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                                                                   Exhibit 10.17

                        (SAIFUN SEMICONDUCTORS LTD. LOGO)

                           SAIFUN SEMICONDUCTORS LTD.

                        2005 EMPLOYEE STOCK PURCHASE PLAN

1.   PURPOSE.

     The purpose of the Plan is to provide employees of the Company and its
Designated Subsidiaries with an opportunity to purchase Ordinary Shares of the
Company through accumulated payroll deductions.

     It is the intention of the Company to have the Plan qualify under varying
tax regimes in the jurisdictions in which the Company or its Designated
Subsidiaries have employees. The provisions of the Plan, accordingly, shall be
construed so as to extend and limit participation in a manner consistent with
the requirements of applicable laws of each such jurisdiction.

     The Plan was adopted by the Board of Directors of the Company on June 7,
2005 and approved by the Company's shareholders on September 29, 2005.

2.   DEFINITIONS.

     2.1. "Board" shall mean the Board of Directors of the Company.

     2.2. "Change in Control" means any of the following shareholder-approved
transactions to which the Company is a party:

          2.2.1. a merger or consolidation in which the Company is not the
surviving entity, except for (i) a transaction the principal purpose of which is
to change the jurisdiction in which the Company is incorporated, form a holding
company or effect a similar reorganization as to form and (ii) whereupon this
Plan and all Reserves are assumed or substituted by the successor entity;

          2.2.2. the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions to
clause 2.2.1, above; or

          2.2.3. any reverse merger in which the Company is the surviving entity
but 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 those who held such securities immediately
prior to such merger.

     2.3. "Company" shall mean Saifun Semiconductors Ltd., a company
incorporated under the laws of the State of Israel, or any successor thereof.

     2.4. "Compensation" shall mean (i) the total compensation paid in cash by
the Company or a Designated Subsidiary, including, salaries, wages, bonuses,
incentive compensation, commissions, overtime pay and shift premium, plus (ii)
any pre-tax-contributions made by the Employee; except, however, that
"Compensation" shall exclude all non-cash items, expenses, reimbursement, moving
or relocation allowances, cost-of-living equalization payments, car allowances,
imputed income attributable to car, cellular or life insurance, severance pay,
fringe benefits, contributions or benefits received under employee benefit,
option or stock plan, income attributable to the grant or exercise of stock
options, and similar items. The
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Board shall have the authority to determine and approve all forms of pay to be
included in or excluded from the definition of Compensation.

     2.5. "Designated Subsidiary" shall mean any Subsidiary which has been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.

     2.6. "Discount Percentage" shall mean such discount percentage between 85%
and 95%, as shall be determined by the Board.

     2.7. "Employee" shall mean any individual who is an employee of the Company
or any Designated Subsidiary for tax purposes in the jurisdiction of the Company
or such Designated Subsidiary. For purposes of the Plan, the employment
relationship shall be treated as continuing intact while the individual is on
sick leave or other leave of absence approved by the Company or a Designated
Subsidiary. Where the period of leave exceeds ninety (90) days and the
individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave, unless approved otherwise for the purpose of this Plan
by the Board. Payroll deductions for an employee who has been on an unpaid leave
of absence will resume at the same rate as in effect prior to such leave upon
return to work unless changed by such employee or unless the employee has been
on an unpaid leave of absence throughout an entire Offering Period, in which
case the employee shall not be permitted to re-enter the Plan until an
enrollment form is filed with respect to a subsequent Offering Period that
commences after such employee has returned to work from the unpaid leave of
absence.

     2.8. "Enrollment Date" shall mean a date prior to the beginning of an
Offering Period, as specified by the Board, on which the eligibility for
participation in the following Offering Period is determined.

     2.9. "Exercise Date" shall mean the last day of each Offering Period.

