2011 (the “Award Agreement”), a copy of which is included as Exhibit 99.1 to this Schedule 13D, by which it receives an option to purchase Ordinary Shares upon the terms and conditions set forth in the Award Agreement. Prescott Capital received 40,000 Awards (as defined in the Award Agreement) vesting in three equal installments as of January 2, 2011, January 2, 2012 and January 2, 2013, subject to Mr. Green continuing to serve as a member of the Board. Upon meeting the vesting criteria, Prescott Capital shall have the right to pay the Purchase Price (as defined in the Award Agreement) for the vested Awards and be entitled to receive the relevant amount of Ordinary Shares. Prescott Capital may sell such Ordinary Shares upon the delivery to the Secretary of the Issuer a written Notice of Sale.

Other than as described herein, there are no contracts, arrangements, understandings or relationships among the Reporting Persons, or between the Reporting Persons and any other person, with respect to the securities of the Issuer.


Item 7.		Material to be Filed as Exhibits

Exhibit 99.1

Award Agreement by and between BluePhoenix Solutions Ltd. and Prescott Group Capital Management, L.L.C. made as of the 2^nd day of January, 2011.

Page 10 of 11

Signatures

After reasonable inquiry and to the best of their knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.

Dated: January 6, 2011


	Prescott Group Capital Management, L.L.C.
	By:	/s/ Phil Frohlich
		Phil Frohlich, Managing Member

	Prescott Group Aggressive Small Cap, L.P. By: Prescott Group Capital Management, L.L.C., its general partner
	By:	/s/ Phil Frohlich
		Phil Frohlich, Managing Member

	Prescott Group Aggressive Small Cap II, L.P. By: Prescott Group Capital Management, L.L.C., its general partner
	By:	/s/ Phil Frohlich
		Phil Frohlich, Managing Member

	Phil Frohlich
	By:	/s/ Phil Frohlich
		Phil Frohlich

Page 11 of 11

EX-99.1 2 c10680exv99w1.htm EXHIBIT 99.1 Exhibit 99.1

EXHIBIT 99.1

AWARD AGREEMENT

This Award Agreement (the “Agreement”) made as of the 2^nd day of January, 2011 (the “Grant Date”), by and between BluePhoenix Solutions Ltd., an Israeli corporation (the “Company”) and Prescott Group Capital Management, LLC of 1924 South UTICA SUITE 1120, Tulsa, Oklahoma 74104, US (the “Grantee”).

WITNESSETH

WHEREAS, at the annual general meeting of shareholders of the Company it was approved to grant to the Grantee Restricted Share Units, under which the Grantee receives an option to purchase the Company’s Ordinary Shares (the “Ordinary Shares”), upon the terms and conditions set forth in this Agreement and the Grantee accepts such grant.

NOW, THEREFORE, the parties hereto agree as follows:

Item 1. Definitions.

	1.1		*Award* means a conditional right to receive an ordinary share of the Company, granted to the Grantee, subject to the provisions of this Agreement;

	1.2		*Board* means the Company’s Board of Directors or any committee empowered by the board;

	1.3		*Consultant* means Mr. Eric Green, who is , engaged by a Group Company, in order to render services to such company as a member of the board of directors, and who is not an Employee of a Group Company;

	1.4		*Employee* means any person, who is a common law employee of a Group Company, and who is on the payroll of such company;

	1.5		*Group Company* means any of the Company, its Subsidiaries and Affiliates;

	1.6		*Purchase Price* means the consideration required to be paid by a Grantee upon vesting of one Award;

	1.7		*Share* means an ordinary share of the Company (par value NIS 0.01 per share) issued upon the Vesting of an Award;

	1.8		*Structural Change* means (a) An acquisition of all or substantially all of the Company’s assets; or (b) A merger or spin-off or an arrangement which economically amounts to a merger or a spin-off, under which the Company is not the surviving entity; or (c) A sale or a series of sales of ordinary shares constituting at least 50% of the Company’s capital or at least 50% of the voting power, which causes the delisting of the Company from NASDAQ Global Market;

1.9

Termination means (1) For an Employee, the interruption or termination of service as an Employee, and (2) for a Consultant, the interruption, expiration, or termination of such person’s consulting or advisory relationship with a Group Company.

Item 2. Awards. The Company hereby grants to the Grantee 40,000 Awards.

Item 3. Vesting. The Awards shall vest in three equal installments as follows:

January 2, 2011 — 13,333 Awards;

January 2, 2012 — 13,333 Awards;

January 2, 2013 — 13,334 Awards.

Item 4. Cessation of Employment.

	4.1		In the event of termination of service of Consultant, all outstanding Awards granted hereunder shall be automatically vested as of the date of termination, unless termination was made in accordance with sections 233, 245A, 246 or 247 of the Israeli Companies Law — 1999.

