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                                                                   EXHIBIT 10.32

                                 DSP GROUP INC.

                       THE 2003 ISRAELI SHARE OPTION PLAN

                   (amended and restated on January 22, 2003)
                    (amended and restated on March 12, 2003)

   (*In compliance with Amendment No. 132 of the Israeli Tax Ordinance, 2002)

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TABLE OF CONTENTS

1.   PURPOSE OF THE ISOP                                            3

2.   DEFINITIONS                                                    3

3.   ADMINISTRATION OF THE ISOP                                     6

4.   DESIGNATION OF PARTICIPANTS                                    8

5.   DESIGNATION OF OPTIONS PURSUANT TO SECTION 102                 8

6.   TRUSTEE                                                        9

7.   SHARES RESERVED FOR THE ISOP; RESTRICTION THEREON             10

8.   PURCHASE PRICE                                                10

9.   ADJUSTMENTS                                                   10

10.  TERM AND EXERCISE OF OPTIONS                                  12

11.  VESTING OF OPTIONS                                            13

12.  PURCHASE FOR INVESTMENT                                       14

13.  DIVIDENDS                                                     14

14.  RESTRICTIONS ON ASSIGNABILITY AND SALE OF OPTIONS             14

15.  EFFECTIVE DATE AND DURATION OF THE ISOP                       15

16.  AMENDMENTS OR TERMINATION                                     15

17.  GOVERNMENT REGULATIONS                                        15

18.  CONTINUANCE OF EMPLOYMENT OR HIRED SERVICES                   15

19.  GOVERNING LAW & JURISDICTION                                  16

20.  TAX CONSEQUENCES                                              16

21.  NON-EXCLUSIVITY OF THE ISOP                                   16

22.  MULTIPLE AGREEMENTS                                           16

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        This plan, as amended from time to time, shall be known as the DSP Group
        Inc 2003 Israeli Share Option Plan (the "ISOP").

1.      PURPOSE OF THE ISOP

        The ISOP is intended to provide an incentive to retain, in the employ of
        the Company and its Affiliates (as defined below), persons of training,
        experience, and ability, to attract new employees, directors,
        consultants, service providers and any other entity which the Board
        shall decide their services are considered valuable to the Company, to
        encourage the sense of proprietorship of such persons, and to stimulate
        the active interest of such persons in the development and financial
        success of the Company by providing them with opportunities to purchase
        shares in the Company, pursuant to the ISOP.

2.      DEFINITIONS

        For purposes of the ISOP and related documents, including the Option
        Agreement, the following definitions shall apply:

        2.1     "Affiliate" means any "employing company" within the meaning of
                Section 102(a) of the Ordinance.

        2.2     "Approved 102 Option" means an Option granted pursuant to
                Section 102(b) of the Ordinance and held in trust by a Trustee
                for the benefit of the Optionee.

        2.3     "Board" means the Board of Directors of the Company.

        2.4     "Capital Gain Option (CGO)" as defined in Section 5.4 below.

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        2.5     "Cause" means, (i) conviction of any felony involving moral
                turpitude or affecting the Company; (ii) any refusal to carry
                out a reasonable directive of the chief executive officer, the
                Board or the Optionee's direct supervisor, which involves the
                business of the Company or its Affiliates and was capable of
                being lawfully performed; (iii) embezzlement of funds of the
                Company or its Affiliates; (iv) any breach of the Optionee's
                fiduciary duties or duties of care of the Company; including
                without limitation disclosure of confidential information of the
                Company; and (v) any conduct (other than conduct in good faith)
                reasonably determined by the Board to be materially detrimental
                to the Company.

        2.6     "Chairman" means the chairman of the Committee.

        2.7     "Code" means the United States Internal Revenue Code of 1986, as
                now in effect or as hereafter amended.

        2.8     "Committee" means a share option compensation committee of the
                Board, designated from time to time by the resolution of the
                Board, which shall consist of no fewer than two members of the
                Board. The Committee shall consist of directors who are "outside
                directors" as defined in Section 162(m) of the Code and
                "Non-Employee Directors" as defined in Rule 16b-3 promulgated by
                the Securities and Exchange Commission under the United States
                Securities Exchange Act of 1934.

        2.9     "Company" means DSP Group Inc, a Delaware corporation.

