Exhibit 10.3

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                        MER TELEMANAGEMENT SOLUTIONS LTD.



                         2003 ISRAELI SHARE OPTION PLAN


   (*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................................................7

5. DESIGNATION OF OPTIONS PURSUANT TO SECTION 102 ............................7

6. TRUSTEE....................................................................8

7. SHARES RESERVED FOR THE ISOP...............................................9

8. PURCHASE PRICE.............................................................9

9. ADJUSTMENTS...............................................................10

10. TERM AND EXERCISE OF OPTIONS.............................................11

11. VESTING OF OPTIONS.......................................................12

12. PURCHASE FOR INVESTMENT..................................................12

13. DIVIDENDS................................................................13

14. RESTRICTIONS ON ASSIGNABILITY AND SALE OF OPTIONS........................13

15. EFFECTIVE DATE AND DURATION OF THE ISOP..................................13

16. AMENDMENTS OR TERMINATION................................................14

17. GOVERNMENT REGULATIONS...................................................14

18. CONTINUANCE OF EMPLOYMENT................................................13

19. GOVERNING LAW & JURISDICTION.............................................14

20. TAX CONSEQUENCES.........................................................14

21. NON-EXCLUSIVITY OF THE ISOP..............................................15

22. MULTIPLE AGREEMENTS......................................................15


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     This  plan,  as  amended  from  time  to  time,   shall  be  known  as  MER
     Telemanagement Solutions Ltd. 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" as defined in Section 5.4 below.

     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  "Committee"  means a stock option  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.

     2.8  "Company" means MER Telemanagement Solutions Ltd, an Israeli company.

     2.9  "Companies Law" means the Israeli Companies Law 5759-1999.

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

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          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:

          (i) If the Shares are listed on any  established  stock  exchange or a
          national  market  system,  including  without  limitation  the  Nasdaq
          National  Market,  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 for the last  market  trading day prior to
          time of determination, as reported in the Wall Street Journal, or such
          other source as the Board deems reliable.

          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;

          (ii) 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  last   market   trading  day  prior  to  the  day  of
          determination, or;

          (iii) 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" 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

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        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.

     2.24 "Ordinance"  means the 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 ordinary  shares,  NIS 0.01 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.

     2.31 "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 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.

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3.   ADMINISTRATION OF THE ISOP

     3.1  The Board shall have the power to administer the ISOP either  directly
          or upon  the  recommendation  of the  Committee,  all as  provided  by
          applicable  law  and  in  the  Company's   Articles  of   Association.
          Notwithstanding the above, the Board shall automatically have residual
          authority:  (i) if no Committee  shall be constituted or; (ii) if such
          Committee shall cease to operate for any reason or; (iii) with respect
          to the  rights not  delegated  by the Board to the  Committee.  In the
          event that no  Committee  shall be  appointed,  any  reference  to the
          Committee  in the ISOP or in the Option  Agreement  shall refer to 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 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.  Subject to applicable  law, any member of such
          Committee  shall be eligible to receive  Options under this ISOP while
          serving on the Committee, unless otherwise specified herein.

     3.3  The Committee  shall have the full power to and authority to,  subject
          to limitation under the terms and provisions of any applicable law and
          subject to changes according to the Board's  decisions:  (i) designate
          participants;   (ii)   determine  the  terms  and  provisions  of  the
          respective Option Agreements (which need not be identical), including,
          but not limited to,  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 Approved 102
          Option; (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  Notwithstanding  the above,  the  Committee  shall not be  entitled to
          grant  Options to the  Optionees,  however,  it will be  authorized to
          issue Shares  underlying  Options which have been granted by the Board
          and duly  exercised  pursuant to the  provisions  herein in accordance
          with section 112(a)(5) of the Companies Law.

     3.5  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 Board or the Committee may prescribe
          in accordance with the provisions of the ISOP.

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     3.6  Subject to the Company's  Articles of  Association,  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   Articles  of
          Association, as the same may be in effect from time to time.

     3.7  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.

     3.8  Subject to the  Company's  Articles of  Association  and the Company's
          determination to provide  indemnification  to a member of the board or
          the Committee,  and to all approvals legally required,  including, but
          not limited to the provisions of the Companies Law, 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 Articles of Association,  any agreement,
          any vote of shareholders or disinterested directors,  insurance policy
          or otherwise.