     2.10. "Fair Market Value" shall mean, as of any date, the value of an
Ordinary Share determined as follows:

          2.10.1. the closing price of an Ordinary Share on the principal
exchange on which Ordinary Shares are then trading, if any (or as reported on
any composite index which includes such principal exchange), on the trading day
immediately preceding such date, or if Ordinary Shares were not traded on such
date, then on the next preceding date of which a trade occurred, as reported in
the Wall Street Journal, or such other source as the Board deems reliable;

          2.10.2. if the Ordinary Shares are not traded on an exchange but are
quoted on the Nasdaq National Market System or a successor quotation system, the
mean between the closing representative bid and asked prices for the Ordinary
Shares on the trading day immediately preceding such date as reported by the
NASDAQ National Market System or such successor quotation system; or

          2.10.3. if the Ordinary Shares are not publicly traded on an exchange
and not quoted on the NASDAQ National Market System or a successor quotation
system, the Fair Market Value of an Ordinary Share as established by the Board
acting in good faith.

     2.11. "Initial Trading Date" shall mean the date on which Ordinary Shares
commence trading on the Nasdaq National Market System.

     2.12. "Maximum Number of Shares" shall mean such number of the Company's


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Ordinary Shares determined by dividing (i) the Employee's payroll deductions
accumulated prior to the Exercise Date and retained in the Employee's account as
of the Exercise Date by (ii) an amount equal to the Discount Percentage of the
Fair Market Value of an Ordinary Share on the Offering Date or if so determined
by the Board, by a lower price per Ordinary Share, provided however, that such
Maximum Number of Shares may be always adjusted by the Board pursuant to Section
18.

     2.13. "Offering Date" shall mean the first date of each Offering Period.

     2.14. "Offering Period" shall mean a period of approximately three (3)
months during which an option granted pursuant to the Plan may be exercised. The
first Offering Period will commence on the Initial Trading Date and terminate on
the last Trading Day of the calendar quarter in which the Initial Trading Date
occurs. Thereafter, subsequent Offering Periods, if any, will commence on the
first Trading Day of each calendar quarter and terminate on the last Trading Day
of that calendar quarter. The duration of Offering Periods may be changed
pursuant to Section 4 of this Plan.

     2.15. "Ordinary Shares" shall mean the Ordinary Shares, par value NIS 0.01
each, of the Company.

     2.16. "Plan" shall mean this 2005 Employee Stock Purchase Plan.

     2.17. "Purchase Price" shall mean an amount equal to the Discount
Percentage of the Fair Market Value of an Ordinary Share on the Exercise Date,
provided, however, that the Purchase Price may be adjusted by the Board pursuant
to Section 18. Notwithstanding anything to the contrary, the Board shall be
entitled to determine that the Purchase Price shall be an amount equal to the
Discount Percentage of the lesser of (i) the Fair Market Value of an Ordinary
Share on the Exercise Date, or (ii) the Fair Market Value of an Ordinary Share
on the Offering Date, provided however, that the Purchase Price may be always
adjusted by the Board pursuant to Section 18.

     2.18. "Reserves" shall mean (i) the number of Ordinary Shares covered by
each option under the Plan which have not yet been exercised; and (ii) the
number of Ordinary Shares which have been authorized for issuance under the Plan
but not yet placed under option.

     2.19. "Subsidiary" shall mean any corporation (other than the Company) in
which the Company directly or indirectly owns shares possessing fifty (50%)
percent or more of the total combined voting power of all classes of shares in
such corporation, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.

     2.20. "Trading Day" shall mean a day on which national stock exchanges are
open for trading.

3.   ELIGIBILITY.

     3.1. Any Employee who shall be employed by the Company or a Designated
Subsidiary on a given Enrollment Date shall be eligible to participate in the
Plan.

     3.2. Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan if his or her participation
in the Plan is prohibited by any applicable law or by any collective bargaining
agreement to which the Employee is subject.

4.   OFFERING PERIODS.


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     The Plan shall be implemented by consecutive Offering Periods with the
first offering period commencing on the Initial Trading Date, or on such other
date as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 19 hereof. The Board shall have the power to change the
duration of Offering Periods (including the commencement dates thereof) with
respect to future offerings without shareholders approval if such change is
announced at least five (5) days prior to the scheduled beginning of the first
Offering Period to be affected thereafter.

5.   PARTICIPATION.

     5.1. An eligible Employee may become a participant in the Plan by
completing an enrollment form designated by the Board (which may include such
further provisions and limitations, as it may deem equitable and in the best
interests of the Company), on or before the date which is two (2) weeks prior to
the Enrollment Date or such other date designated by the Board.