        2.10    "Controlling Shareholder" shall have the meaning ascribed to it
                in Section 32(9) of the Ordinance.

        2.11    "Date of Grant" means, the date of grant of an Option, as
                determined by the Board or authorized Committee and set forth in
                the Optionee's Option Agreement.

        2.12    Employee" means a person who is employed by the Company or its
                Affiliates, including an individual who is serving as a director
                or an office holder, but excluding Controlling Shareholder.

        2.13    "Expiration date" means the date upon which an Option shall
                expire, as set forth in Section 10.2 of the ISOP.

        2.14    "Fair Market Value" means as of any date, the value of a Share
                determined as follows:

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                (i)     If the Shares are listed on any established stock
                        exchange or a national market system, including without
                        limitation the NASDAQ National Market system, or the
                        NASDAQ SmallCap Market of the NASDAQ Stock Market, the
                        Fair Market Value shall be the closing sales price for
                        such Shares (or the closing bid, if no sales were
                        reported), as quoted on such exchange or system on the
                        date of determination, as reported in the Wall Street
                        Journal, or such other source as the Board deems
                        reliable.

                (ii)    Without derogating from the above, solely for the
                        purpose of determining the tax liability pursuant to
                        Section 102(b)(3) of the Ordinance, if at the Date of
                        Grant the Company's shares are listed on any established
                        stock exchange or a national market system or if the
                        Company's shares will be registered for trading within
                        ninety (90) days following the Date of Grant, the Fair
                        Market Value of a Share at the Date of Grant shall be
                        determined in accordance with the average value of the
                        Company's shares on the thirty (30) trading days
                        preceding the Date of Grant or on the thirty (30)
                        trading days following the date of registration for
                        trading, as the case may be;

                (iii)   If the Shares are regularly quoted by a recognized
                        securities dealer but selling prices are not reported,
                        the Fair Market Value shall be the mean between the high
                        bid and low asked prices for the Shares on the date of
                        determination, or;

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

        2.15    "ISOP" means this 2003 Israeli Share Option Plan.

        2.16    "ITA" means the Israeli Tax Authorities.

        2.17    "Non-Employee" means a consultant, adviser, service provider,
                Controlling Shareholder or any other person who is not an
                Employee.

        2.18    "Ordinary Income Option (OIO)" as defined in Section 5.5 below.

        2.19    "Option" means an option to purchase one or more Shares of the
                Company pursuant to the ISOP.

        2.20    "102 Option" means any Option granted to Employees pursuant to
                Section 102 of the Ordinance.

        2.21    "3(i) Option" means an Option granted pursuant to Section 3(i)
                of the Ordinance to any person who is Non-Employee.

        2.22    "Optionee" means a person who receives or holds an Option under
                the ISOP.

        2.23    "Option Agreement" means the share option agreement between the
                Company and an Optionee that sets out the terms and conditions
                of an Option.

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        2.24    "Ordinance" means the 1961 Israeli Income Tax Ordinance [New
                Version] 1961 as now in effect or as hereafter amended.

        2.25    "Purchase Price" means the price for each Share subject to an
                Option.

        2.26    "Section 102" means section 102 of the Ordinance as now in
                effect or as hereafter amended.

        2.27    "Share" means the common stock $ 0.001 par value each, of the
                Company.

        2.28    "Successor Company" means any entity the Company is merged to or
                is acquired by, in which the Company is not the surviving
                entity.

        2.29    "Transaction" means (i) merger, acquisition or reorganization of
                the Company with one or more other entities in which the Company
                is not the surviving entity, (ii) a sale of all or substantially
                all of the assets of the Company.

        2.30    "Trustee" means any individual appointed by the Company to serve
                as a trustee and approved by the ITA, all in accordance with the
                provisions of Section 102(a) of the Ordinance.

        2.31    "Unapproved 102 Option" means an Option granted pursuant to
                Section 102(c) of the Ordinance and not held in trust by a
                Trustee.

        2.32    "Vested Option" means any Option, which has already been vested
                according to the Vesting Dates.

        2.33    "Vesting Dates" means, as determined by the Board or by the
                Authorized Committee, the date as of which the Optionee shall be
                entitled to exercise the Options or part of the Options, as set
                forth in section 11 of the ISOP.

