Exhibit 4.(c)1

              ECI Telecom Ltd. Employee Share Incentive Plan 2002,
                        as last amended January 15, 2006.



<PAGE>

               ECI TELECOM LTD. EMPLOYEE SHARE INCENTIVE PLAN 2002
                          (as updated 15 January 2006)


                               A. NAME AND PURPOSE

1.    Name: This plan, as amended from time to time,  shall be known as the "ECI
      Telecom Ltd. Employee Share Incentive Plan 2002" (the "Plan").

2.    Purpose:  The purpose and intent of the Plan is to provide  incentives  to
      employees  and  directors  of ECI Telecom  Ltd.  (the  "Company")  and any
      subsidiary or affiliate  thereof,  and other  beneficiaries,  by providing
      them with options  ("Options") to purchase  Ordinary Shares (nominal value
      NIS 0.12 per share) in the Company ("Shares"),  pursuant to (i) a plan (or
      plans)  approved by the Board of Directors  of the Company  (the  "Board")
      which is (are)  designed to benefit  from,  and is (are) made pursuant to,
      the  provisions of Section 102 of the Israeli  Income Tax  Ordinance  [New
      Version],  1961 (the  "Ordinance") and any regulations,  rules,  orders or
      procedures  promulgated  thereunder (a "Qualified Plan"),  and/or (ii) any
      other   share   incentive   plan  which  is   approved  by  the  Board  (a
      "Non-Qualified  Plan"),  provided that any Qualified Plan or Non-Qualified
      Plan  (individually - a "Sub-Plan" and  collectively - "Sub-Plans")  shall
      not contain any provisions which are  inconsistent  with the general terms
      and conditions  contained herein below (the term "Plan" shall,  unless the
      context  requires  otherwise,  include  any  and  all  Sub-Plans  then  in
      existence).

                   B. GENERAL TERMS AND CONDITIONS OF THE PLAN

3.    Administration:

3.1   The Plan will be administered by the Board or by a Remuneration  Committee
      (the  "Committee"),  if permitted by applicable law, which will consist of
      such number of Directors of the Company (not less than two in number),  as
      may be fixed from time to time by the Board.  The Board shall  appoint the
      members of the  Committee,  may from time to time remove  members from, or
      add members to, the  Committee  and shall fill  vacancies in the Committee
      however caused.  The Board may make grants in accordance with the Plan and
      otherwise  administer the Plan without having received  recommendations on
      such matters from the Committee.  If a Committee is not  appointed,  or to
      the extent that the Board acts in accordance  with the Plan without having
      received   recommendations  from  the  Committee,  the  term  "Committee,"
      whenever used herein, shall mean the Board.

3.2   The  Committee  shall  select one of its members as its Chairman and shall
      hold its meetings at such times and places as it shall determine.  Actions
      taken by a majority of the members of the Committee  present and voting at
      a meeting of the Committee at which a majority of its members are present,
      or  acts  reduced  to,  or  approved  in  writing  by all  members  of the
      Committee,  shall be the valid acts of the  Committee.  The  Committee may
      appoint a  Secretary,  shall keep  records of its  meetings and shall make
      such rules and  regulations  for the  conduct of its  business as it shall
      deem advisable.

3.3   Subject to applicable  law and to the general terms and conditions of this
      Plan and subject to any special provisions of any Sub-Plan,  the Committee
      shall have full authority in its discretion,  from time to time and at any
      time,  to  determine  (i) the  persons  to whom  Options  shall be granted
      ("Grantees"),  (ii) the  number of Shares to be  covered  by each  Option,
      (iii)  the  time or times at which  the same  shall be  granted,  (iv) the
      schedule and  conditions  on which such  Options may be  exercised  and on
      which  such  Shares  shall be paid for,  (v)  subject to  applicable  law,
      whether or not the Options will be granted  pursuant to Section 102 of the
      Ordinance ("102  Options"),  (vi) with regard to Section 102 as amended in
      amendment  132 of the Ordinance - whether the Options will be granted to a
      trustee  under  Section  102(b) of the  Ordinance  and the election of the
      "Work Income Route"  according to Section  102(b)(1) of the Ordinance (the
      "Work  Income  Route") or the "Capital  Gains Route"  according to Section
      102(b)(2) of the Ordinance (the "Capital  Gains Route"),  or - whether the
      Options will not be granted to a trustee, as detailed in Section 102(c) of
      the  Ordinance,  and/or  (vii)  any other  matter  which is  necessary  or
      desirable for, or incidental to, the administration of the Plan.


