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                                                                    EXHIBIT 10.1

                            COMMTOUCH SOFTWARE LTD.

                           1996 CSI STOCK OPTION PLAN



       1. Purposes of the Plan. The purposes of this Plan are to attract and
retain the best available personnel, to provide additional incentive to
Employees and Consultants of the Company and its Subsidiary and to promote the
success of the Company and the Subsidiary's business. Options granted under the
Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined
by the Administrator at the time of grant of an Option and subject to the
applicable provisions of Section 422 of the Code and the regulations promulgated
thereunder. Shares Purchase Rights may also be granted under the Plan. The
Options and Shares Purchase Rights offered pursuant to the Plan are a matter of
separate inducement and are not in lieu of salary or other compensation.

       2. Definitions. As used herein, the following definitions shall apply:

               (a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan, in its capacity as an administrator
of the Plan.

               (b) "Board" means the Board of Directors of the Company.

               (c) "Code" means the Internal Revenue Code of 1986, as amended.

               (d) "Committee" means a Committee appointed by the Board in
accordance with Section 4 of the Plan.

               (e) "Company" means CommTouch Software Ltd., an Israeli company.

               (f) "Consultant" means any person who is not an Employee and who
is engaged by the Company or the Subsidiary to render consulting or advisory
services and is compensated for such services, and any Director of the Company
or the Subsidiary whether compensated for such services or not. If the Company
registers any class of any equity security pursuant to the Exchange Act, the
term Consultant shall thereafter not include Directors who are not compensated
for their services or are paid only a Director's fee.

               (g) "Continuous Status as an Employee or Consultant" means that
the employment or consulting relationship with the Company or the Subsidiary is
not interrupted or terminated. Continuous Status as an Employee or Consultant
shall not be considered interrupted in the case of (i) any leave of absence
approved by the Company or the Subsidiary or (ii) transfers between locations of
the Company or the Subsidiary or between the Subsidiary and the Company or any
successor. A leave of absence shall include sick leave, military leave, or any
other personal leave approved by an authorized representative of the Company or
the Subsidiary, as applicable. For purposes of Incentive Stock Options, no such
leave may exceed 90 days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract, including policies of the Company or the
Subsidiary, as applicable. If reemployment upon expiration of a leave of absence
approved by the Company or the Subsidiary is not so guaranteed, on the 181st day
of such leave any Incentive Stock Option held by the Optionee shall

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cease to be treated as an Incentive Stock Option and shall be treated for tax
purposes as a Nonstatutory Stock Option.

               (h) "CSI" means CommTouch Software, Inc., a California
corporation.

               (i) "Director" means a member of either of the boards of
directors of the Company or the Subsidiary.

               (j) "Employee" means any person, including Officers and
Directors, employed by the Company or the Subsidiary. The payment of a
Director's fee by the Company or the Subsidiary shall not be sufficient to
constitute "employment."

               (k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

               (l) "Fair Market Value" means, as of any date, the value of the
Ordinary Shares determined as follows:

                   (i) If the Ordinary Shares are listed on any established
           stock exchange or a national market system, including without
           limitation the Nasdaq National Market of the National Association of
           Securities Dealers, Inc. Automated Quotation ("NASDAQ") System, its
           Fair Market Value shall be the closing sales price for such stock (or
           the closing bid, if no sales were reported) as quoted on such
           exchange or system for the last market trading day prior to the time
           of determination and reported in The Wall Street Journal or such
           other source as the Administrator deems reliable;

                   (ii) If the Ordinary Shares are quoted on the NASDAQ System
           (but not on the Nasdaq National Market thereof) or regularly quoted
           by a recognized securities dealer but selling prices are not
           reported, its Fair Market Value shall be the mean between the high
           bid and low asked prices for the Ordinary Shares on the last market
           trading day prior to the day of determination; or

                   (iii) In the absence of an established market for the
           Ordinary Shares, the Fair Market Value thereof shall be determined in
           good faith by the Administrator.

               (m) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.

               (n) "Nonstatutory Stock Option" means an option not intended to
qualify as an Incentive Stock Option.

               (o) "Officer" means a person who is an officer of the Company or
the Subsidiary within the meaning of Section 16 of the Exchange Act and the
rules and regulations promulgated thereunder.