3.      ADMINISTRATION OF THE ISOP

        3.1     The Board or the Committee shall have the power to administer
                the ISOP, all as provided by applicable law and in the Company's
                incorporation documents. Notwithstanding the above, the Board
                shall automatically have residual authority if no Committee
                shall be constituted or if such Committee shall cease to operate
                for any reason.

        3.2     The Committee shall select one of its members as its Chairman
                and shall hold its meetings at such times and places as the
                Chairman shall determine. The Committee shall keep records of
                its meetings and shall make such rules and regulations for the
                conduct of its business, as it shall deem advisable.

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        3.3     The Committee shall have the full power and authority, subject
                to the approval of the Board to the extent required under
                applicable law to: (i) designate participants; (ii) determine
                the terms and provisions of the respective Option Agreements,
                including, but not limited to, the number of Options to be
                granted to each Optionee, the number of Shares to be covered by
                each Option, provisions concerning the time and the extent to
                which the Options may be exercised and the nature and duration
                of restrictions as to the transferability or restrictions
                constituting substantial risk of forfeiture and to cancel or
                suspend awards, as necessary; (iii) determine the Fair Market
                Value of the Shares covered by each Option; (iv) make an
                election as to the type of 102 Approved Option; and (v)
                designate the type of Options.(vi) alter any restrictions and
                conditions of any Options or Shares subject to any Options (vii)
                interpret the provisions and supervise the administration of the
                ISOP; (viii) accelerate the right of an Optionee to exercise in
                whole or in part, any previously granted Option; (ix) determine
                the Purchase Price of the Option; (x) prescribe, amend and
                rescind rules and regulations relating to the ISOP; and (xi)
                make all other determinations deemed necessary or advisable for
                the administration of the ISOP.

        3.4     The Board or the Committee shall have the authority to grant, at
                its discretion, to the holder of an outstanding Option, in
                exchange for the surrender and cancellation of such Option, a
                new Option having a purchase price equal to, lower than or
                higher than the Purchase Price of the original Option so
                surrendered and canceled and containing such other terms and
                conditions as the Committee may prescribe in accordance with the
                provisions of the ISOP.

        3.5     Subject to the Company's incorporation documents, all decisions
                and selections made by the Board or the Committee pursuant to
                the provisions of the ISOP shall be made by a majority of its
                members except that no member of the Board or the Committee
                shall vote on, or be counted for quorum purposes, with respect
                to any proposed action of the Board or the Committee relating to
                any Option to be granted to that member. Any decision reduced to
                writing shall be executed in accordance with the provisions of
                the Company's incorporation documents, as the same may be in
                effect from time to time.

        3.6     The interpretation and construction by the Committee of any
                provision of the ISOP or of any Option Agreement thereunder
                shall be final and conclusive unless otherwise determined by the
                Board.

        3.7     Subject to the Company's incorporation documents and the
                Company's decision and to all approvals legally required, each
                member of the Board or the Committee shall be indemnified and
                held harmless by the Company against any cost or expense
                (including counsel fees) reasonably incurred by him, or any
                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 ISOP 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 a director or
                otherwise under the Company's incorporation documents, any
                agreement, any vote of shareholders or disinterested directors,
                insurance policy or otherwise.

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4.      DESIGNATION OF PARTICIPANTS

        4.1     The persons eligible for participation in the ISOP as Optionees
                shall include any Employees and/or Non-Employees of the Company
                or of any Affiliate; provided, however, that (i) Employees may
                only be granted 102 Options; (ii) Non-Employees may only be
                granted 3(i) Options; and (iii) Controlling Shareholders may
                only be granted 3(i) Options.

        4.2     The grant of an Option hereunder shall neither entitle the
                Optionee to participate nor disqualify the Optionee from
                participating in, any other grant of Options pursuant to the
                ISOP or any other option or share plan of the Company or any of
                its Affiliates.

        4.3     Anything in the ISOP to the contrary notwithstanding, all grants
                of Options to directors and office holders shall be authorized
                and implemented in accordance with the provisions of any
                applicable law, as in effect from time to time.

5.      DESIGNATION OF OPTIONS PURSUANT TO SECTION 102

        5.1     The Company may designate Options granted to Employees pursuant
                to Section 102 as Unapproved 102 Options or Approved 102
                Options.

        5.2     The grant of Approved 102 Options shall be made under this ISOP
                adopted by the Board as described in Section 16 below, and shall
                be conditioned upon the approval of this ISOP by the ITA.

