EXHIBIT 10.5

                                 POWERDSINE LTD.

                         2003 ISRAELI SHARE OPTION PLAN
                         ------------------------------

1.      PURPOSE

The  purpose of this Plan (as  defined  in  Section  2.1 below) is to secure for
PowerDsine  Ltd., a company  incorporated  under the laws of the State of Israel
(the  "COMPANY")  and its  shareholders  the benefits  arising from ownership of
share  capital by  employees,  officers  and  directors  of the  Company and its
Affiliates (as defined in Section 2.1 below),  who are expected to contribute to
the Company's future growth and success.

2.      DEFINITIONS

2.1     DEFINED TERMS

Initially,  capitalized  terms,  as used in this Plan,  shall  have the  meaning
ascribed thereto as set forth below:

ADMINISTRATOR           Means the Company's  Board,  or a committee to which the
                        Board  shall have  delegated  power to act on its behalf
                        with  respect to this Plan.  Subject to the Articles (as
                        defined  herein),   the   Administrator,   if  it  is  a
                        committee, shall consist of at least two (2) members, or
                        such greater number as may be determined by the Board.

AFFILIATE(S)            Means  a  present  or  future  entity  that  either  (i)
                        Controls the Company or is Controlled by the Company; or
                        (ii) is  Controlled  by the same  person or entity  that
                        Controls the Company. Control is defined herein.

ALLOCATE and/or         With respect to Options, means the allocation of Options
ALLOCATED               by  the   Company   to  the   Trustee  on  behalf  of  a
                        Participant.

ARTICLES                The Articles of  Association  of the Company,  as may be
                        amended from time to time.

BOARD                   The board of directors of the Company.

CAUSE                   when  used  in  connection  with  the  termination  of a
                        Participant's   employment  with,  or  services  to  the
                        Company or an  Affiliate,  and forming the basis of such
                        termination: (a) the definition ascribed to Cause in the
                        individual  employment  agreement or services  agreement
                        between  the  Company   and/or  its  Affiliate  and  the
                        Participant,  (b) if no  such  definition  exists,  then
                        anyone of the following:  (i)  termination of engagement
                        by the Company or an Affiliate,  which under Israeli law
                        denies the  Participant's  entitlement to severance pay;
                        (ii)  dishonesty  toward the  Company  or an  Affiliate,
                        (iii)   insubordination   with  respect  to   reasonable
                        directives of the Participant's  direct supervisor or to
                        directives of the Board, (iv) substantial malfeasance or
                        nonfeasance of duty, (v)  embezzlement  of the Company's
                        or an

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                        Affiliate's  funds,  (vi)  unauthorized   disclosure  of
                        confidential  information,  (vii) conduct  substantially
                        prejudicial to the business of the Company or Affiliate,
                        (viii) any substantial breach by the Participant of his/
                        her  employment  or  service   agreement  or  any  other
                        obligations towards Company or an Affiliate.

CHANGE IN               Any increase,  reduction or change or exchange of shares
CAPITALIZATION          for a  different  number  or kind  of  shares  or  other
                        securities    by   reason    of   a    reclassification,
                        recapitalization,  merger,  assets sale,  consolidation,
                        reorganization, issuance of warrants or rights, dividend
                        or  other  distribution  (whether  in the  form of cash,
                        shares  or  other  property),   share  split,  spin-off,
                        combination or exchange of shares, repurchase of shares,
                        or change in corporate structure.

COMMENCEMENT DATE       Means  the  date on  which  the  vesting  schedule  with
                        respect  to  a  Grant  of  Options  begins,  and  unless
                        otherwise determined by the Administrator,  shall be the
                        date on which such Grant of Options is Allocated.

CONTROL and/or          Shall have the meaning  ascribed  thereto in Section 102
CONTROLLED              (as defined herein).