               (p) "Option" means a stock option granted pursuant to the Plan.

               (q) "Optioned Stock" means the Ordinary Shares subject to an
Option or a Shares Purchase Right.

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               (r) "Optionee" means an Employee or Consultant who receives an
Option or Shares Purchase Right.

               (s) "Ordinary Shares" means the Ordinary Shares of stock of the
Company.

               (t) "Plan" means the 1996 CSI Stock Option Plan.

               (u) "Restricted Shares" means each of the Ordinary Shares
acquired pursuant to a grant of a Shares Purchase Right under Section 11 below.

               (v) "Section 16(b)" means Section 16(b) of the Exchange Act.

               (w) "Shares Purchase Right" means a right to purchase Ordinary
Shares pursuant to Section 11 below.

               (x) "Subsidiary" means CommTouch Software, Inc., a California
corporation, the Company's wholly-owned U.S. subsidiary.

        3. Shares Subject to the Plan. Subject to the provisions of Section 13
of the Plan, the aggregate number of Ordinary Shares that may be subject to
option and sold under this Plan is 5,000,000, unless amended by the shareholders
of the Company. The Ordinary Shares may be authorized but unused, or reacquired
Ordinary Shares.

               If an Option or Shares Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an option exchange pursuant to Section 4(c)(viii) or otherwise, the
unpurchased Ordinary Shares which were subject thereto shall become available
for future grant or sale under the Plan (unless the Plan has terminated).
However, Ordinary Shares that have actually been issued under the Plan, upon
exercise of either an Option or Shares Purchase Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan.

        4. Administration of the Plan.

               (a) Initial Plan Procedure. Prior to the date, if any, upon which
the Company becomes subject to the Exchange Act, the Plan shall be administered
by the Board or a Committee appointed by the Board.

               (b) Plan Procedure After the Date, if any, upon which the Company
becomes Subject to the Exchange Act.

                       (i) Multiple Administrative Bodies. If permitted by Rule
        16b-3, the plan may be administered by different bodies with respect to
        Directors, Officers and Employees who are neither Directors nor
        Officers.

                       (ii) Administration With Respect to Directors and
        Officers. With respect to grants of Options and Shares Purchase Rights
        to Employees who are also Officers or Directors, the Plan shall be
        administered by (A) the Board if the Board may administer the Plan in
        compliance with applicable Israeli securities laws, the rules under Rule
        16b-3 promulgated under the Exchange Act or any successor thereto ("Rule
        16b-3") relating to the disinterested administration of employee benefit
        plans under which Section 16(b) exempt discretionary grants and awards
        of equity securities are to be made, or (B) a Committee designated by
        the Board to


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        administer the Plan, which Committee shall be constituted to comply with
        the applicable laws of Israel, rules under Rule 16b-3 relating to the
        disinterested administration of employee benefit plans under which
        Section 16(b) exempt discretionary grants and awards of equity
        securities are to be made. Once appointed, such Committee shall continue
        to serve in its designated capacity until otherwise directed by the
        Board. From time to time the Board may increase the size of the
        Committee and appoint additional members thereof, remove members (with
        or without cause) and appoint new members in substitution therefor, fill
        vacancies, however caused, and remove all members of the Committee and
        thereafter directly administer the Plan, all to the extent permitted by
        applicable laws of Israel, the rules under Rule 16b-3 relating to the
        disinterested administration of employee benefit plans under which
        Section 16(b) exempt discretionary grants and awards of equity
        securities are to be made.

                       (iii) Administration With Respect to Other Employees and
        Consultants. With respect to grants of Options and Shares Purchase
        Rights to Employees or Consultants who are neither Directors nor
        Officers, the Plan shall be administered by (A) the Board or (B) a
        Committee designated by the Board, which committee shall be constituted
        in such a manner as to satisfy the legal requirements relating to the
        administration of incentive stock option plans, if any, of the laws and
        regulations of Israel, of California laws and regulations, of the Code,
        and of any applicable stock exchange (collectively, the "Applicable
        Laws"). Once appointed, such Committee shall continue to serve in its
        designated capacity until otherwise directed by the Board. From time to
        time the Board may increase the size of the Committee and appoint
        additional members thereof, remove members (with or without cause) and
        appoint new members in substitution therefor, fill vacancies, however
        caused, and remove all members of the Committee and thereafter directly
        administer the Plan, all to the extent permitted by the Applicable Laws.