        5.3     Approved 102 Option may either be classified as Capital Gain
                Option ("CGO") or Ordinary Income Option ("OIO").

        5.4     Approved 102 Option elected and designated by the Company to
                qualify under the capital gain tax treatment in accordance with
                the provisions of Section 102(b)(2) shall be referred to herein
                as CGO.

        5.5     Approved 102 Option elected and designated by the Company to
                qualify under the ordinary income tax treatment in accordance
                with the provisions of Section 102(b)(1) shall be referred to
                herein as OIO.

        5.6     The Company's election of the type of Approved 102 Options as
                CGI or OIO granted to Employees (the "Election"), shall be
                appropriately filed with the ITA before the Date of Grant of an
                Approved 102 Option. Such Election shall become effective
                beginning the first Date of Grant of an Approved 102 Option
                under this ISOP and shall remain in effect until the end of the
                year following the year during which the Company first granted
                Approved 102 Options. The Election shall obligate the Company to
                grant only the type of Approved 102 Option it has elected, and
                shall apply to all Optionees who were granted Approved 102
                Options during the period indicated herein, all in accordance
                with the provisions of Section 102(g) of the Ordinance. For the
                avoidance of doubt, such Election shall not prevent the Company
                from granting Unapproved 102 Options simultaneously.

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        5.7     All Approved 102 Options must be held in trust by a Trustee, as
                described in Section 6 below.

        5.8     For the avoidance of doubt, the designation of Unapproved 102
                Options and Approved 102 Options shall be subject to the terms
                and conditions set forth in Section 102 of the Ordinance and the
                regulations promulgated thereunder.

        5.9     Any provision of Section 102 and/or regulations promulgated
                thereunder and/or any applicable law, which is necessary in
                order to receive and/or to keep any tax benefit pursuant
                thereto, which is not expressly specified in the ISOP or in the
                Option Agreement, shall be considered binding upon the Company
                and the Optionees.

6.      TRUSTEE

        6.1     Approved 102 Options which shall be granted under the ISOP
                and/or any Shares allocated or issued upon exercise of such
                Approved 102 Options and/or other shares received subsequently
                following any realization of rights, including bonus shares,
                shall be allocated or issued to the Trustee and held for the
                benefit of the Optionees for such period of time as required by
                Section 102 or any regulations, rules or orders or procedures
                promulgated thereunder (the "Holding Period"). In the case the
                requirements for Approved 102 Options are not met, then the
                Approved 102 Options shall be treated as Unapproved 102 Options,
                all in accordance with the provisions of Section 102 and
                regulations promulgated thereunder.

        6.2     Notwithstanding anything to the contrary, the Trustee shall not
                release any Shares allocated or issued upon exercise of Approved
                102 Options prior to the full payment of the Optionee's tax
                liabilities arising from Approved 102 Options which were granted
                to him and/or any Shares allocated or issued upon exercise of
                such Options.

        6.3     Upon receipt of Approved 102 Option, the Optionee 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 ISOP, or any Approved 102 Option or Share
                granted to him thereunder.

        6.4     With respect to any Approved 102 Option, subject to the
                provisions of Section 102 and any rules or regulation or orders
                or procedures promulgated thereunder, an Optionee shall not sell
                or release from trust any Share received upon the exercise of an
                Approved 102 Option and/or any share received subsequently
                following any realization of rights, including without
                limitation, bonus shares, until the lapse of the Holding Period
                required under Section 102 of the Ordinance. Notwithstanding the
                above, if any such sale or release occurs during the Holding
                Period, the sanctions under Section 102 of the Ordinance and
                under any rules or regulation or orders or procedures
                promulgated thereunder shall apply to and shall be borne by such
                Optionee.