DISABILITY              Means, (A) the definition of such term in the individual
                        employment  or  services  agreement  between the Company
                        and/or an Affiliate  and the  Participant,  or (B) if no
                        such  definition  exists,  then any  physical  or mental
                        illness  or injury as a result of which the  Participant
                        remains absent from work or is otherwise  precluded from
                        rendering  his/her  services  to the  Company  and/or an
                        Affiliate,  for,  (i) a  period  of two (2)  consecutive
                        months,  or (ii) an  aggregate  of two (2) months in any
                        twelve (12) month  period.  Disability  shall occur upon
                        the end of such period.

EXERCISE PRICE          Means,  the price  determined  by the  Administrator  in
                        accordance  with  Section  7.1 below,  to be paid to the
                        Company upon exercise of a granted Option and conversion
                        of such Option into Underlying Shares.

GRANT LETTER            Means a letter  from the  Company or an  Affiliate  to a
                        Participant, in which the Participant is notified of the
                        decision to grant  Participant  Options according to the
                        terms of this  Plan.  The Grant  Letter  shall  specify,
                        among  other  things (i) the Tax Track that the  Company
                        chooses in accordance with Section 11 of this Plan; (ii)
                        the Exercise Price;  (iii) the number of Options granted
                        to the Participant; and (iv) the time(s) at which all or
                        portions of an  outstanding  Option  becomes  vested and
                        exercisable by the Participant.

GRANT OF OPTIONS        Means  the  grant  of  Options  by  the   Company  to  a
                        Participant pursuant to a Grant Letter.

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HOLDING PERIOD          Means the period in which the Allocated  Options granted
                        to a Participant under Tax Tracks Through a Trustee, or,
                        upon exercise of the Options,  the Underlying Shares are
                        to be held by the Trustee on behalf of the  Participant,
                        in accordance  with Section 102, and pursuant to the Tax
                        Track selected by the Company.

IPO                     Means  the  initial  public  offering  of the  Company's
                        shares and the listing of such shares for trading on any
                        recognized   stock  exchange  or   over-the-counter   or
                        computerized securities trading system.

LAW                     Means the laws of the State of Israel,  as are in effect
                        from time to time.

MERGER TRANSACTION      Means  (i) a sale  of all  or  substantially  all of the
                        assets  of the  Company;  or (ii) a sale  (including  an
                        exchange) of all or  substantially  all of the shares of
                        the  capital  stock of the  Company;  or (iii) a merger,
                        consolidation or like transaction of the Company with or
                        into another corporation.

NOTICE OF EXERCISE      A notice of  exercise of Options as set forth in Section
                        7.4 below.

OPTION                  Means the right granted to a Participant to purchase one
                        (1) Share of the Company.

PARTICIPANT             Employee(s), officer(s) or director(s) of the Company or
                        any  Affiliate,  provided  that  such  person  does  not
                        Control  the  Company,  on  behalf  of whom an Option is
                        Allocated pursuant to this Plan.

PLAN or OPTION PLAN     Means this 2003 Israeli  Share  Option  Plan,  as may be
                        amended from time to time.

RETIREMENT              Means the termination of a Participant's employment as a
                        result of his/her reaching the earlier of (i) the age of
                        retirement  prescribed  by  Law;  or  (ii)  the  age  of
                        retirement  specified  in the  Participant's  employment
                        agreement;  or (iii) the Company's  written  consent for
                        retirement.

SECTION 102             Means Section 102 of the Israeli Tax  Ordinance,  as may
                        be amended from time to time.

SECTION 102 RULES       Means the Income Tax Rules (Tax  Relief for  Issuance of
                        Shares to Employees),  2003, as may be amended from time
                        to time.

SHARE(S)                Means Ordinary  Shares of the Company,  of nominal value
                        NIS 0.10  each,  subject  to  adjustment  for any  share
                        splits,  combinations  or  share  dividends  having  the
                        effect of a share split.

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SHARE REGISTER          The  Company's   shareholder   register   maintained  in
                        accordance with the provisions of applicable Law.

TAX ORDINANCE           Means the Israeli  Income Tax Ordinance  [New  Version],
                        1961, as amended, and any regulations,  rules, orders or
                        procedures promulgated thereunder.