                       (iv) Compliance with Section 162(m). If, at any time,
        awards made under the Plan shall be subject to Section 162(m) of the
        Code, the Plan shall be administered by a committee comprised solely of
        "outside directors" (within the meaning of Prop. Treas. Reg. Section
        1.162-27(e)(3)) or such other persons as may be permitted from time to
        time under Section 162(m) of the Code and the Treasury Regulations
        promulgated thereunder.

               (c) Powers of the Administrator. Subject to the provisions of the
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the
Ordinary Shares are listed, the Administrator shall have the authority in its
discretion:

                       (i) to determine the Fair Market Value of the Ordinary
        Shares, in accordance with Section 2(1) of the Plan;

                       (ii) to select the Consultants and Employees to whom
        Options and Shares Purchase Rights may from time to time be granted
        hereunder;

                       (iii) to determine whether and to what extent Options and
        Shares Purchase Rights or any combination thereof are granted hereunder;

                       (iv) to determine the number of Ordinary Shares to be
        covered by each such award granted hereunder;

                       (v) to approve forms of agreement for use under the Plan;

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                       (vii) to reduce the exercise price of any Option to the
        then current Fair Market Value if the Fair Market Value of the Ordinary
        Shares covered by such Option has declined since the date the Option was
        granted; and

                       (viii) to construe and interpret the terms of the Plan
        and awards granted pursuant to the Plan.

               (d) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options or Shares Purchase
Rights.

        5. Eligibility.

               (a) Nonstatutory Stock Options and Shares Purchase Rights may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. An Employee or Consultant who has been granted an Option or
Shares Purchase Right may, if otherwise eligible, be granted additional Options
or Shares Purchase Rights.

               (b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designation, to the extent that the aggregate Fair
Market Value of the Ordinary Shares with respect to which Incentive Stock
Options are exercisable for the first time by any particular Optionee during any
calendar year (under all plans of the Company and the Subsidiary) exceeds
$100,000, such Options shall be treated as Nonstatutory Stock Options. For
purposes of this Section 5(b), Incentive Stock Options shall be taken into
account in the order in which they were granted. The Fair Market Value of the
Ordinary Shares shall be determined as of the time the Option with respect to
such Ordinary Shares is granted.

               (c) Neither the Plan nor any Option or Shares Purchase Right
shall confer upon any Optionee any right with respect to continuation of his or
her employment or consulting relationship with the Company or the Subsidiary, as
applicable, nor shall it interfere in any way with his or her right or the
Company or the Subsidiary's right to terminate his or her employment or
consulting relationship at any time, with or without cause.

        6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company, as described in Section 18 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 14 of the Plan.

        7. Term of Option. The term of each Option shall be the term stated in
the option agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. In the case of an Incentive Stock
Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or the Subsidiary, the term of the Option shall be five (5)
years from the date of grant thereof or such shorter term as may be provided in
the option agreement.





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        8. Option Exercise Price and Consideration.

               (a) The per share exercise price for the Ordinary Shares to be
issued upon exercise of any Option shall be such price as is determined by the
Administrator, but shall be subject to the following:

                       (i) In the case of an Incentive Stock Option

                               (A) granted to an Employee who, at the time of
               grant of such Option, owns stock representing more than ten
               percent (10%) of the voting power of all classes of stock of the
               Company or of the Subsidiary, the per share exercise price shall
               be no less than 110% of the Fair Market Value per Ordinary Share
               on the date of grant.

                               (B) granted to any other Employee, the per share
               exercise price shall be no less than 100% of the Fair Market
               Value per Ordinary Share on the date of grant.

                       (ii) In the case of a Nonstatutory Stock Option

                               (A) granted to a person who, at the time of grant
               of such Option, owns stock representing more than ten percent
               (10%) of the voting power of all classes of stock of the Company
               or of the Subsidiary, the per share exercise price shall be no
               less than 110% of the Fair Market Value per Ordinary Share on the
               date of the grant.