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7.      SHARES RESERVED FOR THE ISOP; RESTRICTION THEREON

        7.1     Subject to adjustment as set forth in Section 9 below, the
                maximum aggregate number of authorized but unissued Shares which
                the Company has reserved for issuance pursuant to the ISOP is
                one million five hundred thousand (1,500,000) Shares plus an
                annual increase to be added on the first business day of each
                calendar year beginning in 2004 equal to three percent (3%) of
                the number of Shares outstanding as of such date or a lesser
                number of Shares determined by the Board or the Committee. Any
                Shares which remain unissued and which are not subject to the
                outstanding Options at the termination of the ISOP shall cease
                to be reserved for the purpose of the ISOP, but until
                termination of the ISOP the Company shall at all times reserve
                sufficient number of Shares to meet the requirements of the
                ISOP. Should any Option for any reason expire or be canceled
                prior to its exercise or relinquishment in full, the Shares
                subject to such Option may again be subjected to an Option under
                the ISOP 7.2 Each Option granted pursuant to the ISOP, shall be
                evidenced by a written Option Agreement between the Company and
                the Optionee, in such form as the Board or the Committee shall
                from time to time approve. Each Option Agreement shall state,
                among other matters, the number of Shares to which the Option
                relates, the type of Option granted thereunder (whether a CGI,
                OIO, Unapproved 102 Option or a 3(i) Option), the Vesting Dates,
                the Purchase Price per share, the Expiration Date and such other
                terms and conditions as the Committee or the Board in its
                discretion may prescribe, provided that they are consistent with
                this ISOP.

8.      PURCHASE PRICE

        8.1     The Purchase Price of each Share subject to an Option shall be
                determined by the Committee in its sole and absolute discretion
                in accordance with applicable law, subject to any guidelines as
                may be determined by the Board from time to time. Each Option
                Agreement will contain the Purchase Price determined for each
                Optionee.

        8.2     The Purchase Price shall be payable upon the exercise of the
                Option in a form satisfactory to the Committee, including
                without limitation, by cash or check. The Committee shall have
                the authority to postpone the date of payment on such terms as
                it may determine.

        8.3     The Purchase Price shall be denominated in the currency of the
                primary economic environment of, either the Company or the
                Optionee (that is the functional currency of the Company or the
                currency in which the Optionee is paid) as determined by the
                Company.

9.      ADJUSTMENTS

        Upon the occurrence of any of the following described events, Optionee's
        rights to purchase Shares under the ISOP shall be adjusted as hereafter
        provided:

        9.1     In the event of Transaction, the unexercised Options then
                outstanding under the ISOP shall be assumed or substituted for
                an appropriate number of shares of each class of shares or other
                securities of the Successor Company (or a

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                parent or subsidiary of the Successor Company) as were
                distributed to the shareholders of the Company in connection and
                with respect to the Transaction. In the case of such assumption
                and/or substitution of Options, appropriate adjustments shall be
                made to the Purchase Price so as to reflect such action and all
                other terms and conditions of the Option Agreements shall remain
                unchanged, including but not limited to the vesting schedule,
                all subject to the determination of the Committee or the Board,
                which determination shall be in their sole discretion and final.
                If the Successor Company (or parent or subsidiary of the
                Successor Company) does not agree to assume the Options, the
                Options shall terminate upon the effective date of the
                Transaction. The Company shall notify the Optionee of the
                Transaction in such form and method as it deems applicable at
                least ten (10) days prior to the effective date of such
                Transaction.

        9.2     Notwithstanding the above and subject to any applicable law, the
                Board or the Committee shall have full power and authority to
                determine that in certain Option Agreements there shall be a
                clause instructing that, if in any such Transaction as described
                in section 9.1 above, the Successor Company (or parent or
                subsidiary of the Successor Company) does not agree to assume or
                substitute for the Options, the Vesting Dates shall be
                accelerated so that any unvested Option or any portion thereof
                shall be immediately vested as of the date which is ten (10)
                days prior to the effective date of the Transaction.

        9.3     For the purposes of section 9.1 above, an Option shall be
                considered assumed or substituted if, following the Transaction,
                the Option confers the right to purchase or receive, for each
                Share underlying an Option immediately prior to the Transaction,
                the consideration (whether shares, options, cash, or other
                securities or property) received in the Transaction by holders
                of shares held on the effective date of the Transaction (and if
                such holders were offered a choice of consideration, the type of
                consideration chosen by the holders of a majority of the
                outstanding shares); provided, however, that if such
                consideration received in the Transaction is not solely ordinary
                shares (or their equivalent) of the Successor Company or its
                parent or subsidiary, the Committee may, with the consent of the
                Successor Company, provide for the consideration to be received
                upon the exercise of the Option to be solely ordinary shares (or
                their equivalent) of the Successor Company or its parent or
                subsidiary equal in Fair Market Value to the per Share
                consideration received by holders of a majority of the
                outstanding shares in the Transaction; and provided further that
                the Committee may determine, in its discretion, that in lieu of
                such assumption or substitution of Options for options of the
                Successor Company or its parent or subsidiary, such Options will
                be substituted for any other type of asset or property including
                cash which is fair under the circumstances.

