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                                                                    EXHIBIT 10.5


                             GALILEO TECHNOLOGY LTD.

                           1997 GTI STOCK OPTION PLAN

         1. Purposes of the Plan. The 1997 GTI Stock Option Plan amends and
restates the Company's GTI Stock Option Plan. The purposes of this Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, 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. Stock Purchase
Rights may also be granted under the Plan. The Options and Stock 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.

              (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 Galileo Technology Ltd., an Israeli company.

              (f) "Consultant" means any person who is engaged by the Company or
the 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) "Director" means a member of either of the boards of directors
of the Company or the Subsidiary.

              (i) "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."

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

              (k) "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.

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

              (m) "GTI" means Galileo Technology, Inc.

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

              (o) "Notice of Grant" means the notice of stock option grant to be
given to each of the Optionees.

              (p) "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.

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



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

              (s) "Optionee" means an Employee or Consultant who receives an
Option or Stock Purchase Right.

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

              (u) "Plan" means the 1997 GTI Stock Option Plan.

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

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

              (x) "Share" means each of the Ordinary Shares, as adjusted in
accordance with Section 12 below.

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

              (z) "Subsidiary" means Galileo Technology, Inc., the Company's
wholly-owned U.S. subsidiary.

         3. Stock Subject to the Plan. Subject to the provisions of Section 12
of the Plan, the aggregate number of Ordinary Shares that may be subject to
option and sold under this Plan is 2,820,000 unless amended by the Board or the
shareholders of the Company; provided, however, that the number of shares that
may be subject to option and sold under this Plan and the Galileo Technology
Ltd. 1997 Employees' Stock Option Plan (the "GTL Plan") shall be increased each
year by an aggregate of four percent of the outstanding Ordinary Shares of the
Company. Such increase shall be effected each year on January 1, and the
allocation of the Ordinary Shares to the Plan and the GTL Plan will be as
determined by the Board of Directors. The Shares may be authorized but unused,
or reacquired Ordinary Shares. If an Option or Stock 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 Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated). However, Shares
that have actually been issued under the Plan, upon exercise of either an Option
or Stock 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.


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                  (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 Stock 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 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 Stock 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 of
         Israel, of California corporate and securities laws, of the Code, and
         of any applicable stock exchange (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. (S) 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



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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 Stock Purchase Rights may from time to time be granted hereunder;

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

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

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

                  (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 Stock Purchase
Rights.

         5. Eligibility.

              (a) Nonstatutory Stock Options and Stock 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
Stock Purchase Right may, if otherwise eligible, be granted additional Options
or Stock 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 Shares with respect to which Incentive Stock Options are
exercisable for the first time by the 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 Shares shall be determined as of
the time the Option with respect to such Shares is granted.

              (c) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon any Optionee any right with respect to continuation of his or her
employment or consulting



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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.

         8. Option Exercise Price and Consideration.

              (a) The per share exercise for the 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
         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 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
         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 Share on the date of grant.

              (b) The consideration to be paid for the 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), 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.

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         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 a Share. An Option shall be deemed to be exercised when written
notice of such exercise 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 Shares with respect to 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 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 12 hereof. Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of 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



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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 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 employed for two (2) years
from the date of such termination. All remaining 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
Shares covered by such Option shall revert to the Plan.

              (e) Rule 16b-3. Options granted to 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 Stock Purchase Rights. Options
and Stock 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. Stock Purchase Rights.

              (a) Rights to Purchase. Stock 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 Stock 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 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 Stock Purchase
Right. The offer shall be accepted by execution of a Restricted Stock purchase
agreement in the form determined by the Administrator. Shares purchased pursuant
to the grant of a Stock Purchase Right shall be referred to herein as
"Restricted Stock."

              (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



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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 Stock 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 Stock Purchase Right is exercised,
except as provided in Section 12 of the Plan.

         12. 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 Stock Purchase Right, and the number of Ordinary Shares
which have been authorized for issuance under the Plan but as to which no
Options or Stock Purchase Rights have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price for each Ordinary Share covered by each
such outstanding Option or Stock 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 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 Stock 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 Stock 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 Stock 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 Stock 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 Stock Purchase
Right shall be considered assumed if, following the merger, the Option or Stock
Purchase Right confers the right to purchase or receive, for each Share of
Optioned Stock subject to the Option or Stock 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



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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 Stock Purchase Right, for each Share of Optioned Stock
subject to the Option or Stock 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 12 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.

         13. Time of Granting Options and Stock Purchase Rights. The date of
grant of an option or Stock Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or Stock
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 Stock Purchase Right is so granted within a reasonable time after the
date of such grant.

         14. 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.

              (b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options or Stock Purchase Rights
already granted, and such Options and Stock 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.

         15. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such 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 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
Stock Purchase Right, the Company may require the person exercising such Option
or Stock Purchase Right to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any


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present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.

         16. Reservation of Shares. During the term of this Plan, the Company
shall at all times reserve and keep available such number of 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 Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.

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

         18. 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 state and federal law and the
rules of any stock exchange upon which the Ordinary Shares are listed.

         19. Information to Optionees and Purchasers. The Company shall provide
to each Optionee and to each individual who acquires Shares pursuant to the
Plan, not less frequently than annually during the period such Option or
purchaser has one or more Options or Stock Purchase Rights outstanding, and, in
the case of an individual who acquires Shares pursuant to the Plan, during the
period such individual owns such 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.