<PAGE>

3.4   The Committee may from time to time adopt such rules and  regulations  for
      carrying  out the Plan as it may deem  best.  No member of the Board or of
      the Committee shall be liable for any action or determination made in good
      faith with respect to the Plan or any Option granted thereunder.

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

4.    Eligible Grantees:

4.1   Options  may be granted  (i) under a Qualified  Plan to any  officer,  key
      employee or other  employee of the  Company,  whether or not a Director of
      the  Company  ("Employee")  and  (ii)  under a  Non-Qualified  Plan to any
      Employee,  director,  consultant  or  contractor  of the Company.  For the
      purpose  of the  Plan  and  subject  to any  limitation  contained  in any
      Sub-Plan,  the term "Employee" shall include  employees of subsidiaries of
      the Company.  Anything in this Plan to the contrary  notwithstanding,  the
      authorization and implementation of all grants of Options to "Nosei Misra"
      (Office  Holders  of the  Company),  as such term is defined in the Israel
      Companies  Law,  1999  (the  "Companies  Law"),  shall be  subject  to the
      provisions of applicable law.

4.2   The grant of an Option to a Grantee hereunder,  shall neither entitle such
      Grantee to  participate,  nor  disqualify him from  participating,  in any
      other grant of options  pursuant to this Plan or any other share incentive
      or stock option plan of the Company or any of its subsidiaries.

5.    Grant of Options and Issuance of Shares in Trust:

5.1   The  effective  date of the grant of an Option (the "Date of Grant") shall
      be the date the Committee  resolved to award the Option,  unless specified
      otherwise by the Committee.  The Committee shall promptly give the Grantee
      written  notice (the  "Notice of Grant") of the grant to the Grantee of an
      Option.

5.2   Anything herein to the contrary notwithstanding, Options granted under the
      Plan  may be  granted  by  the  Company  to a  trustee  designated  by the
      Committee and, with respect to 102 Options, to the trustee approved by the
      Israel  Commissioner of Income Tax (the "Trustee"),  and the Trustee shall
      hold each such Option and the Shares issued upon exercise thereof in trust
      (the  "Trust")  for the  benefit  of the  Grantee  in respect of whom such
      Option was granted (the "Beneficial Grantee").  In accordance with Section
      102 of the Ordinance and the rules and regulations promulgated thereunder,
      102 Options and any Shares  received  upon exercise of such Options may be
      locked  up and held by the  Trustee  for a period of at least (i) one year
      from the end of the tax year in which the 102 Options are granted,  if the
      Company  elects the Work Income  Route,  or (ii) two years from the end of
      the tax year in which the 102 Options are granted,  if the Company  elects
      the Capital  Gains Route,  or (iii) such other period as shall be approved
      by the Israel  Commissioner of Income Tax. All  certificates  representing
      Shares  issued to the Trustee  under the Plan shall be deposited  with the
      Trustee, and shall be held by the Trustee until such time that such Shares
      are released from the Trust as herein provided.  If under the terms of any
      Sub-Plan, Options and/or Shares are to be held in trust, the Trustee shall
      hold the same  pursuant to the Company's  instructions  from time to time.
      The Trustee  shall not use the voting  rights of any such Shares and shall
      not exercise said rights in any way whatsoever.

<PAGE>

5.3   After the Options have vested,  the  following  provisions  shall apply in
      respect of any Options or Shares in trust, as follows:

      (a)   Upon the  written  request of any  Beneficial  Grantee,  the Trustee
            shall release from the Trust the Options granted,  and/or the Shares
            issued,  on behalf of such  Beneficial  Grantee,  by  executing  and
            delivering  to the  Company  such  instrument(s)  as the Company may
            require,  giving  due  notice  of such  release  to such  Beneficial
            Grantee,  provided,  however, that the Trustee shall not release any
            such Options  and/or Shares to such  Beneficial  Grantee  unless the
            latter,  prior to, or concurrently with, such release,  provides the
            Trustee with  evidence,  satisfactory  in form and  substance to the
            Trustee,  that all  taxes,  if any,  required  to be paid  upon such
            release have, in fact, been paid.