                               (B) granted to any other person, the per share
               exercise price shall be no less than 85% of the Fair Market Value
               per Ordinary Share on the date of grant.

               (b) The consideration to be paid for the Ordinary Shares to be
issued upon exercise of an Option, including the method of payment, shall be
determined by the Administrator (and, in the case of an Incentive Stock Option,
shall be determined at the time of grant). Such consideration may consist of (1)
cash, (2) check, (3) promissory note (to the extent permitted by Applicable
Laws) in the form attached hereto as Exhibit A, secured by a pledge of the
shares issued pursuant to a share pledge in the form attached hereto as Exhibit
B, or (4) any combination of the foregoing methods of payment. In making its
determination as to the type of consideration to accept, the Administrator shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company. Optionee shall also deliver a properly executed exercise
notice together with such other documentation as the Administrator and a broker,
if applicable, shall require to effect an exercise of the Option.

        9. Exercise of Option.

               (a) Procedure for Exercise: Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan, but in no case at a rate of less than 20% per year over five (5)
years from the date the Option is granted.

               An Option may not be exercised for a fraction of an Ordinary
Share.

               An Option shall be deemed to be exercised when written notice of
such exercise in the form attached hereto as Exhibit C has been given to the
Company in accordance with terms of the Option by the person entitled to
exercise the Option and full payment for the Ordinary Shares with respect to


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which the Option is exercised has been received by the Company. Full payment
may, as authorized by the Administrator, consist of any consideration and method
of payment allowable under Section 8(b) hereof. Until the issuance (as evidenced
by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Ordinary
Shares, no right to vote, receive dividends or any other rights as a shareholder
shall exist with respect to the Optioned Stock, notwithstanding the exercise of
the Option. The Company shall issue (or cause to be issued) such stock
certificate promptly upon exercise of the Option. No adjustment shall be made
for a dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 13 hereof.

               Exercise of an Option in any manner shall result in a decrease in
the number of Ordinary Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Ordinary
Shares as to which the Option is exercised.

               (b) Termination of Employment or Consulting Relationship. In the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant (but not in the event of an Optionee's change of status from Employee
to Consultant (in which case an Employee's Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the date three (3)
months and one day following such change of status) or from Consultant to
Employee), such Optionee may, but only within such period of time as is
determined by the Administrator, of at least thirty (30) days, with such
determination in the case of an Incentive Stock Option not exceeding three (3)
months after the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the option
agreement), exercise his or her Option to the extent that the Optionee was
entitled to exercise it at the date of such termination. To the extent that the
Optionee was not entitled to exercise the Option at the date of such
termination, or if the Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.

               (c) Disability of Optionee. In the event of termination of an
Optionee's Continuous Status as an Employee or Consultant as a result of his or
her disability, the Optionee may, but, only within twelve (12) months from the
date of such termination (and in no event later than the expiration date of the
termination of such Option as set forth in the option agreement), exercise the
Option to the extent otherwise entitled to exercise it at the date of such
termination. However, in the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of his or her "permanent
disability" as such term is defined in Section 22(e)(3) of the Code, the
Optionee shall be entitled, but only within twelve (12) months from the date of
such termination (and in no event later than the expiration date of the term of
such Option as set forth in the option agreement), to exercise all Options such
Employee or Consultant would have been entitled to exercise had such Employee or
Consultant remained employed for two (2) years from the date of such
termination. If such disability is not a "permanent disability," in the case of
an Incentive Stock Option such Incentive Stock Option shall automatically cease
to be treated as an Incentive Stock Option and shall be treated for tax purposes
as a Nonstatutory Stock Option on the day three months and one day following
such termination. If the Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate, and the
Ordinary Shares covered by such Option shall revert to the Plan.

               (d) Death of Optionee. In the event of the death of an Optionee,
the Optionee's estate or any person who acquired the right to exercise the
Option by bequest or inheritance shall be entitled, but only within twelve (12)
months from the date of such termination (and in no event later than the
expiration date of the term of such Option as set forth in the option
agreement), to exercise all Options such Employee or Consultant would have
received had such Employee or Consultant remained

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employed for two (2) years from the date of such termination. All remaining
Ordinary Shares covered by the unexercisable portion of the Option shall
immediately revert to the Plan. If, after the Optionee's death, the Optionee's
estate or a person who acquires the right to exercise the Option by bequest or
inheritance does not exercise the Option within the time specified herein, the
Option shall terminate, and the Ordinary Shares covered by such Option shall
revert to the Plan.