        9.4     If the Company is voluntarily liquidated or dissolved while
                unexercised Options remain outstanding under the ISOP, the
                Company shall immediately notify all unexercised Option holders
                of such liquidation, and the Option holders shall then have ten
                (10) days to exercise any unexercised Vested Option held by them
                at that time, in accordance with the exercise procedure

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                set forth herein. Upon the expiration of such ten-days period,
                all remaining outstanding Options will terminate immediately.

        9.5     If the outstanding shares of the Company shall at any time be
                changed or exchanged by declaration of a share dividend (bonus
                shares), share split, combination or exchange of shares,
                recapitalization, or any other like event by or of the Company,
                and as often as the same shall occur, then the number, class and
                kind of the Shares subject to the ISOP or subject to any Options
                therefore granted, and the Purchase Prices, shall be
                appropriately and equitably adjusted so as to maintain the
                proportionate number of Shares without changing the aggregate
                Purchase Price, provided, however, that no adjustment shall be
                made by reason of the distribution of subscription rights
                (rights offering) on outstanding shares. Upon happening of any
                of the foregoing, the class and aggregate number of Shares
                issuable pursuant to the ISOP (as set forth in Section 7
                hereof), in respect of which Options have not yet been
                exercised, shall be appropriately adjusted, all as will be
                determined by the Board whose determination shall be final.

10.     TERM AND EXERCISE OF OPTIONS

        10.1    Options shall be exercised by the Optionee by giving written
                notice to the Company and/or to any third party designated by
                the Company (the "Representative"), in such form and method as
                may be determined by the Company and when applicable, by the
                Trustee in accordance with the requirements of Section 102,
                which exercise shall be effective upon receipt of such notice by
                the Company and/or the Representative and the payment of the
                Purchase Price at the Company's or the Representative's
                principal office. The notice shall specify the number of Shares
                with respect to which the Option is being exercised.

        10.2    Options, to the extent not previously exercised, shall terminate
                forthwith upon the earlier of: (i) the date set forth in the
                Option Agreement; and (ii) the expiration of any extended period
                in any of the events set forth in section 10.5 below.

        10.3    The Options may be exercised by the Optionee in whole at any
                time or in part from time to time, to the extent that the
                Options become vested and exercisable, prior to the Expiration
                Date, and provided that, subject to the provisions of section
                10.5 below, the Optionee is employed by or providing services to
                the Company or any of its Affiliates, at all times during the
                period beginning with the granting of the Option and ending upon
                the date of exercise.

        10.4    Subject to the provisions of section 10.5 below, in the event of
                termination of Optionee's employment or services, with the
                Company or any of its Affiliates, all Options granted to such
                Optionee will immediately expire. A notice of termination of
                employment or service shall be deemed to constitute termination
                of employment or service. For the avoidance of doubt, in case of

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                such termination of employment or service, the unvested portion
                of the Optionee's Option shall not vest and shall not become
                exercisable.

        10.5    Notwithstanding anything to the contrary hereinabove and unless
                otherwise determined in the Optionee's Option Agreement, an
                Option may be exercised after the date of termination of
                Optionee's employment or service with the Company or any
                Affiliates during an additional period of time beyond the date
                of such termination, but only with respect to the number of
                Vested Options at the time of such termination according to the
                Vesting Dates, if:

                (i)     termination is without Cause, in which event any Vested
                        Option still in force and unexpired may be exercised
                        within a period of ninety (90) days after the date of
                        such termination; or-

                (ii)    termination is the result of death or disability of the
                        Optionee, in which event any Vested Option still in
                        force and unexpired may be exercised within a period of
                        twelve (12) months after the date of such termination;
                        or

                (iii)   prior to the date of such termination, the Committee
                        shall authorize an extension of the terms of all or part
                        of the Vested Options beyond the date of such
                        termination for a period not to exceed the period during
                        which the Options by their terms would otherwise have
                        been exercisable.

                For avoidance of any doubt, if termination of employment or
                service is for Cause, any outstanding unexercised Option
                (whether vested or non-vested), will immediately expire and
                terminate, and the Optionee shall not have any right in
                connection to such outstanding Options.