      (b)   Alternatively,  provided the Shares have been  registered on a stock
            exchange or admitted to trading on an electronic  securities trading
            system (such as the Nasdaq Stock  Market) or an exemption  from such
            registration  is  available,  upon the written  instructions  of the
            Beneficial  Grantee  to sell any  Shares  issued  upon  exercise  of
            Options, the Trustee shall use his reasonable efforts to effect such
            sale  and  shall  transfer  such  Shares  to the  purchaser  thereof
            concurrently  with  the  receipt,  or  after  having  made  suitable
            arrangements  to secure the payment of, the proceeds of the purchase
            price in such  transaction.  The Trustee  shall  withhold  from such
            proceeds  any and all taxes  required  to be paid in respect of such
            sale,  shall  remit the amount so withheld  to the  appropriate  tax
            authorities  and  shall  pay the  balance  thereof  directly  to the
            Beneficial Grantee,  reporting to such Beneficial Grantee and to the
            Company the amount so withheld and paid to said tax authorities.

5.4   Dividend: All Shares issued upon the exercise of Options granted under the
      Plan shall entitle the Beneficial  Grantee thereof to receive dividends in
      respect thereof.  For so long as Shares issued to the Trustee on behalf of
      a  Beneficial  Grantee  are  held  in the  Trust,  the  dividends  paid or
      distributed  in respect  thereof  shall be remitted to the Trustee for the
      benefit of such Beneficial Grantee or directly to the Beneficial  Grantee,
      as determined by the Board.

<PAGE>

6.    Reserved  Shares:  The  Company has  reserved  32,760,700  authorized  but
      unissued Shares for purposes of the Plan and the Company's  previous Share
      Incentive  Plans,  subject to adjustment as provided in Section 11 hereof.
      Notwithstanding the aforesaid,  the Committee shall have full authority in
      its discretion to determine  that the Company may issue,  for the purposes
      of this Plan, previously issued Shares which are held by the Company, from
      time to time, as Dormant  Shares (as such term is defined in the Companies
      Law).  Any Shares under the Plan, in respect of which the right  hereunder
      of a Grantee to purchase the same shall for any reason  terminate,  expire
      or otherwise  cease to exist,  shall again be available  for grant through
      Options under the Plan.

7.    Grant of Options:

7.1   The Committee in its discretion may award to Grantees  Options to purchase
      Shares available under the Plan.  Options may be granted at any time after
      this Plan has been  approved  by the  Shareholders  of the Company and the
      Shares  reserved  for the Plan  effectively  created,  but not later  than
      December 31, 2012.

7.2   Anything  herein to the contrary  notwithstanding,  Options may be granted
      under  the  Plan  prior  to the date of any  approval  regarding  the Plan
      required of the  Shareholders  of the Company,  provided  such Options are
      made subject to such approval.

7.3   The Notice of Grant of an Option  shall state,  inter alia,  the number of
      Shares  covered  thereby,  the  Vesting  Period (as  hereinafter  defined)
      thereof,  the dates when it may be exercised,  the exercise price, whether
      the Option is a 102 Option and the Route the  Company has elected for such
      102 Option,  if applicable,  the schedule on which such Shares may be paid
      for and such other terms and conditions as the Committee at its discretion
      may prescribe,  provided that they are  consistent  with (i) this Plan and
      (ii) the specific  provisions  of the  Sub-Plan  under which the Option is
      awarded.

7.4   Without  derogating  from the  rights and  powers of the  Committee  under
      Section 7.3 hereof,  unless  determined  otherwise by the  Committee,  the
      schedule  pursuant to which Options  granted under the Plan shall vest and
      the  Grantee  thereof  shall be entitled to pay for and acquire the Shares
      (the  "Vesting  Period"),  shall be such that the  Options  shall be fully
      vested on the first  business day  following the passing of four (4) years
      from the  Date of Grant as  follows:  12.5%  of such  Options  shall  vest
      following  the  elapse  of six (6)  months  from the  Adoption  Date  (the
      "Adoption  Date" for the  purpose  of this Plan means the Date of Grant or
      any other date  determined  by the Committee for a given grant of Options)
      and a further  6.25% of such  Options  shall  vest on the last day of each
      quarter,  during fourteen (14) consecutive  quarters  thereafter.  Vesting
      Period  of an  Option  shall  mean,  for the  purpose  of the Plan and its
      related instruments,  the period between the Date of Grant and the date on
      which the Grantee may exercise the rights awarded pursuant to terms of the
      Option.