               (e) Rule 16b-3. Options granted to a person subject to Section
16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.

        10. Non-Transferability of Options and Shares Purchase Rights. Options
and Shares Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.

        11. Restricted Shares.

               (a) Awards of Restricted Shares.

                       The Committee may, in its discretion, permit an Optionee
to exercise an Option prior to the time the Option would otherwise be
exercisable under Section 9. Without limiting the generality of the foregoing,
the Committee may provide that if an Option is exercised prior to satisfaction
of the vesting requirements of Section 9, the Shares issued upon such exercise
shall remain subject to vesting as described in Section 11(c) and shall be
subject to a right, but not an obligation, of repurchase by the Company with
respect to all unvested Shares if the Optionee ceases to be an Employee for any
reason.

               (b) Restrictions.


                       (i) Restricted Shares may not be sold, assigned,
transferred, pledged, encumbered, or otherwise disposed of, either voluntarily
or involuntarily, until the release of such Shares from the Company's repurchase
option under Section 11(c), other than by will or the laws of descent and
distribution.

                       (ii) Optionees receiving Restricted Shares shall be
entitled to dividend and voting rights for the Restricted Shares even though
they are not vested, provided that such rights shall terminate immediately as to
any Restricted Shares that are repurchased by the Company.

                       (iii) With respect to each receipt of Restricted Shares
by an Optionee, such Optionee shall execute a Restricted Share Purchase
Agreement in the form attached hereto as Exhibit D.

               (c) Vesting.

                       If the Optionee ceases to be an Employee for any reason,
the Company shall have the right, but not the obligation, to repurchase certain
of the Shares at their original Exercise Price. The Company's right to
repurchase the Shares at their original Exercise Price shall lapse, unless the
stock option agreement provides otherwise, as to one-fourth (1/4) of the Shares
at the end


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of the first year of continuous employment and as to one forty-eighth (1/48) of
the Shares per month of continuous employment over the next thirty-six (36)
months. Shares that are subject to repurchase at their original Exercise Price
are referred to as "Restricted Shares."

               (d) Section 83(b) Election.

                       Within 30 days after the issuance of Restricted Shares to
an Optionee under the Plan, the Optionee shall decide whether or not to file an
election pursuant to Section 83(b) of the Code and Treasury Regulation section
1.83-2 (and state law counterparts) with respect to the Restricted Shares. If
the Optionee does file such an election, the Optionee shall promptly furnish a
copy of such election to the Company.

        12. Shares Purchase Rights.

               (a) Rights to Purchase. Shares Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Shares Purchase Rights under the Plan, it shall
advise the offeree in writing of the terms, conditions and restrictions related
to the offer, including the number of Ordinary Shares that such person shall be
entitled to purchase, the price to be paid, and the time within which such
person must accept such offer, which shall in no event exceed thirty (30) days
from the date upon which the Administrator makes the determination to grant the
Shares Purchase Right. The offer shall be accepted by execution of a Restricted
Stock purchase agreement in the form determined by the Administrator.

               (b) Other Provisions. The Restricted Stock purchase agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.

               (c) Rights as a Shareholder. Once the Shares Purchase Right is
exercised, the purchaser shall have rights equivalent to those of a shareholder
of the Company and shall be a shareholder of the Company when his or her
purchase is entered upon the records of the duly authorized transfer agent of
the Company. No adjustment shall be made for a dividend or other right for which
the record date is prior to the date the Shares Purchase Right is exercised,
except as provided in Section 13 of the Plan.

        13. Adjustments Upon Changes in Capitalization or Merger.

               (a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of Ordinary Shares covered by each
outstanding Option or Shares Purchase Right, and the number of Ordinary Shares
which have been authorized for issuance under the Plan but as to which no
Options or Shares Purchase Rights have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option or Shares
Purchase Right, as well as the price for each Ordinary Share covered by each
such outstanding Option or Shares Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued Ordinary Shares
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Ordinary Shares, or any other increase or decrease as
determined by the Administrator. The conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall


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be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number of Ordinary Shares
subject to an Option or Shares Purchase Right.