	4.2		No Grantee shall be entitled to claim against a Group Company that he or she was prevented from continuing to Vest Awards as of the date of Termination. Such Grantee shall not be entitled to any compensation in respect of the Awards which would have Vested had such Grantee’s employment or engagement with a Group Company not been Terminated.

Item 5. Grant

	5.1		Earning Shares. Upon meeting the applicable vesting criteria, the Grantee shall be required to pay the Purchase Price of the Vested Awards in order to be entitled to receive the amount of Shares specified in the relevant Award Agreement. The issuance of Shares shall occur as soon as practicable after the payment of the Purchase Price.

	5.2		Transfer of Shares. Upon fulfillment of the conditions herein, the Grantee may sell the Shares by delivering to the Secretary of the Company a written Notice of Sale in the form attached hereto as Appendix A or any other was as instructed by the company.

	5.3		Dilution. The Shares, being part of the ordinary share capital of the Company, shall not be protected against dilution in any manner whatsoever.

	5.4		Dividend Rights. Grantee shall not have any rights to receive dividends in respect of Shares, until such Shares are issued to the Grantee. Following the issuance of the Shares, such Shares will entitle the Grantee to receive any dividend, to which other holders of ordinary shares in the Company are entitled.

	5.5		One Time Benefit. The Awards and Shares are extraordinary, one-time benefits granted to the Grantee, and are not and shall not be deemed a salary component for any purpose whatsoever, including in connection with calculating severance compensation under any applicable law.

	5.6		Fractions. An Award may not be converted into a fraction of a Share. In lieu of issuing fractional Shares, on the vesting of a fraction of an Award, the Company shall convert any such fraction of an Award, which represents a right to receive 0.5 or more of a Share, to one Share and shall extinguish any such fraction of an Award, which represents a right to receive less than 0.5 of a Share without issuing any Shares.

Item 6. Tax Consequences.

	6.1		All tax consequences and obligations regarding any other compulsory payments (“Tax”) arising from the grant or exercise of an Award shall be borne solely by the Grantee. As a condition of exercise, the Grantee shall pay to the Company (or make arrangements acceptable to the Company for the payment of) such amount as the Company determines is necessary for the satisfaction of any withholding tax obligations arising from vesting or exercise which may be imposed on the Company by the domestic law of the state of residence of Grantee or other applicable law.

	6.2		Any Tax imposed in respect of the Awards and/or Shares, including, but not limited to, the grant of Awards, and/or the Vesting of an Award, and/or issuance of Shares, and/or the transfer, waiver, or expiration of Awards and/or Shares, and/or the sale of Shares, shall be borne solely by the Grantee. The Company or anyone on its behalf shall not be required to bear the aforementioned Taxes, directly or indirectly, nor shall they be required to gross up such Tax in the Grantee’s salary or remuneration. The applicable Tax shall be deducted from the proceeds of sale of Shares or shall be paid to the Company by the Grantee. Without derogating from the aforementioned, the Company shall be entitled to withhold any Taxes according to the requirements of any applicable laws, rules, and regulations.

	6.3		The Grantee shall indemnify the Company, immediately upon request of the Company, for any Tax (including interest and/or fines of any type and/or linkage differentials in respect of Tax and/or withholding Tax) for which the Grantee is liable under any applicable law and which was paid by the Company, or which the Company is required to pay. The Company may exercise such indemnification by deducting the amount subject to indemnification from the Grantee’s salary or remunerations or proceeds of sale of any other Shares.

	6.4		The grantee is required to remit to the Company the full amount of applicable Tax one business day before vesting of an Award. If the Grantee fails to do so, the Company shall be entitled, at its sole consideration, to cancel the Award or exercise the Awards and sell the Shares on behalf of the Grantee (even though an exercise notice was not submitted by the Grantee) in order to cover any Tax liabilities anticipated upon vesting.

6.5

The Grantee has not relied upon any representations or other information (whether oral or written) from the Company or its shareholders, directors, officers or affiliates, or from any other person or entity, in connection with the Awards. The Grantee acknowledges that the Company has not given any assurances with respect to the tax consequences of the ownership and disposition of the Awards and Shares.

Item 7. Nontransferability. The Award is not assignable or transferable other than by will or the laws of descent, and the Award shall be exercisable during the lifetime of the Grantee only by the Grantee. The Award hereby granted shall be null and void and without effect upon any attempted assignment or transfer except as herein provided, including without limitation, any purported assignment, whether voluntary or by operation of law, pledge, hypothecation or other disposition, attachment, trustee process or similar process, whether legal or equitable, upon the Award.