TAX TRACK               Means  anyone of the three tax  tracks  described  under
                        Section 102, specifically:  (1) the "Capital Gains Track
                        Through a  Trustee";  (2)  "Income  Tax Track  Through a
                        Trustee";  or  (3)  the  "Income  Tax  Track  Without  a
                        Trustee";  each as more fully described in Sections 11.1
                        and 11.2 below.

TERM OF THE OPTIONS     Means, with respect to granted but unexercised  Options,
                        the time period set forth in Section 9 below.

TERMINATION OF          Termination   of  the  employment   relationship   of  a
EMPLOYMENT              Participant  who is  either  an  employee,  director  or
                        officer of the  Company or an  Affiliate,  by either the
                        Company, an Affiliate or the Participant.

TRUSTEE                 Means a  trustee  appointed  by the  Company  to hold in
                        trust,  Allocated  Options  and  the  Underlying  Shares
                        issued  upon  exercise  of such  Options,  on  behalf of
                        Participants.

TAX YEAR                A year beginning on January 1 and ending on December 31.

UNDERLYING SHARES       Means  Shares  issued or to be issued  upon  exercise of
                        Granted Options, all in accordance with this Plan.

2.2     GENERAL

Without  derogating from the meanings  ascribed to the capitalized  terms above,
all singular  references  in this Plan shall  include the plural and vice versa,
and reference to one gender shall include the other,  unless otherwise  required
by the context.

3.      SHARES AVAILABLE FOR OPTIONS

3.1     The total number of Underlying  Shares  reserved for issuance under this
        Plan and any modification thereof, shall be determined from time to time
        by the Board.  Such number of Shares shall be subject to  adjustment  as
        required  for the  implementation  of the  provisions  of this Plan,  in
        accordance with the provisions of Section 4 below.

3.2     If Options Granted and/or  Allocated under this Plan expire or otherwise
        terminate in accordance  with the provisions of this Plan,  such expired
        or  terminated  Options  shall become  available  for future  Grants and
        Allocations under this Plan.

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4.      ADJUSTMENTS

        (a)     In case of any Change in Capitalization, and in order to prevent
diminution or enlargement of the benefits or potential  benefits  intended to be
made available  under this Plan,  appropriate  adjustments  shall be made by the
Administrator,  whose  determination  shall be final, to the number and class of
Shares which may be purchased and delivered under this Plan,  and/or the number,
class,  and price of Shares  covered  by each  outstanding  Option,  and/or  the
Exercise  Price under  outstanding  Options.  The Company  may, but shall not be
obligated to, provided for immediate  maturity of all outstanding  Options prior
to the  effectiveness  of such  Change in  Capitalization,  with all Options not
being  exercised  within the time period  specified by the  Administrator  being
terminated. Upon the occurrence of any such adjustment,  references in this Plan
to Shares and  Underlying  Shares  shall be  construed to mean the Shares of the
Company subject to this Plan, as determined by the  Administrator  and following
such adjustment.

        (b)     If the Change in  Capitalization  is the  distribution of a cash
dividend,  the  Company  shall  transfer  to the  Trustee the amount of dividend
resulting  from the  Underlying  Shares  held by the  Trustee for the benefit of
Participants  in accordance  with the provisions of this Plan. The Trustee shall
deduct all applicable  taxes from the dividend amount and transfer the remaining
dividend amount to such Participants.

5.      ADMINISTRATION OF THE PLAN

5.1     POWER

Subject to the Law,  the  Articles  and any  resolution  to the  contrary by the
Board, the Administrator is authorized,  in its sole and absolute discretion, to
exercise all powers and authorities either specifically granted to it under this
Plan or necessary or advisable  in the  administration  of this Plan,  including
without limitation,

(A)     To determine:

        (i)     The  Participants  in the Plan,  and the number of Options to be
                Granted   for  the   benefit   of  each   Participant.   If  the
                Administrator  is a committee of the Board,  then this authority
                shall be deemed to be an  authority to make  recommendations  to
                the Board, which  recommendations  may or may not be approved by
                the Board in it sole discretion;

        (ii)    The time(s) at which Options shall be Granted;

        (iii)   The Exercise Price for any Granted Option;

        (iv)    The vesting period and schedule of any Granted Option;

        (v)     Whether,  to what extent, and under what circumstances an Option
                may be settled, canceled, forfeited, exchanged, or surrendered;

        (vi)    Any terms and conditions in addition to those  specified in this
                Plan under which an Option may be Granted; and

        (vii)   Any measures,  and to take any actions,  as are deemed necessary
                or advisable for the  administration  and implementation of this
                Plan.