        10.6    To avoid doubt, the holders of Options shall not be deemed
                owners of the Shares issuable upon the exercise of Options and
                shall not have any of the rights or privileges of shareholders
                of the Company in respect of any Shares purchasable upon the
                exercise of any part of an Option, until registration of the
                Optionee as holder of such Shares in the Company's register of
                shareholders upon exercise of the Option in accordance with the
                provisions of the ISOP.

        10.7    Any form of Option Agreement authorized by the ISOP may contain
                such other provisions as the Committee may, from time to time,
                deem advisable.

        10.8    With respect to Unapproved 102 Option, if the Optionee ceases to
                be employed by the Company or any Affiliate, the Optionee shall
                extend to the Company and/or its Affiliate 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 or orders promulgated thereunder.

11.     VESTING OF OPTIONS

        11.1    Subject to the provisions of the ISOP, each Option shall vest
                following the Vesting Dates and for the number of Shares as
                shall be provided in the Option

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                Agreement. However, no Option shall be exercisable after the
                Expiration Date.

        11.2    An Option may be subject to such other terms and conditions on
                the time or times when it may be exercised, as the Committee may
                deem appropriate. The vesting provisions of individual Options
                may vary.

12.     PURCHASE FOR INVESTMENT

        The Company's obligation to issue or allocate Shares upon exercise of an
        Option granted under the ISOP is expressly conditioned upon: (a) the
        Company's completion of any registration or other qualifications of such
        Shares under all applicable laws, rules and regulations or (b)
        representations and undertakings by the Optionee (or his legal
        representative, heir or legatee, in the event of the Optionee's death)
        to assure that the sale of the Shares complies with any registration
        exemption requirements which the Company in its sole discretion shall
        deem necessary or advisable. Such required representations and
        undertakings may include representations and agreements that such
        Optionee (or his legal representative, heir, or legatee): (a) is
        purchasing such Shares for investment and not with any present intention
        of selling or otherwise disposing thereof; and (b) agrees to have placed
        upon the face and reverse of any certificates evidencing such Shares a
        legend setting forth (i) any representations and undertakings which such
        Optionee has given to the Company or a reference thereto and (ii) that,
        prior to effecting any sale or other disposition of any such Shares, the
        Optionee must furnish to the Company an opinion of counsel, satisfactory
        to the Company, that such sale or disposition will not violate the
        applicable laws, rules, and regulations, whether of the State of Israel
        or of the United States or any other State having jurisdiction over the
        Company and the Optionee.

13.     DIVIDENDS

        With respect to all Shares (but excluding, for avoidance of any doubt,
        any unexercised Options) allocated or issued upon the exercise of
        Options purchased by the Optionee and held by the Optionee or by the
        Trustee, as the case may be, the Optionee shall be entitled to receive
        dividends in accordance with the quantity of such Shares, subject to the
        provisions of the Company's Incorporation Documents (and all amendments
        thereto) and subject to any applicable taxation on distribution of
        dividends, and when applicable subject to the provisions of Section 102
        and the rules, regulations or orders promulgated thereunder.

14.     RESTRICTIONS ON ASSIGNABILITY AND SALE OF OPTIONS

        14.1    No Option or any right with respect thereto, purchasable
                hereunder, whether fully paid or not, shall be assignable,
                transferable or given as collateral or any right with respect to
                it given to any third party whatsoever, except as specifically
                allowed under the ISOP, and during the lifetime of the Optionee
                each and all of such Optionee's rights to purchase Shares
                hereunder shall be exercisable only by the Optionee.

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                Any such action made directly or indirectly, for an immediate
                validation or for a future one, shall be void.

        14.2    As long as the Shares are held by the Trustee on behalf of the
                Optionee, all rights of the Optionee over the Shares are
                personal, can not be transferred, assigned, pledged or
                mortgaged, other than by will or pursuant to the laws of descent
                and distribution.

15.     EFFECTIVE DATE AND DURATION OF THE ISOP

        The ISOP shall be effective as of the day it was adopted by the Board
        and shall continue in effect until terminated by the Board.