7.5   Anything  herein  to  the  contrary  in  this  Plan  notwithstanding,  the
      Committee shall have full authority to determine any provisions  regarding
      the  acceleration of the Vesting Period of any Option or the  cancellation
      of all or any portion of any outstanding  restrictions with respect to any
      Option or Share upon certain  events or  occurrences,  and to include such
      provisions  in the  Notice of Grant on such  terms and  conditions  as the
      Committee shall deem appropriate.


<PAGE>

8.    Exercise Price: The exercise price per Share covered by an Option shall be
      as determined solely by the Committee.

9.    Exercise of Options:

9.1   Options shall be  exercisable  pursuant to the terms under which they were
      awarded  and subject to the terms and  conditions  of this Plan and of the
      Sub-Plan under which they were awarded.

9.2   Options granted pursuant to the Plan shall be exercisable by the Grantee's
      signing and  returning to the Company at its  principal  office (or,  with
      respect to Options held in the Trust,  by the  Trustee's  delivering  upon
      receipt of written instructions from the Beneficial Grantee), a "Notice of
      Exercise" specifying the number of Shares to be purchased,  accompanied by
      the payment  therefor,  and containing  such other terms and conditions as
      the Committee shall prescribe from time to time.

9.3   Anything herein to the contrary  notwithstanding,  but without  derogating
      from the  provisions  of  Section  10  hereof,  if any Option has not been
      exercised  and the  shares  covered  thereby  not paid for within ten (10)
      years after the Date of Grant (or any other  relevant  period set forth in
      the Notice of Grant),  such  Option and the right to acquire  such  Shares
      shall  terminate,  all  interests  and rights of the Grantee in and to the
      same  shall  ipso  facto  expire,  and,  in the event  that in  connection
      therewith  any  Options are held in Trust as  aforesaid,  such Trust shall
      ipso facto expire. Such Options will return to the unallocated pool stated
      in  section 6 until  instructed  by the  Company  that some or all of such
      Options are again to be held in trust for one or more Grantees.

9.4   Each  payment for Shares  shall be in respect of a whole number of Shares,
      shall be effected in cash or by a cashier's or certified  check payable to
      the order of the Company,  or such other method or payment  acceptable  to
      the Company.

9.5   Notwithstanding  the provisions of Section 9.4 above, and unless otherwise
      provided  by the  terms of the  Notice  of  Grant,  all  Options  shall be
      exercised in the following manner (the "Net Exercise"):

      (a)   The  Company  shall  issue to the  Grantee  (or to the  Trustee,  as
            applicable) a number of Shares having an aggregate  Market Value (as
            defined  below)  equal to the  Benefit  Amount  (the  "Net  Exercise
            Shares");

            For the purposes of this Section:

            (i)   The "Benefit Amount" shall mean the difference between:

                  (A)   the product of (i) the Market  Value and (ii) the number
                        of  Shares  corresponding  to the  Options  for  which a
                        Notice of Exercise has been given; and

                  (B)   the  product  of (i) the  Exercise  Price  and  (ii) the
                        number of Shares  corresponding to the Options for which
                        a Notice of Exercise has been given.

<PAGE>

            (ii)  "Market Value" shall mean the closing price for a Share on the
                  last trading day prior to the date of exercise, as reported or
                  quoted on the  Nasdaq or on any  other  stock  market on which
                  Shares are traded, as shall be determined by the Committee.

      (b)   The Grantee shall not be required to pay to the Company any sum with
            respect to the exercise of such  Options,  other than a sum equal to
            the aggregate  nominal value of the Net Exercise Shares (which shall
            be paid in a manner  provided in Section  9.4 above)  (the  "Nominal
            Value Sum").  However,  the Company shall have the full authority in
            its  discretion  to determine at any time that the Nominal Value Sum
            shall not be paid and that the Company shall  capitalize  applicable
            profits so that it meets any requirement of applicable law regarding
            issuance of Shares for consideration  that is lower than the nominal
            value of such Shares;

      (c)   No fractional  Share will be issued to the Grantee and the number of
            Shares granted to the Grantee  pursuant  hereto shall be rounded off
            to the nearest whole number.