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(B)     To  interpret  the  provisions  of this  Plan  and to take  all  actions
        resulting therefrom, including without limitation,

        (i)     Subject to Section 7 below,  to accelerate the date on which any
                Granted Option under this Plan becomes vested and exercisable;

        (ii)    To waive or amend  provisions  of this Plan relating to exercise
                of Options,  including  exercise of Options after termination of
                employment for any reason; and

        (iii)   To  amend  any  of  the  terms  of  this  Plan,   or  any  prior
                determinations of the Administrator.

(C)     The  Administrator  may,  at  any  time,  and  when  applicable,   after
        consultation with the Trustee,  amend, alter,  suspend or terminate this
        Plan.  Termination  of this Plan shall not  affect  the  Administrator's
        ability to exercise the powers  granted to it hereunder  with respect to
        Options granted under this Plan prior to the date of such termination.

5.2     LIMITATIONS

Notwithstanding  the  provisions  of  Section  5.1  above,  no  interpretations,
determinations or actions of the  Administrator  shall contradict the provisions
of Section 102, and no waiver or amendment  with respect to this Plan shall have
an  adverse  affect on the  rights of any  Participant  in  connection  with any
Granted  Option under this Plan without first  obtaining the written  consent of
the Participant being adversely affected.

6.      GRANT AND ALLOCATION OF OPTIONS

6.1     CONDITIONS FOR GRANT OF OPTIONS

Options may be granted at any time after:

        (A)     This Plan has been approved by the necessary corporate bodies of
                the Company; and

        (B)     All other approvals,  consents or requirements  necessary by Law
                have been received or met.

6.2     CONDITIONS FOR ALLOCATION OF OPTIONS

Options may be  allocated  thirty (30) days after a request for approval of this
Plan has been  submitted by the Company for approval,  to the Israeli Income Tax
Authorities pursuant to the requirements of the Tax Ordinance.

6.3     DATE OF GRANT OR ALLOCATION

        (A)     The date on which  Options  shall be deemed  Granted  under this
                Plan  shall  be the  date on  which  the  Company  notifies  the
                Participant that an Option has been Granted thereto.

        (B)     The date on which Options shall be deemed  Allocated  under this
                Plan shall be the date on which the Company notifies the Trustee
                that an Option has been  Allocated in the name of the Trustee on
                behalf of a Participant.

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7.      EXERCISE OF OPTIONS

7.1     EXERCISE PRICE

The Exercise  Price per  Underlying  Share  deliverable  upon the exercise of an
Option shall be determined by the Administrator. The Exercise Price shall be set
forth in the Grant Letter.

7.2     VESTING SCHEDULE

        (a)     Options shall vest (i.e.,  Options shall become  exercisable) at
the dates set forth in the Grant Letter (the "VESTING DATES").  An Option may be
subject  to such  other  terms  and  conditions  on the  time(s)  when it may be
exercised as the Administrator may deem appropriate.  The vesting  provisions of
individual Options may vary.

        (b)     Unless otherwise  determined by the  Administrator,  all Options
Granted on a certain date shall be subject to the continued  employment  with or
service to the Company or Affiliate by the Participant, from the date the Option
is  Granted  until  the end of the last  Vesting  Dates  set  forth in the Grant
Letter.

7.3     MINIMUM EXERCISE

        (a)     When exercising an Option,  and unless  restricted by the number
of  Underlying  Shares  available for exercise,  the  Participant  must exercise
his/her  right to a minimum of one (1) unit of the Option.  For the  purposes of
this Plan, one (1) 'UNIT' of an Option shall equal ten (10)  Underlying  Shares.
An Option may not be exercised for fractional Shares.