Item 8. Adjustments to the Shares

	8.1		Adjustment. If the ordinary share capital of the Company shall at any time be changed or exchanged by declaration of a stock dividend, stock split, combination or exchange of shares, recapitalization, or any other like event by or of the Company effected without receipt of consideration by the Company, and as often as the same shall occur, then the number, class and kind of the underlying shares of the Awards shall be appropriately and equitably adjusted so as to maintain the proportionate number of Shares, provided, however, that no adjustment shall be made by reason of the distribution of subscription rights (rights offering) on outstanding ordinary share. Upon occurrence of any of the foregoing, the class and aggregate number of underlying Shares of the Awards shall be appropriately adjusted by the Board, whose determination in that respect shall be final, binding, and conclusive. Except as expressly provided herein, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of Shares underlying an Award.

	8.2		Structural Change. Without derogating from the Board’s general powers to determine the treatment of the Awards and Shares upon a Structural Change, in the event of any Structural Change, the Board shall be entitled (but not obliged), at its sole discretion, to: (i) provide for an assumption or exchange of Awards and/or Shares for awards and/or shares and/or other securities or rights of the Successor Company; and/or (ii) provide for an exchange of Awards or Shares for a monetary compensation; and/or (iii) determine that all unvested Awards shall terminate on the date of such Structural Change. In the case of assumption and/or substitution of Awards, appropriate adjustments shall be made so as to reflect such action and all other terms and conditions of the Award Agreements shall remain unchanged, including but not limited to the vesting schedule, all subject to the determination of the Board, which determination shall be at its sole discretion and final. The grant of any substitutes for the Awards and/or Shares to the Grantee further to a Structural Change, as provided in sub-clauses (i) and (ii), shall be considered as full compliance with the terms of this Agreement. The value of the exchanged Awards and/or Shares pursuant to this section shall be determined in good faith solely by the Board and its decision shall be final and binding on the Grantee.

			For the purposes of this section, Awards shall be considered assumed or substituted if, following the Structural Change, the Awards confer the right to purchase or receive, for each Share immediately prior to the Structural Change, the consideration (whether shares, options, cash, or other securities or property) received in the Structural Change by holders of ordinary shares held on the effective date of the Structural Change (and if such holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding ordinary share capital); provided, however, that if such consideration received in the Structural Change is not solely ordinary shares (or their equivalent) of the Successor Company or its parent or subsidiary, the Board may, with the consent of the Successor Company, provide for the consideration received in the Structural Change to be solely ordinary shares (or their equivalent) of the Successor Company or its parent or subsidiary equal in value to the per Share consideration received by holders of a majority of the outstanding ordinary share capital in the Structural Change; and provided further that the Board may determine, at its discretion, that in lieu of such assumption or substitution of Awards for awards of the Successor Company or its parent or subsidiary, such Awards will be substituted for any other type of asset or property including cash which is fair under the circumstances.

			Without derogating from the above, in the event of a sale of all or substantially all of the Company’s share capital, the Board shall be entitled, at its sole discretion, to require the Grantee to sell all of their Shares on the same terms and conditions as applicable to the other shareholders selling their Company’s ordinary shares as part of the Structural Change. The Grantee acknowledges and agrees that the Board shall be entitled to authorize any one of its members to sign share transfer deeds in customary form in respect of the Shares held by the Grantee and that such share transfer deed shall bind the Grantee.

	8.3		Liquidation. In the event of the proposed dissolution or liquidation of the Company, Awards will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board.

Item 9. Miscellaneous.

(a) This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

(b) This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Israel without giving effect to any choice or conflict of law provision or rule (whether of the State of Israel or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Israel. The competent courts of Tel-Aviv, Israel shall have exclusive jurisdiction to hear all disputes arising in connection with this Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof, and controls and supersedes any prior understanding, agreements or representations by or between the parties, written or oral between the parties with respect to its subject matter and may not be modified except by written instrument executed by the parties.

(c) Any notice under this Agreement shall be in writing and shall be deemed to have been duly given when delivered personally or when deposited in registered, postage prepaid mail, and addressed, in the case of the Company, to the Company’s Secretary at 8 Maskit Street, Herzliya, Israel 46120, or if the Company should move its principal office, to such principal office, and, in the case of the Grantee, to the Grantee’s last permanent address as shown on the Company’s records, subject to the right of either party to designate some other address at any time hereafter in a notice satisfying the requirements of this Section.

IN WITNESS WHEREOF, this Agreement has been executed as of the date first above written.


	BLUEPHOENIX SOLUTIONS LTD.
	By:



	The Grantee

Appendix A
Notice of Sale

The form and method of exercise shall be as provided by Tamir Fishman Assets Management LTD or any other entity or person designated by BluePhoenix Solutions Ltd. from time to time (the “Agent”).

The Grantee shall execute the agreements and forms as requested by the Agent, including any electronically submitted requests, forms and agreements.

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