               (b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify the
Optionee at least fifteen (15) days prior to such proposed action. To the extent
it has not been previously exercised, the Option or Shares Purchase Right shall
terminate immediately prior to the consummation of such proposed action.

               (c) Merger. In the event of a merger of the Company with or into
another corporation, each outstanding Option or Shares Purchase Right may be
assumed or an equivalent option or right may be substituted by such successor
corporation or a parent or subsidiary of such successor corporation. If, in such
event, an Option or Shares Purchase Right is not assumed or substituted, the
Option or Stock Purchases Right shall terminate as of the date of the closing of
the merger. For the purposes of this paragraph, the Option or Shares Purchase
Right shall be considered assumed if, following the merger, the Option or Shares
Purchase Right confers the right to purchase or receive, for each share of
Optioned Stock subject to the Option or Shares Purchase Right immediately prior
to the merger, the consideration (whether stock, cash, or other securities or
property) received in the merger by holders of Ordinary Shares for each share
held on the effective date of the transaction (and if the holders are offered a
choice of consideration, the type of consideration received in the merger is not
solely common stock of the successor corporation or its parent). The
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option or Shares
Purchase Right, for each share of Optioned Stock subject to the Option or Shares
Purchase Right, to be solely common stock of the successor corporation or its
parent equal in fair market value to the per share consideration received by
holders of Ordinary Shares in the merger.

               (d) Compliance with Incentive Stock Option Provisions.
Notwithstanding anything to the contrary herein, each adjustment made to an
Incentive Stock Option pursuant to this Section 13 shall comply with the rules
of Section 424(a) of the Code, and no adjustment shall be made that would cause
any Incentive Stock Option to become a Nonstatutory Stock Option.

        14. Time of Granting Options and Shares Purchase Rights. The date of
grant of an Option or Shares Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or
Shares Purchase Right, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option or Shares Purchase Right is so granted within a reasonable time
after the date of such grant.

        15. Amendment and Termination of the Plan.

               (a) Amendment and Termination. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.


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               (b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options or Shares Purchase Rights
already granted, and such Options and Shares Purchase Rights shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Administrator, which
agreement must be in writing and signed by the Optionee and the Company.

        16. Conditions Upon Issuance of Ordinary Shares. Ordinary Shares shall
not be issued pursuant to the exercise of an Option or Shares Purchase Right
unless the exercise of such Option or Shares Purchase Right and the issuance and
delivery of such Ordinary Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the laws of Israel, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Ordinary Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.

        As a condition to the exercise of an Option or Shares Purchase Right,
the Company may require the person exercising such Option or Shares Purchase
Right to represent and warrant at the time of any such exercise that the
Ordinary Shares are being purchased only for investment and without any present
intention to sell or distribute such Ordinary Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.

        17. Reservation of Ordinary Shares. During the term of this Plan, the
Company shall at all times reserve and keep available such number of Ordinary
Shares as shall be sufficient to satisfy the requirements of the Plan.

        The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by Company counsel to be
necessary to the lawful issuance and sale of any Ordinary Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Ordinary Shares as to which such requisite authority shall not have
been obtained.

        18. Agreements. Options and Shares Purchase Rights shall be evidenced by
written agreements in such form as the Administrator shall approve from time to
time.

        19. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under Applicable Laws.

        20. Information to Optionees and Purchasers. The Company shall provide
to each Optionee and to each individual who acquires Ordinary Shares pursuant to
the Plan, not less frequently than annually during the period such Optionee has
one or more Options or Shares Purchase Rights outstanding, and, in the case of
an individual who acquires Ordinary Shares pursuant to the Plan, during the
period such individual owns such Ordinary Shares, copies of annual financial
statements. The Company shall not be required to provide such statements to key
employees whose duties in connection with the Company assure their access to
equivalent information.

        Approved by the Board of Directors: January 1, 1996

        Approved by the Shareholders: January 1, 1996

        Amended by the Board of Directors: April 18, 1999

        Amendment approved by the Shareholders: June 8, 1999

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