     5.2. Payroll deductions for a participant shall commence on the first
payroll following the first day of the Offering Period and shall end on the last
payroll in the Offering Period to which such authorization is applicable, unless
sooner terminated by the participant as provided in Section 10 hereof.

6.   PAYROLL DEDUCTIONS.

     6.1. At the time a participant files his or her enrollment agreement, he or
she shall elect to have payroll deductions (or, when not allowed under any local
law or regulation, another form of payment) made on each pay day during the
Offering Period in an amount not exceeding fifteen percent (15%) of the
Compensation which he or she receives on each pay day during the Offering
Period. Payroll deductions may be permitted on the basis of flat dollar
contributions, or a percentage of compensation (in whole percentages only), as
determined by the Board; if not determined otherwise by the Board, such
deduction shall be a whole percentage of the Compensation.

     6.2. All payroll deductions made for a participant shall be credited to his
or her account under the Plan. A participant may not make any additional
payments into such account.

     6.3. A participant may discontinue his or her participation in the Plan as
provided in Section 10 hereof, or may increase or decrease the rate of his or
her payroll deductions by completing or filing with the Company a new enrollment
form authorizing a change in payroll deduction rate. A participant shall make no
more than one election to make a participation rate change per Offering Period.
The Board may, in its discretion, further limit or expand the number of
participation rate changes allowed during any Offering Period. The change in
rate shall be effective with the first full payroll period following the
administrative deadline established by the Company. A participant's enrollment
form shall remain in effect for successive Offering Periods unless terminated as
provided in Section 10 hereof.

     6.4. Notwithstanding the foregoing, to the extent necessary for the Company
or any Designated Subsidiary to comply with any applicable law, a participant's
payroll deductions may be refunded to the participant, or decreased to zero
percent (0%), at any time in the sole discretion of the Board.

     6.5. At the time the option is exercised, in whole or in part, or at the
time some or all of the Company's Ordinary Shares issued under the Plan is
disposed of, the participant must


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make adequate provision for the Company's federal, state, or other tax
withholding obligations, if any, which arise upon the exercise of the option or
the disposition of the Ordinary Shares and any tax consequences arising
therefrom shall be borne solely by the participant. At any time, the Company
may, but shall not be obligated to, withhold from the participant's compensation
the amount necessary for the Company to meet applicable withholding or other tax
obligations, including any withholding required to make available to the Company
or any tax deductions or benefits attributable to sale or early disposition of
Ordinary Shares by the Employee. The Company shall not be required to release
any share certificate to an Employee until all required payments have been fully
made, as evidenced in writing.

     6.6. The participant shall agree to indemnify the Company and any
Designated Subsidiary that employs or engages the participant, if applicable 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 Employee.

7.   GRANT OF OPTION.

     7.1. On the first day of each Offering Period, each eligible Employee
participating in such Offering Period shall be granted an option to purchase on
the Exercise Date of such Offering Period (at the applicable Purchase Price as
per section 2.17) up to a number of the Company's Ordinary Shares (the
"EXERCISED NUMBER OF SHARES") determined by dividing (i) such Employee's payroll
deductions accumulated prior to such Exercise Date and retained in the
Employee's account as of the Exercise Date by (ii) the applicable Purchase
Price; provided that such purchase shall be subject to the limitations set forth
in Sections 3.2 and 13 hereof and, if so determined by the Board, to the
limitations set forth in Section 7.2. Exercise of the option shall occur as
provided in Section 8 hereof, unless the participant has withdrawn pursuant to
Sections 10 or 11 hereof. The option shall expire on the last day of the
Offering Period.

     7.2. Notwithstanding anything to the contrary, the Board shall have the
power to limit the number of Ordinary Shares that may be purchased by an
Employee on account of a purchase option granted to an Employee to the Maximum
Number of Shares, notwithstanding the Fair Market Value as of the Exercise Date.
If the Board so determines, the Employee shall only be entitled to purchase such
Exercised Number of Shares which shall not exceed the Maximum Number of Shares
even if the Fair Market Value as of the Exercise Date is lower than the Fair
Market Value as of the Offering Date and the Employee shall not be entitled to
receive any return of payroll deductions credited to such Employee's account
during the Offering Period.