9.6   (a) In the event of any Change in Control (as hereinafter  defined),  each
      outstanding  Option not yet vested shall,  unless otherwise  determined by
      the  Board,  automatically  vest in full so that each such  Option  shall,
      immediately  prior to the effective date of the Change in Control,  become
      fully  exercisable  for all of the Shares of the Company  underlying  such
      Option.  Each such  Option  shall  remain  exercisable  for  Shares in the
      Company existing after the Change of Control until the original expiration
      or sooner termination of the Option.

      (b)   Change in Control shall mean a change in ownership or control of the
            Company effected through any of the following transactions:

            (i)   the  acquisition,  directly  or  indirectly  by any  person or
                  related  group  of  persons   (other  than  Clal   Electronics
                  Industries Ltd., Koor Industries Ltd. and/or their affiliates)
                  of  beneficial  ownership of securities  possessing  more than
                  thirty-five  percent (35%) of the total combined  voting power
                  of the Company's outstanding securities;

            (ii)  a change  in the  composition  of the  Board  over a period of
                  thirty-six  (36)  consecutive  months  or  less  such  that  a
                  majority of the members of the Board ceases,  by reason of one
                  or more contested  elections to the Board,  to be comprised of
                  individuals  who either (x) have been  members of the Board of
                  Directors  continuously  since the beginning of such period or
                  (y) have been elected or nominated  for election as members of
                  the Board  during  such  period by at least a majority  of the
                  shareholders of the Company prior to such change;

            (iii) a merger or consolidation  or a similar business  combination,
                  in which securities  possessing fifty percent (50%) or more of
                  the total combined  voting power of the Company's  outstanding
                  securities are  transferred  to a person or persons  different
                  from the persons holding those securities immediately prior to
                  such transaction; or

<PAGE>

            (iv)  the   sale,   transfer   or  other   disposition   of  all  or
                  substantially all of the Company's assets.

10.   Termination of Employment:

10.1  In General: Subject to the provisions of Section 10.2 hereof, if a Grantee
      should,  for  any  reason,  cease  to be  employed  by  the  Company  or a
      subsidiary  thereof,  all of his  rights,  if any,  in  respect of (i) all
      Options  theretofore  granted  to such  Grantee  under  the  Plan  and not
      exercised  (to the  extent  that they are  exercisable)  within the Notice
      Period, as defined below, and/or (ii) all Shares which may be purchased by
      such  Grantee  under the Plan and not fully  paid for  within  the  Notice
      Period,  shall  ipso  facto  terminate.  In the  event of  resignation  or
      discharge  of a Grantee  from the employ of the  Company  or a  subsidiary
      thereof,  for the purposes of this Section 10.1, the "Notice Period" shall
      be the  period  which  ends 30 days  after the date on which  the  Grantee
      actually ceases to be employed by the Company or a subsidiary thereof. The
      transfer  of a Grantee  from the employ of the  company to the employ of a
      subsidiary  of the  Company,  or from the  employ of a  subsidiary  of the
      Company to the employ of the Company or another subsidiary of the Company,
      shall not be deemed a  termination  of  employment  for  purposes  hereof.
      Whether an authorized leave of absence on military, governmental or public
      service  or  otherwise,   or  termination  of  employment   under  certain
      conditions,  shall  constitute  termination of employment for the purposes
      hereof shall be conclusively determined by the Committee.

10.2  Cessation  of  Employment  for  Cause:  Anything  herein  to the  contrary
      notwithstanding, if the Grantee should cease to be employed by the Company
      or a subsidiary thereof due to (i) breach of the Grantee's duty of loyalty
      towards the Company,  or (ii) breach of the Grantee's duty of care towards
      the Company,  or (iii) the Grantee has  committed  any  flagrant  criminal
      offense,  or (iv) the Grantee has  committed a fraudulent  act towards the
      Company, or (v) the Grantee caused intentionally,  by act or omission, any
      financial damage to the Company,  or (vi) if the Company may terminate the
      Grantee's  employment  without  severance  pay,  according  to the  Israel
      Severance Pay Law, 1963, all Options  theretofore  granted to such Grantee
      under the Plan, whether vested or not, shall ipso facto expire immediately
      and be of no legal effect.