        (b)     The  exercise  by a  Participant  of a  portion  of the  Options
granted  shall not cause the  expiration,  termination  or  cancellation  of the
remaining  portions  of  Options  that  have  vested  and  that  are held by the
Participant or the Trustee on behalf of the Participant.

7.4     MANNER OF EXERCISE

An Option may be exercised by a Participant at any time according to the Vesting
Dates in the following manner:

        (A)     NOTICE OF EXERCISE

        The Participant shall sign and deliver to the Company,  at its principal
        office,  with a copy  to the  Trustee  (if  the  Options  are  held by a
        Trustee),  a notice of exercise of Option,  in the form  determined  for
        such purpose by the Administrator  (the "NOTICE OF EXERCISE").  Any form
        of Notice of  Exercise  must  include  the  following  details:  (i) the
        identity of the Participant, (ii) the number of Options being exercised,
        and (iii) the aggregate  Exercise Price to be paid for all Options being
        exercised (the "PURCHASE PRICE").

        (B)     PAYMENT OF EXERCISE PRICE

        Payment by the Participant to the Company of the Purchase Price shall be
        made in case or by  certified  check,  in U.S.  dollars  or New  Israeli
        Shekels  ("NIS"),  and if  payment  is made in NIS,  to the  extend  the
        Exercise Price is noted in U.S. dollars,  the amount shall be calculated
        at the representative rate of exchange known on the date of payment. The
        Administrator  may,  in its sole  discretion,  accept  any other form of
        payment from the Participant.

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        (C)     ALLOCATION OF SHARES

        Upon the delivery of a duly signed Notice of Exercise and the payment to
        the  Company  of  the  Purchase  Price,  the  Company  shall  issue  the
        Underlying  Shares to the Trustee  (according to the applicable  Holding
        Period) or to the Participant, as the case may be.

8.      WAIVER OF OPTION RIGHTS

        (a)     At  any  time  prior  to the  expiration  of  any  Granted  (but
unexercised)  Option,  a  Participant  may  waive his  rights to such  Option by
providing the Company, at its principal office, written notice expressly waiving
his/her  rights to the Option(s)  (the "WAIVER  NOTICE").  A Waiver Notice shall
specify  the  number  of  Options  being  waived  and  shall  be  signed  by the
Participant.

        (b)     Upon receipt by the Company of the Waiver  Notice,  such Options
shall expire and become  available for future Grants and Allocations  under this
Plan.

9.      TERM OF THE OPTIONS

Unless earlier  terminated  pursuant to the provisions of this Plan, all Granted
but  unexercised  Options shall expire and cease to be  exercisable at 5:00 p.m.
Israel time on the tenth (10th)  anniversary  of the  Commencement  Date of such
Options.

10.     TERMINATION OF EMPLOYMENT

10.1    VOLUNTARY  TERMINATION BY PARTICIPANT AND TERMINATION BY COMPANY NOT FOR
        CAUSE

        (a)     If  Termination  of Employment is  voluntarily  initiated by the
Participant  or is initiated by the Company other than for Cause  (circumstances
of  Termination  of  Employment  being  ultimately  determined by the Company or
Affiliate, in their sole discretion), then any vested but unexercised Options on
the  date of  Termination  of  Employment,  Granted  to the  Participant  may be
exercised,  provided they have not previously expired,  not later than the first
to occur of: (i) sixty (60) days after the date of Termination of Employment; or
(ii) the end of the Term of the Options.

        (b)     All other  Granted  but  unvested  Options  for the benefit of a
Participant shall expire upon the date of Termination of Employment.

10.2    TERMINATION FOR CAUSE

        (a)     If  Termination  of Employment is initiated by the Company or an
Affiliate for Cause, the Participant's right to exercise any unexercised Options
Granted to such Participant, whether vested or not on the date of Termination of
Employment,  shall cease as of such date of Termination  of Employment,  and the
Options shall thereupon expire.

        (b)     If,  subsequent to the  Termination of Employment for any reason
other  than for Cause,  but prior to the  exercise  of  Options  Granted to such
Participant,  the  Administrator  determines that, either prior or subsequent to
the Participant's Termination of Employment,  the Participant engaged in conduct
which would constitute Cause, then the Participant's  right to exercise his/her,
whether  or  not  vested  on  the  date  of  Termination  of  Employment,  shall
immediately  cease  upon such  determination  and the  Options  shall  thereupon
expire.