8.   EXERCISE OF OPTION.

     8.1. Unless a participant withdraws from the Plan as provided in Sections
10 or 11 hereof, his or her option for the purchase of shares shall be exercised
automatically on the Exercise Date, and the maximum number of shares subject to
option shall be purchased for such participant in accordance with the provisions
of Section 7, at the applicable Purchase Price with the accumulated payroll
deductions in his or her account. During a participant's lifetime, a
participant's option to purchase shares hereunder is exercisable only by him or
her. No fractional shares shall be purchased unless otherwise determined by the
Board; any payroll deductions accumulated in a participant's account under the
Plan that are not sufficient to purchase a full share shall be retained in such
account for the subsequent Offering Period, subject to earlier withdrawal by the
participant as provided in Sections 10 or 11. In the case of the participant's


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death, any monies remaining in his or her account under the Plan after the
Exercise Date of an Offering Period shall be returned to the person or persons
entitled thereto, in cash.

     8.2. Prior to exercise, the Employees shall have none of the rights and/or
privileges of a shareholder of the Company in respect to any shares purchasable
upon the exercise of any part of an option (including but not limited to voting
right or dividend rights) nor shall they be deemed to be a class of shareholders
or creditors of the Company under applicable law, including Sections 350 and 351
of the Israeli Companies Law - 1999.

     8.3. Upon exercise of an option, an Employee shall have no shareholder
rights until the shares are issued, as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company
(unless the shares are delivered electronically, in which case upon such
delivery). The Company shall issue (or cause to be issued) such shares promptly
after the option is exercised. No adjustment will be made for a dividend or
other shareholders' right, for which the record date precedes the date of
issuance of the shares, except as provided in Section 18 hereof.

9.   DELIVERY.

     As promptly as practicable after each Exercise Date on which a purchase of
shares occurs, the Company shall arrange the delivery to each participant or its
designated securities account or institution, as appropriate, of the shares
purchased upon exercise of his or her option.

10.  WITHDRAWAL.

     10.1. A participant may withdraw from the Plan at any time by giving notice
to the Company on the form designated by the Board, no later than two (2) weeks
prior to the last day of any Offering Period, or on or before any other date
designated by the Board. If a participant withdraws from the Plan, payroll
deductions shall not resume at the beginning of the succeeding Offering Period
unless the participant delivers to the Company a new enrollment form as provided
in Section 5.

     10.2. A participant's withdrawal from the Plan shall not have any effect
upon his or her eligibility to participate in any similar plan which may
hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.

     10.3. In the event a participant withdraws from the Plan prior to an
Exercise Date, any payroll deductions credited to such participant's account
during the Offering Period but not yet used to exercise the option shall be
returned to such participant.

11.  TERMINATION OF EMPLOYMENT.

     Upon a participant's ceasing to be an Employee for any reason, he or she
shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto and such
participant's option shall be automatically terminated.

12.  INTEREST.

     No interest shall accrue on the payroll deductions of a participant in the
Plan.