16.     AMENDMENTS OR TERMINATION

        The Board may at any time, but when applicable, after consultation with
        the Trustee, amend, alter, suspend or terminate the ISOP. No amendment,
        alteration, suspension or termination of the ISOP shall impair the
        rights of any Optionee, unless mutually agreed otherwise between the
        Optionee and the Company, which agreement must be in writing and signed
        by the Optionee and the Company. Termination of the ISOP shall not
        affect the Committee's ability to exercise the powers granted to it
        hereunder with respect to Options granted under the ISOP prior to the
        date of such termination.

        The Company shall obtain the approval of the Company's shareholders for
        any amendment to this ISOP if shareholders' approval is necessary or
        desirable to comply with any applicable law. The Board may also, but
        need not, require that the Company's shareholders approve any other
        amendments to this ISOP.

17.     GOVERNMENT REGULATIONS

        The ISOP, and the granting and exercise of Options hereunder, and the
        obligation of the Company to sell and deliver Shares under such Options,
        shall be subject to all applicable laws, rules, and regulations, whether
        of the State of Israel or of the United States or any other State having
        jurisdiction over the Company and the Optionee, including the
        registration of the Shares under the United States Securities Act of
        1933, and the Ordinance and to such approvals by any governmental
        agencies or national securities exchanges as may be required. Nothing
        herein shall be deemed to require the Company to register the Shares
        under the securities laws of any jurisdiction.

18.     CONTINUANCE OF EMPLOYMENT OR HIRED SERVICES

        Neither the ISOP nor the Option Agreement with the Optionee shall impose
        any obligation on the Company or an Affiliate thereof, to continue any
        Optionee in its employ or service, and nothing in the ISOP or in any
        Option granted pursuant thereto shall confer upon any Optionee any right
        to continue in the employ or service of the Company or an Affiliate
        thereof or restrict the right of the Company or an Affiliate thereof to
        terminate such employment or service at any time.

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19.     GOVERNING LAW & JURISDICTION

        The ISOP shall be governed by and construed and enforced in accordance
        with the laws of the State of Israel applicable to contracts made and to
        be performed therein, without giving effect to the principles of
        conflict of laws. The competent courts of Tel-Aviv, Israel shall have
        sole jurisdiction in any matters pertaining to the ISOP.

20.     TAX CONSEQUENCES

        20.1    Any tax consequences arising from the grant or exercise of any
                Option, from the payment for Shares covered thereby or from any
                other event or act (of the Company and/or its Affiliates, the
                Trustee or the Optionee), hereunder, shall be borne solely by
                the Optionee. The Company and/or its Affiliates and/or the
                Trustee shall withhold taxes according to the requirements under
                the applicable laws, rules, and regulations, including
                withholding taxes at source. Furthermore, the Optionee shall
                agree to indemnify the Company and/or its Affiliates and/or the
                Trustee and hold them harmless against and from any and all
                liability for any such tax or interest or penalty thereon,
                including without limitation, liabilities relating to the
                necessity to withhold, or to have withheld, any such tax from
                any payment made to the Optionee.

        20.2    The Company and/or, when applicable, the Trustee shall not be
                required to release any Share certificate to an Optionee until
                all required payments have been fully made.

21.     NON-EXCLUSIVITY OF THE ISOP

        The adoption of the ISOP by the Board shall not be construed as
        amending, modifying or rescinding any previously approved incentive
        arrangements or as creating any limitations on the power of the Board to
        adopt such other incentive arrangements as it may deem desirable,
        including, without limitation, the granting of Options otherwise than
        under the ISOP, and such arrangements may be either applicable generally
        or only in specific cases.

        For the avoidance of doubt, prior grant of options to Optionees of the
        Company under their employment agreements, and not in the framework of
        any previous option plan, shall not be deemed an approved incentive
        arrangement for the purpose of this Section.

22.     MULTIPLE AGREEMENTS

        The terms of each Option may differ from other Options granted under the
        ISOP at the same time, or at any other time. The Board may also grant
        more than one Option to a given Optionee during the term of the ISOP,
        either in addition to, or in substitution for, one or more Options
        previously granted to that Optionee.

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23.     ISOP APPROVAL

        The ISOP was adopted by the Board in November of 2002. In January 2003,
        the Board adopted and approved an amendment and restatement of the ISOP
        to increase the number of Shares reserved for issuance under the ISOP by
        400,000 shares. In March 2003, the Board adopted and approved an
        amendment and restatement of the ISOP to amend the ISOP in order to
        comply with changes in Israeli tax law.

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