        (c)     A  determination  by the  Administrator  as to the  existence of
Cause shall be final and conclusive for all purposes of this Plan.

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10.3    TERMINATION BY REASON OF DEATH, RETIREMENT, OR DISABILITY

        (a)     DEATH. If Termination of Employment is by reason of death of the
Participant,  his/her estate,  personal  representative  or  beneficiaries  may,
exercise the  Participant's  Options,  to the extent that the Participant  would
have been  entitled to do so at the time of his/her  death,  at any time but not
later  than the first to occur of:  (i) two (2)  years  following  Participant's
death; or (ii) the end of the Term of the Options.

        (b)     DISABILITY  AND  RETIREMENT.  If Termination of Employment is by
reason of  Retirement  or Disability of the  Participant,  the  Participant  may
exercise any portion of the Options  which have vested on the date of Retirement
or Disability, at any time but not later than the first to occur of: (i) one (1)
year  after  the  date of  Retirement  and  two  (2)  years  after  the  date of
Disability,  as the case may be; or (ii) the end of the Term of the Options. All
other Granted Options for the benefit of a Participant and which have not vested
on the date of Disability or  Retirement,  as the case may be, shall expire upon
the date of Retirement or Disability, as applicable.

10.4    EXCEPTIONS

Notwithstanding  the  provisions  of Sections  10.1,  10.2 and 10.3  above,  the
Administrator  may,  for  individual  special  circumstances  and  in  its  sole
discretion,  extend the periods during which a Participant, or upon the death of
a  Participant,   his/her  estate,  personal  representative  or  beneficiaries,
exercise any vested Options.

10.5    TRANSFER OF EMPLOYMENT OR SERVICE

Subject to the receipt of appropriate approvals from the Israeli Tax Authorities
(if required),  a Participant's right to Granted Options or the exercise thereof
under  this  Plan,  shall  not  terminate  or  expire  solely as a result of the
transfer of the  Participant  from the employ of the Company to an  Affiliate or
vice versa, whether as an employee, officer or director.

11.     TRUST ARRANGEMENT AND HOLDING PERIOD

11.1    TRUSTEE TAX TRACKS

        (a)     If the Company  elects to Grant  Options  pursuant to either (i)
the Capital Gains Track Through a Trustee,  or (ii) the Income Tax Track Through
a Trustee, then, in accordance with the requirements of Section 102, the Company
shall  appoint a Trustee  who will hold the  Allocated  Options  and  Underlying
Shares issued upon exercise of Options, in trust on behalf of each Participant.

        (b)     The Holding Period for the Options and Underlying Shares in each
of the above referenced tracks will be as follows:

        (A)     THE CAPITAL  GAINS TAX TRACK  THROUGH A TRUSTEE - if the Company
                elects to Allocate the Options  according to the  provisions  of
                this track,  then the Holding  Period will be  twenty-four  (24)
                months  from the end of the Tax Year in which the  Options  were
                Allocated to the Trustee on behalf of the  Participant,  or such
                shorter   period  as  may  be   approved   by  the  Israeli  Tax
                Authorities.

        (B)     INCOME TAX TRACK  THROUGH A TRUSTEE - if the  Company  elects to
                Allocate Options according to the provisions of this track, then
                the  Holding  Period  will be twelve (12) months from the end of
                the Tax Year in which the Options were  Allocated to the Trustee
                on behalf of the  Participant,  or such shorter period as may be
                approved by the Israeli Tax Authorities.

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        (C)     Subject to the  provisions  of Section  102 and the  Section 102
                Rules,  Participants  are prohibited from (i) receiving from the
                Trustee,   or  (ii)  selling  or  otherwise   disposing  of  the
                Underlying  Shares  prior to the end of the  applicable  Holding
                Period. Notwithstanding the foregoing, if a Participant sells or
                otherwise  disposes of Underlying  Shares held by the Trustee on
                his/her  behalf,  prior  to the  end of the  applicable  Holding
                Period (a "Breach"),  the  Participant  shall be responsible for
                the payment of all applicable  taxes imposed as a result of such
                Breach, in accordance with the provisions of the Rules.