13.  STOCK.


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     13.1. Subject to adjustment upon changes in capitalization of the Company
as provided in Section 18 hereof, the aggregate number of Ordinary Shares which
shall be made available by the Company for (i) sale under the Plan; and (ii)
allocation and exercise of options under the Company's 2003 Share Option Plan
((i) and (ii) shall be collectively referred to as the "AGGREGATE NUMBER OF
SHARES"), shall not exceed fifteen million (15,000,000) shares. Notwithstanding
the foregoing, the Aggregate Number of Shares shall be increased annually on
January 1st by a number of Ordinary Shares equal to the lowest of (a) 4% of the
total number of shares of the Company outstanding (on an as converted basis) as
of December 31st of the preceding calendar year, (b) 1,333,333 Shares, subject
to adjustment as provided in Section 18, or (c) number of Ordinary Shares
determined by the Board. The allocation of the Aggregate Number of Shares and
any increase thereof between the Plan and the Company's 2003 Share Option Plan
shall be decided at the discretion of the Board. If, on a given Exercise Date,
the number of shares with respect to which options are to be exercised exceeds
the number of shares then available under the Plan, the Company shall make a pro
rata allocation of the shares remaining available for purchase in as uniform a
manner as shall be practicable and as it shall determine to be equitable. Any
Ordinary Shares under the Plan, in respect of which the right hereunder of an
Employee to purchase the same shall for any reason terminate, become cancelled,
expire or otherwise cease to exist, shall again be available for grant through
options under the Plan. Furthermore, Ordinary Shares subject to options which
are adjusted pursuant to Section 18.1 and become exercisable with respect to
shares of another corporation shall be considered cancelled and may again be
optioned, granted or awarded hereunder, subject to the share limit set forth in
this Section 13.1. Shares which are actually or constructively delivered by the
Employee or withheld by the Company upon the exercise of an option in payment of
the exercise price thereof or tax withholding thereon may again be optioned,
granted or awarded hereunder.

     13.2. Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant (or, if required under applicable law,
in the name of a trustee for the benefit of the participant).

14.  ADMINISTRATION.

     The Plan shall be administered by the Board or a committee appointed by the
Board to administer the Plan and to perform the functions set forth herein. The
Board or its committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. In the event that a
committee is appointed by the Board, any decision of the committee regarding the
Plan shall have the same effect as a decision by the Board, subject to the
provisions of any applicable law. Every finding, decision and determination made
by the Board or its committee shall, to the full extent permitted by law, be
final and binding upon all parties.

15.  TRANSFERABILITY.

     Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an option or to receive shares under the
Plan may be assigned, transferred, pledged or otherwise disposed of in any way
(other than by will, or the laws of descent and distribution) by the
participant. Any such attempt at assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may treat such act
as an election to withdraw funds from an Offering Period in accordance with
Sections 10 or 11 hereof.


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16.  USE OF FUNDS.

     All payroll deductions received or held by the Company under the Plan may
be used by the Company for any corporate purpose, and the Company shall not be
obligated to segregate such payroll deductions.

17.  REPORTS.

     Individual accounts shall be maintained for each participant in the Plan.
Statements of account shall be given to participating Employees at least
annually, which statements shall set forth the amounts of payroll deductions,
the Purchase Price, the number of shares purchased (and the Maximum Number of
Shares, if applicable) and the remaining cash balance, if any.

18.  ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, LIQUIDATION,
     MERGER OR ASSET SALE.

     18.1. Changes in Capitalization and Distributions. Subject to any required
action by the shareholders of the Company, the Board shall, in such manner as it
may deem equitable, proportionately adjust any or all of the Reserves, the
maximum number of shares each participant may purchase per Offering Period
(pursuant to Section 7), as well as the price per share and the number of
Ordinary Shares covered by each option under the Plan which has not yet been
exercised, following any increase or decrease in the number of issued Ordinary
Shares resulting from a stock split, reverse stock split, stock dividend or
other stock distribution, recapitalization, reorganization, combination or
reclassification of the Ordinary Shares, or any other increase or decrease in
the number of Ordinary 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 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 or price
of Ordinary Shares subject to an option (subject to the provisions of Section
7).

     18.2. Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company in a transaction not covered by the exceptions to
clause 18.3, the Offering Period then in progress shall be shortened by setting
a new Exercise Date (for purposes of this paragraph only, the "NEW EXERCISE
DATE"), and shall terminate immediately prior to the consummation of such
proposed dissolution or liquidation, unless provided otherwise by the Board. The
New Exercise Date shall be before the date of the Company's proposed dissolution
or liquidation. The Board shall notify each participant, at least ten (10)
business days prior to the New Exercise Date, that the Exercise Date for the
participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Sections 10 or 11 hereof.

