Ordinary shares confer upon their holders voting rights, the right to receive cash dividends and the right to share in excess assets upon liquidation of the Company.

In October 2008, the compensation stock option committee of the Company's Board of Directors approved the adoption of the 2008 Stock Incentive Plan (the "2008 Plan") with 1,000,000 shares or stock options available for grant and a sub-plan to enable qualified optionees certain tax benefits under the Israeli Income Tax Ordinance. Among the incentives that may be adopted are stock options, performance share awards, performance share unit awards, restricted shares, RSUs awards and other stock-based awards. During the years commencing in 2010 and through December 31, 2019, the Company's Board of Directors approved, in the aggregate, an increase of 6,015,500 shares to the number of shares available for grant under the 2008 Plan, bringing the total number of shares available for grant to 7,015,500. As of December 31, 2020, an aggregate of 200,388 shares are still available for future grants under the 2008 Plan.

Options granted under the 2008 Plan vest quarterly over three to four years or 50% at the second anniversary and 25% at the third and fourth anniversary. The options expire after six, seven or ten years from the date of grant. Any options, which are forfeited or canceled before expiration of the 2008 Plan, become available for future grants.

All options granted by the Company on or before March 23, 2017 that are unvested and remain outstanding shall become fully vested upon change of control. In addition, options granted to several management members after such date that are unvested and remain outstanding shall also become fully vested upon change of control.

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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data)

NOTE 11:- SHAREHOLDERS' EQUITY (Cont.)

In February 2019, the 2008 Plan was amended to include a dividend adjustment, whereby unless otherwise is resolved by the Board of Directors, the exercise price of each outstanding share option (whether vested or not) (as such term is defined in the 2008 Plan), shall be reduced by an amount equal to the cash dividend per share distributed on the applicable distribution date. The amendment applied to the dividend distributed by the Company’s Board of Directors in April 2019, and the following dividends declared since, as described below. In addition, the amendment stipulates that the administrating committee may apply a “net exercise” payment method, whereby a certain number of ordinary shares to which a participant is entitled, may be withheld according to the formula set forth in the amendment.

Valuation assumptions:

The Company selected the Black-Scholes-Merton option-pricing model as the most appropriate fair value method for its stock options awards. The option-pricing model requires a number of assumptions, of which the most significant are the expected stock price volatility and the expected option term. Expected volatility was calculated based upon actual historical stock price movements. The expected term of options granted is based upon historical experience and represents the period of time that options granted are expected to be outstanding. The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. In April 2019 the Company distributed a cash dividend for the first time in the amount of $24,864 or $0.45 per share. In November 2020 the Company distributed a cash dividend in the amount of $19,999 or $0.36 per share, in December 2020 the Company declared a cash dividend in the amount of $35,003 or $0.63 per share which was paid in January 2021 (see Note 17). For all of the above a protective adjustment was applied to the outstanding equity awards. However, the Company has not adopted a general policy regarding the distribution of dividends and makes no statements as to the distribution of dividends in the foreseeable future.

Options granted to employees:

The fair value of the Company's stock options granted to employees for the years ended December 31, 2020, 2019 and 2018 was estimated using the following weighted average assumptions:

	Year ended December 31,
	2020	2019	2018

Risk free interest	-	1.35%-2.51%	2.48%-2.82%
Dividend yields	-	0%	0%
Volatility	-	33.35%-34.32%	33%
Expected term (in years)	-	4.22-4.26	4.3-4.39

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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data)

NOTE 11:- SHAREHOLDERS' EQUITY (Cont.)

A summary of employee option balances under the 2008 Plan as of December 31, 2020 and changes during the year then ended are as follows:

	Number of options			Weighted-average exercise price (*)		Weighted- average remaining contractual term (in years)		Aggregate intrinsic value (in thousands) (*)

Outstanding at January 1, 2020		3,168,980		$	6.6		3.8	$	5,936

Granted		-		$	-
Exercised		(269,702	)	$	4.8
Forfeited		(122,500	)	$	8.1

Outstanding at December 31, 2020		2,776,778		$	6.7		3.0	$	2,393

Exercisable at December 31, 2020		1,360,403		$	5.0		1.9	$	2,258

(*) In November 2020 the Company distributed a cash dividend in the amount of $19,999 or $0.36 per share. All exercise prices were updated on a retrospective basis (See also Note 11.c)

During the year ended December 31, 2020 no new options were granted to employees. The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company's closing stock price on the last trading day of the year 2020 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2020. These amounts change based on the fair market value of the Company's stock. Total intrinsic value of options exercised for the year ended December 31, 2020 was $424.

In 2019, the Company accounted for changes in award terms as a modification in accordance with ASC 718. A modification to the terms of an award should be treated as an exchange of the original award for a new award with total compensation cost equal to the grant-date fair value of the original award plus the incremental value measured at the same date. Under ASC 718, the calculation of the incremental value is based on the excess of the fair value of the new (modified) award based on current circumstances over the fair value of the original award measured immediately before its terms are modified based on current circumstances. The total incremental effect in connection with the modification described above considering the outstanding options as of December 31, 2020 amounted to $917 out of which $89 and $803 were recorded during the years ended December 31, 2020 and 2019, respectively.

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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data)

NOTE 11:- SHAREHOLDERS' EQUITY (Cont.)

The outstanding and exercisable options granted to employees under the 2008 Plan as of December 31, 2020, have been separated into ranges of exercise price as follows:

Ranges of exercise price	Options outstanding as of December 31, 2020		Weighted average remaining contractual life (years)		Weighted average exercise price		Options exercisable as of December 31, 2020		Weighted average exercise price of exercisable options

$2.96-4.27		824,982		1.3	$	4.0		824,982		4.0
$4.32-5.70		333,046		2.4	$	5.0		235,421		5.0
$7.05-9.15		1,618,750		4.0	$	8.4		300,000		7.5

		2,776,778		3.0	$	6.7		1,360,403		5.0

Additional stock-based compensation data:

As of December 31, 2020, there was $1,304 of unrecognized compensation costs related to non-vested stock-based compensation arrangements granted to employees under the 2008 Plan. The cost related to employees is expected to be recognized over a weighted-average period of 2 years.

During the year ended December 31, 2020, 2019 and 2018 the stock-based compensation for options were recognized in the consolidated statement of income (loss) in the following line items:

	Year ended December 31,
	2020		2019		2018

Cost of revenues of products	$	82	$	138	$	75
Cost of revenues of services		84		120		39
Research and development, net		279		280		134
Selling and marketing		287		448		236
General and administrative		550		1,149		522
	$	1,282	$	2,135	$	1,006

c.Dividends:

1.In the event that cash dividends are declared by the Company, such dividends will be declared and paid in Israeli currency. Under current Israeli regulations, any cash dividend paid in Israeli currency in respect of ordinary shares purchased by non-residents of Israel with non-Israeli currency, may be freely repatriated in such non-Israeli currency, at the exchange rate prevailing at the time of repatriation.

2.In April 2019, the Company distributed a cash dividend for the first time, in the amount of $24,864 or $0.45 per share.

In November 2020 the Company distributed a cash dividend, in the amount of $19,999 or $0.36 per share. In December 30, 2020, the Comapny declared an additional dividend in the amount of $35,003 or $0.63, which was paid in January 2021 (see Note 17). However, the Company has not adopted a general policy regarding the distribution of dividends and makes no statements as to the distribution of dividends in the foreseeable future.

3.Pursuant to the terms of a loan from a bank (see also Note 13c), the Company is restricted from paying cash dividends to its shareholders without initial approval from the bank; which was received for all of the above mentioned dividends.