10.3  Death,   Disability,   Retirement:   Anything   herein  to  the   contrary
      notwithstanding:

      (a)   If a Grantee  should  die while in the  employ of the  Company  or a
            subsidiary  thereof,  his estate, to the extent that it has acquired
            by will  and/or  by  operation  of law the  rights  of the  deceased
            Grantee in  connection  with the  purchase  of any shares  under the
            Plan, shall have, subject to the specific provisions, if any, of the
            relevant  Sub-Plan,  the right,  for a period of twelve  (12) months
            from the date of death of such  Grantee,  to exercise such rights of
            the deceased Grantee not theretofore  exercised,  to the same extent
            (but only to the extent) that the deceased  Grantee  could have done
            so during or at the end of such 12-month  period had he survived and
            had he continued his employment with the Company or its subsidiary.

      (b)   If a  Grantee,  while in the employ of the  Company or a  subsidiary
            thereof, should be incapacitated by reason of accident or illness or
            other  cause  approved  by the  Committee,  and by  virtue  of  such
            incapacity  should,  in the judgment of the  Committee,  be rendered
            unable to continue to be so employed,  the Committee  shall have the
            right in its discretion, subject to the specific provisions, if any,
            of the relevant  Sub-Plan,  to permit such Grantee (or his guardian)
            to  continue  to  enjoy  rights  under  the Plan on such  terms  and
            conditions,  with such limitations and subject to such requirements,
            as the Committee in its discretion may determine,  subject, however,
            to such specific limitations,  if any as are imposed by the relevant
            Sub-Plan.  In exercising  its judgment as  aforesaid,  the Committee
            may,  but shall not be required  to, take into  account the economic
            situation  of the  Grantee,  his  ability  to obtain  other  gainful
            employment and such other factors as the Committee in its discretion
            may deem relevant.

<PAGE>

      (c)   If a Grantee should retire, he shall, subject to the approval of the
            Committee, continue to enjoy such rights, if any, under the Plan and
            on such terms and conditions,  with such  limitations and subject to
            such  requirements as the Committee in its discretion may determine,
            subject,  however,  to such  specific  limitations,  if any,  as are
            imposed by the relevant Sub-Plan.

10.4  Determination  of  Disability  or  Retirement:  Whether the  cessation  of
      employment of a particular  Grantee is by reason of  "disability"  for the
      purposes of Section  10.3(b) hereof or by virtue of  "retirement"  for the
      purposes of Section 10.3(c)  hereof,  on the one hand, or is a termination
      of employment  otherwise than by reason of such  disability or retirement,
      on the other hand,  shall be finally and  conclusively  determined  by the
      Committee in its absolute discretion.

10.5  Directors,  Consultants or Service Providers:  In the event that a Grantee
      who is a director, consultant, contractor or other service provider of the
      Company or a subsidiary thereof, ceases, for any reason, to serve as such,
      all of his  rights,  if any,  in  respect of (i) all  Options  theretofore
      granted to such Grantee  under the Plan and not  exercised  (to the extent
      that they are  exercisable)  within the Notice  Period,  as defined below,
      and/or (ii) all Shares which may be  purchased  by such Grantee  under the
      Plan and not fully paid for within  the  Notice  Period,  shall ipso facto
      terminate.  In the event of cessation of services  provided by the Grantee
      to the Company or a subsidiary  thereof,  for the purposes of this Section
      10.5, the "Notice Period" shall be the period which ends on:

      (a)   with regard to directors, 30 days after the date on which a director
            submits  notice of  resignation  from the Board or the date on which
            the  shareholders of the Company or the  subsidiary,  as applicable,
            remove such director from the Board; and

      (b)   with regard to consultants,  contractors or other service providers,
            30 days after the date on which the services  agreement between such
            consultant,  contractor or service provider, as applicable,  and the
            Company or the subsidiary, as applicable, terminates; or the date on
            which either of the parties to such agreement sends the other notice
            of its intention to terminate said agreement.

10.6  Notwithstanding the foregoing provisions of this Section 10, the Committee
      may provide,  either at the time an Option is granted or thereafter,  that
      such  Option  may be  exercised  after the  periods  provided  for in this
      Section 10, but in no event beyond the term of the Option (as specified in
      Section 9.3 hereto).

<PAGE>

11.   Changes in Capitalization and Corporate Transactions:

11.1  Definitions:

      "Sale of All of the Company's  Assets"  means the sale,  transfer or other
      disposition of all or substantially all of the Company's assets.