     18.3. Merger or Asset Sale. In the event of (i) a proposed merger or
consolidation in which the Company is not the surviving entity, except for a
transaction the principal purpose of which is to change the jurisdiction in
which the Company is incorporated, form a holding company or effect a similar
reorganization as to form; or (ii) a proposed sale of all or substantially all
of the assets of the Company, each outstanding option shall be assumed or an


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equivalent option substituted by the successor corporation or a parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, the Offering Period
then in progress shall be shortened by setting a new Exercise Date (for purposes
of this paragraph only, the "NEW EXERCISE DATE"). The New Exercise Date shall be
before the date of the Company's proposed sale or merger. The Board shall notify
each participant, at least ten (10) business days prior to the New Exercise
Date, that the Exercise Date for the participant's option has been changed to
the New Exercise Date and that the participant's option shall be exercised
automatically on the New Exercise Date, unless prior to such date the
participant has withdrawn from the Offering Period as provided in Sections 10 or
11 hereof.

     18.4. Plan Termination. Notwithstanding anything to the contrary set forth
herein, in the event of any Change in Control or other event described in this
Section 18 which results in Ordinary Shares or other securities of the Company
being exchanged for or converted into cash, securities (including securities of
another corporation) or other property, the Board will have the right to
terminate this Plan as of the date of the event or transaction, in which case
all Ordinary Shares covered by each option under the Plan which has not yet been
exercised shall, at the option of the Board (i) become the right to receive such
cash, securities or other property, net of any applicable exercise price; or
(ii) shall terminate, in which case, any payroll deductions credited to such
participant's account during the Offering Period but not yet used to exercise
the option shall be returned to such participant.

     18.5. Further Actions. In addition to and without derogating from the
provisions of section 18.1 - 18.4, in the event of (i) any Change in Control,
(ii) other event described in Section 18, (iii) any unusual or nonrecurring
transactions or events affecting the Company, any affiliate of the Company, or
the financial statements of the Company or any affiliate or (iv) of changes in
applicable laws, regulations or accounting principles, the Board, in its sole
discretion, and on such terms and conditions as it deems appropriate, is
authorized to take any one or more of the following actions or determinations,
with respect to the outstanding option under this Plan, by action taken prior to
the occurrence of the event, or at any other time, whenever the Board determines
that such action is appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan
or with respect to any outstanding option under this Plan, to facilitate such
transactions or events, or to give effect to such changes in laws, regulations
or principles:

          18.5.1. that the outstanding option shall be purchased for an amount
of cash equal to the amount that could have been attained upon the exercise of
such outstanding option or the realization of the Employee's rights had such
outstanding option been currently exercisable or payable;

          18.5.2. that the outstanding option shall be replaced with other
rights or property selected by the Board in its sole discretion;

          18.5.3. that the outstanding option cannot be exercised after such
event, in which case, any payroll deductions credited to such participant's
account during the Offering Period but not yet used to exercise the option shall
be returned to such participant;

          18.5.4. that, for a specified period of time prior to such transaction
or event, such outstanding option shall be exercisable as to all Ordinary Shares
covered thereby, notwithstanding anything to the contrary in this Plan or the
provisions of such outstanding option;


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          18.5.5. that upon such event, such outstanding option shall be assumed
by the successor corporation, or a parent or subsidiary thereof, or shall be
substituted for by a similar outstanding option covering the stock of the
successor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices.

19.  AMENDMENT OR TERMINATION.

     19.1. The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 18, no such
termination shall affect options previously granted, provided that an Offering
Period may be terminated by the Board on any Exercise Date if the Board
determines that the termination of the Offering Period or the Plan is in the
best interests of the Company and its shareholders. Except as provided in
Section 18 and Section 19, no amendment may make any change in any option
theretofore granted which adversely affects the rights of any participant. To
the extent necessary to comply with any applicable law, regulation or stock
exchange rule, the Company shall obtain shareholder and governmental approvals
in such a manner and to such a degree as required.

     19.2. Without shareholders consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to add or delete Designated
Subsidiaries to be eligible to participate in the Plan, change the Offering
Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Ordinary Shares for each participant properly correspond with amounts withheld
from the participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole discretion
advisable which are consistent with the Plan.

     19.3. The Plan may not be amended in any way which would cause options
issued under the Plan to fail to meet the requirements of applicable law.