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 the Companies Law or
          any successor act or regulation, 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 15 below,  and shall be
          conditioned  upon the  approval of this ISOP by the ITA as required by
          Section 102.

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     5.3  Approved 102 Option may either be  classified as a Capital Gain Option
          ("CGO") or an 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 CGO 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
          at least 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.

     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  With  regards to Approved  102  Options,  the  provisions  of the ISOP
          and/or the Option  Agreement  shall be  subject to the  provisions  of
          Section  102 and the Tax  Assessing  Officer's  permit,  and the  said
          provisions and permit shall be deemed an integral part of the ISOP and
          of the Option Agreement.  Any provision of Section 102 and/or the said
          permit which is  necessary in order to receive  and/or to keep any tax
          benefit  pursuant to Section 102, which is not expressly  specified in
          the ISOP or 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 without limitation 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 may be treated as  Unapproved
          102 Options,  all in accordance with the provisions of Section 102 and
          regulations promulgated thereunder.

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     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  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.

     6.4  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.

7.   SHARES RESERVED FOR THE ISOP; RESTRICTION THEREON

     7.1  The Company  has  reserved  893,915  (eight  hundred and ninety  three
          thousand and nine hundred and fifteen) authorized but unissued Shares,
          for the  purposes of the ISOP and for the  purposes of any other share
          option  plans  which may be  adopted  by the  Company  in the  future,
          subject  to  adjustment  as set forth in  Section 9 below.  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 or under the Company's other share option plans.

     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 CGO,  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.

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     8.2  The Purchase Price shall be payable upon the exercise of the Option in
          a form  satisfactory  to the Committee.  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
          Option is paid) as determined by the Company.

9.   ADJUSTMENTS

     Upon the occurrence of any of the following described events, an 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 may be assumed or substituted for an appropriate number
          of shares of each class of shares or other securities of the Successor
          Company (or a parent or subsidiary  of the Successor  Company) as were
          distributed to the  shareholders of the Company in connection with 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,  all as subject to the  determination of
          the Committee or the Board, which determination shall be in their sole
          discretion  and final.  In the event the  Successor  Company  does not
          agree to assume or  substitute  as  described in this Section 9.1, the
          Options  shall  terminate  as of  the  date  of  the  closing  of  the
          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.

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     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  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 Each Option granted under this ISOP shall be exercisable following the
          Vesting  Dates and for the  number of Shares as shall be  provided  in
          Exhibit  B to  the  Option  Agreement.  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 such  termination of employment
          or service, the unvested portion of the Optionee's Option

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          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,  including  termination as a result
               of death or disability, 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) prior to the date of 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,  an  Optionees  shall  not have any of the  rights or
          privileges of a  shareholders  of the Company in respect of any Shares
          purchasable  upon the exercise of an Option,  nor shall an Optionee be
          deemed to be a  shareholder  or creditor of the Company for purpose of
          the  operation  of Sections  350 and 351 of the  Companies  Law or any
          successor to such section,  until  registration of the Optionee as the
          holder of such Shares in the Company's  register of shareholders  upon
          exercise of the Option in accordance  with the provisions of the ISOP,
          but in case of Options and Shares held by the Trustee,  subject to the
          provisions of Section 6 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 an 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  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.

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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
     appropriate.  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  Articles of  Association  (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, other than by will or the laws of descent and distribution
          or as  specifically  otherwise  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.

          Any action made  directly or  indirectly  in  violation of the Section
          shall be void for all purposes.

     14.2 As long as Options  and/or 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 terminate at the end of ten (10) years from such day of adoption.



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     The Company shall obtain the approval of the Company's shareholders for the
     adoption of this ISOP or for any amendment to this ISOP,  if  shareholders'
     approval  is  necessary  or  desirable  to comply with any  applicable  law
     including  without  limitation the US securities law or the securities laws
     of other jurisdiction applicable to Options granted to Optionees under this
     ISOP, or if  shareholders'  approval is required by any authority or by any
     governmental  agencies or national  securities  exchanges including without
     limitation the US Securities and Exchange Commission.

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.

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.

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,

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                                       15

          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.

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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