      "Merger"  means  a  merger  or   consolidation   or  a  similar   business
      combination,  in which securities possessing more than fifty percent (50%)
      of the total combined voting power of the Company's outstanding securities
      are transferred to a person or persons  different from the persons holding
      those securities immediately prior to such transaction.

11.2  Subject to any action by the  shareholders  of the Company  required under
      applicable law, the number of Shares covered by each  outstanding  Option,
      and the number of Shares which have been authorized for issuance under the
      Plan but as to which no Options  have yet been  granted or which have been
      returned to the Plan upon cancellation or expiration of an Option, as well
      as the price per share of Shares covered by each such outstanding  Option,
      shall be  proportionately  adjusted  for any  increase  or decrease in the
      number of issued Shares resulting from a stock split, reverse stock split,
      stock  dividend,  combination  or  reclassification  of the  Shares or the
      payment of a stock  dividend  (bonus shares) with respect to the Shares or
      any other  increase or decrease  in the number of issued  Shares  effected
      without receipt of consideration by the Company;  provided,  however, that
      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 Committee,  whose  determination  in that
      respect  shall be final,  binding  and  conclusive.  Except  as  expressly
      provided  herein,  no issuance  by the Company of shares of any class,  or
      securities  convertible  into shares of any class,  shall  affect,  and no
      adjustment by reason  thereof shall be made with respect to, the number or
      price of Shares subject to an Option.

11.3  Unless  otherwise  provided  by the  Board,  in the event of the  proposed
      dissolution or liquidation of the Company,  all  outstanding  Options will
      terminate  immediately  prior to the consummation of such proposed action.
      In such case, the Committee may declare that any Option shall terminate as
      of a date  fixed by the  Committee  and give  each  Grantee  the  right to
      exercise his Option,  including  any Option  which would not  otherwise be
      exercisable.

11.4  If, upon a Merger or Sale of all of the Company's  Assets (as  hereinafter
      defined),  the consideration  received (the "Consideration")  shall be the
      exchange of the  securities  of the Company for the  securities of another
      corporation or a parent or subsidiary of such other  corporation  (each, a
      "Successor  Entity"),  then,  each Option shall,  at the sole and absolute
      discretion of the Committee, either:

      (a)   be  substituted  for  options to  purchase  shares of the  Successor
            Entity,  and appropriate  adjustments  shall be made in the exercise
            price per share to reflect such exchange; or

      (b)   be  assumed  by the  Successor  Entity  such  that the  Grantee  may
            exercise  the Options for such number of shares of the Other  Entity
            or amount of other securities thereof,  and appropriate  adjustments
            shall  be made in the  purchase  price  per  share to  reflect  such
            exchange.

<PAGE>

      Anything  herein to the contrary  notwithstanding,  the provisions of this
      Section 11.4 shall be subject to all the terms and  provisions of the Plan
      remaining in full force and effect.

11.5  In the event that all or  substantially  all of the issued and outstanding
      share  capital of the  Company is to be sold (the  "Sale"),  each  Grantee
      shall be obligated to  participate  in the Sale and sell his or her Shares
      and/or Options in the Company, provided,  however, that each such Share or
      Option  shall be sold at a price  equal to that of any  other  Share  sold
      under the Sale (minus the applicable exercise price), while accounting for
      changes in such price due to the respective terms of any such Option,  and
      subject to the absolute discretion of the Board.

11.6  The Committee  shall  determine the specific  adjustments to be made under
      this  Section 11 or in any event of a change in  capitalization  or in the
      event of a corporate  transaction which is not detailed in this Section 11
      (spin-off, spin-up, etc.), and its determination shall be conclusive.

12.   Assignability  and  Transferability:  No Option and no Shares  purchasable
      hereunder   which  were  not  fully  paid  for,  shall  be  assignable  or
      transferable  by the Grantee;  and during the lifetime of the Grantee each
      and all of his rights to purchase  shares  hereunder  shall be exercisable
      only by him. At the request of a Grantee,  Shares  purchased  and paid for
      following the exercise of an Option may be issued in, or transferred into,
      the name of the  Grantee  and  another  person  jointly  with the right of
      survivorship,  or in the  name of a bank or  broker  either  for the  sole
      account of the  Grantee or for the  account of the  Grantee  jointly  with
      another person.