20.  NOTICES.

     All notices or other communications by a participant to the Company under
or in connection with the Plan shall be deemed to have been duly given when
received in the form specified by the Company at the location, or by the person,
designated by the Company for the receipt thereof.

21.  CONDITIONS UPON ISSUANCE OF SHARES.

     21.1. Compliance with Applicable Laws. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
United States Securities Act of 1933, as amended, the United States Securities
Exchange Act of 1934, as amended, 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.

     21.2. Holding Period after Exercise of Option. Shares issued as a result of
the exercise of an option under this Plan will be subject to a holding period of
six (6) months from the date of


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<PAGE>
exercise. During this holding period, the shares may not be sold or transferred
by the Employee. The Board, at its sole discretion, may change or eliminate this
holding period.

     21.3. Limitations on Shares. Shares issued as a result of the exercise of
an option under this Plan will be subject to the terms and limitations contained
in the corporate documents of the Company, as amended from time to time; to
limitations imposed on holders of Ordinary Shares in any shareholders agreement;
and, in the event that the Company's shares shall be registered for trading in
any public market, to certain limitations (including lock-up period and stop
transfer restrictions), as will be requested by the Company or its underwriters,
and by exercise of the options granted hereunder, the participant
unconditionally agrees and accepts any such limitations.

     21.4. Representations. As a condition to the exercise of an option, the
Company may require a person exercising such option to represent and warrant at
the time of any such exercise that the shares are being purchased only for
investment and without any present intention to sell or distribute such shares
if, in the opinion of the counsel of the Company, such a representation is
required by any of the aforementioned provisions of law. Furthermore, the
Company shall have the authority to endorse upon the certificate or certificates
representing the shares such legends referring to the foregoing restrictions,
and any other applicable restriction, as it may deem appropriate.

22.  TERM OF PLAN.

     The Plan shall become effective on the Initial Trading Date, subject to
approval by the shareholders of the Company within twelve (12) months of the
date on which the Plan is adopted by the Board. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 19 hereof.

23.  GOVERNING LAW.

     This Plan shall be governed by the laws of the State of Israel, without
giving effect to the principles of conflict of laws thereof.

24.  NO ENLARGEMENT OF EMPLOYEE RIGHTS.

     Nothing contained in this Plan shall be deemed to give any Employee the
right to be retained in the employ of the Company or any Designated Subsidiary,
or to interfere with the right of the Company or Designated Subsidiary to
discharge any Employee at any time.

25.  RULES FOR ISRAELI AND FOREIGN JURISDICTIONS.

     25.1. With respect to Israeli residents employees of the Company or any
Designated Subsidiary, the Plan may qualify, at Company's option, under any tax
route of Section 102 of the Israeli Tax Ordinance (as amended) or under any tax
ruling given in this matter by the Israeli tax authorities (if any).
Notwithstanding any other provision of this Plan, the grant of options and
issuance of shares hereunder is subject to any rules, regulations and
limitations of applicable law resulting from the tax route elected by the
Company or as promulgated by such tax ruling (if any). As a condition for grant
of options and issuance of shares hereunder, the participant shall execute any
document and assume any obligation required by the Company in order to comply
with such rules, regulations and limitations, including any trust arrangement
(if applicable).

     25.2. The Board may adopt rules or procedures relating to the operation and
administration of the Plan to accommodate the specific requirements of local
laws and


                                       11
<PAGE>
procedures. Without limiting the generality of the foregoing, the Board is
specifically authorized to adopt rules and procedures regarding handling of
payroll deductions, payment of interest, conversion of local currency, payroll
tax, withholding procedures and handling of stock certificates which vary with
local requirements. The Board may also adopt sub-plans applicable to particular
Designated Subsidiaries or locations. The rules of such sub-plans may take
precedence over other provisions of this Plan, with the exception of Section 13,
but unless otherwise superseded by the terms of such sub-plan, the provisions of
this Plan shall govern the operation of such sub-plan.

26.  SEVERABILITY.

     If any term or other provision of this Plan is determined to be invalid,
illegal or incapable of being enforced by any applicable rule, regulation or
law, the invalidity of such term or provision of the Plan shall not affect the
validity or enforceability of any other provision of the Plan, which shall
remain in full force and effect.


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