<PAGE>

13.   Agreement to Purchase for Investment:

13.1  By exercise  of an Option  hereunder,  the Grantee  agrees that any Shares
      purchased thereunder shall be purchased for investment and not with a view
      to their distribution as that term is used in the United States Securities
      Act of 1933, as amended,  unless in the opinion of counsel to the Company,
      such  distribution is in compliance  with or exempt from the  registration
      and prospectus  requirements of that Act; and, if required by the Company,
      the Grantee shall sign a  certificate  to that effect at the time or times
      he exercises such Option. The Company does not obligate itself to register
      the shares under the United States Securities Act of 1933, as amended.

13.2  The Company may place a legend on any share  certificate  delivered to the
      Grantee  to the  effect  that such  shares  are  acquired  pursuant  to an
      investment  representation  without  registration  of the  Shares  and are
      subject to restrictions under this Section 13.

14.   Term and Amendment of the Plan:

14.1  The Plan was adopted by the Board of  Directors  of the Company on October
      7, 2002 (subject to approval by the  Shareholders of the Company not later
      than December 31, 2002),  and shall expire on December 31, 2012 (except as
      to Options outstanding on that date). Such expiration shall not affect the
      instructions contained herein or in any applicable law with respect to the
      Options and Shares held in the Trust at such time of expiration.

14.2  Subject to  applicable  law, the Board of  Directors  may, at any time and
      from time to time, terminate or amend the Plan in any respect except that,
      without the approval of the  Shareholders  of the  Company:  (i) the total
      number of Shares  which may be issued  under the Plan may not be increased
      (except by adjustment pursuant to Section 11 hereof);  (ii) the provisions
      of  Section  4  regarding  eligibility  may  not be  modified;  (iii)  the
      provisions of Section 8,  regarding the exercise price at which Shares may
      be offered  pursuant  to Option  awards,  may not be  modified  (except by
      adjustment pursuant to Section 11 hereof); and (iv) the expiration date of
      the Plan may not be  extended.  In no event may any action of the  Company
      alter or impair the rights of a Grantee,  without his  consent,  under any
      Option previously granted to him.

15.   Continuance  of  Employment:  Neither  the Plan nor the grant of an Option
      thereunder  shall  impose any  obligation  on the Company or a  subsidiary
      thereof, to continue any Grantee in its employ, and nothing in the Plan or
      in any Option granted  pursuant  thereto shall confer upon any Grantee any
      right to continue in the employ of the Company or a subsidiary thereof, or
      restrict  the right of the Company or a subsidiary  thereof,  to terminate
      such employment at any time.

16.   Governing  Law:  The  Plan and all  instruments  issued  thereunder  or in
      connection therewith,  shall be governed by, and interpreted in accordance
      with, the laws of the State of Israel.

17.   Application of Funds:  The proceeds  received by the Company from the sale
      of Shares  pursuant  to  Options  granted  under the Plan will be used for
      general corporate purposes of the Company or any subsidiary thereof.

<PAGE>

18.   Tax Consequences:  Any tax consequences and any obligations  regarding any
      compulsory payments arising from the grant or exercise of any Option, from
      the payment for, or the subsequent  disposition of, Shares covered thereby
      or from any other event or act (of the Company or the Grantee)  hereunder,
      shall be borne  solely by the  Grantee.  Furthermore,  the  Grantee  shall
      indemnify the Company and the Trustee and hold them  harmless  against and
      from any and all  liability  for any such tax  consequences  or compulsory
      payments, 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 Grantee.

19.   Multiple  Agreements:  The terms of each  Option  may  differ  from  other
      Options granted under the Plan at the same time, or at any other time. The
      Committee  may also grant more than one Option to a given  Grantee  during
      the term of the Plan,  either in addition to, or in substitution  for, one
      or more Options previously granted to that Grantee.  The grant of multiple
      Options may be evidenced by a single  Notice of Grant or multiple  Notices
      of Grant, as determined by the Committee.

20.   Non-Exclusivity of the Plan: The adoption of the Plan by the Board and the
      Shareholders of the Company shall not be construed as amending,  modifying
      or rescinding any previously approved incentive arrangement or as creating
      any  limitations  on the power of the Board  and the  Shareholders  of the
      Company to adopt other incentive  arrangements as they may deem desirable,
      including,  without  limitation,  the granting of stock options  otherwise
      than  under  the Plan,  and such  arrangements  may be  either  applicable
      generally or only in specific cases.