        (D)     If the  Company  distributes  rights,  including  an issuance of
                bonus shares,  in connection with Options  originally  Allocated
                (the "Additional  Rights"),  all such Additional Rights shall be
                Allocated  and/or  issued  to the  Trustee  for the  benefit  of
                Participants, and shall be held by the Trustee for the remainder
                of the  Holding  Period  applicable  to the  Options  originally
                Allocated. Such Additional Rights shall be treated in accordance
                with the provisions of the applicable Tax Track.

11.2    INCOME TAX TRACK WITHOUT A TRUSTEE

If the Company  elects to Grant  Options  according  to the  provisions  of this
track,  then the Options will not be subject to a Holding Period.  To the extent
the Company elects this track,  then it reserves the right,  upon an exercise of
Options by a Participant under this Tax Track, to issue the Underlying Shares to
the  Trustee,  who shall  hold such  Underlying  Shares  for the  benefit of the
Participant,  for the  purpose  of  ensuring  due  payment  of any and all taxes
ensuing there-from,  all in accordance with the provisions of Section 16 of this
Plan.

11.3    TRACK SELECTION

The Company, in its sole discretion,  shall elect under which of the above three
(3) Tax Tracks each Option is Granted and shall  notify the  Participant  in the
Grant Letter, which Tax Track applies to each Granted Option.

11.4    CONCURRENT CONDITIONS

The Holding Period, if any, is in addition to the vesting period as specified in
the individual Grant Letter for each Participant. The Holding Period and vesting
period may run concurrently, but neither is a substitute for the other, and each
are independent terms and conditions for Options Granted under this Plan.

11.5    TRUST AGREEMENT

The terms and  conditions  applicable  to the  trust  relating  to the Tax Track
selected by the  Company,  as  appropriate,  shall be set forth in an  agreement
between the Company and the Trustee (the "TRUST AGREEMENT").

12.     TERM OF SHARES HELD IN TRUST

No  Shares or  Additional  Rights  issued by the  Company  to the  Trustee,  nor
Underlying Shares issued upon exercise of Options,  shall be held by the Trustee
on behalf of any  Participant  for a period longer than ten (10) years after the
end of the Term of the Options.  The Administrator shall instruct the Trustee as
to the transfer of these Shares  following  the period set forth in this Section
12.

                                       10
<PAGE>


13.     RIGHTS AS A SHAREHOLDER

Except as specified in this Plan or in the Grant  Letter,  a  Participant  shall
have all the rights and obligations of a shareholder of the Company with respect
to Shares  issued under this Plan,  including all  obligations  specified in the
Articles of Association of the Company.

14.     NO SPECIAL EMPLOYMENT RIGHTS

Nothing  contained  in this  Plan or any  Grant  Letter  shall  confer  upon any
Participant  any right with  respect to the  continuation  of  employment  by or
service to the Company or an Affiliate or to interfere in any way with the right
of the Company or an  Affiliate to terminate  such  employment  or service or to
increase or decrease the  compensation of the  Participant  with respect to such
employment or service.

15.     RESTRICTIONS ON DISPOSITION OF OPTIONS AND SHARES

15.1    OPTIONS

        (a)     Options  Granted under this Plan:  (i) are not  transferable  by
Participants  other than by will or the laws of descent and during the  lifetime
of a Participant may be exercised only by the  Participant;  and (ii) whether or
not fully paid, may not be sold,  assigned,  transferred,  pledged,  encumbered,
hypothecated or otherwise disposed of (each, a "DISPOSITION"); and (iii) are not
assignable  by  operation  of  law,  and  shall  not be  subject  to  execution,
attachment or similar process.

        (b)     During  the  lifetime  of a  Participant,  each  and all of such
Participant's  rights to purchase the Underlying Shares may be exercised only by
the Participant.

        (c)     Any  attempted  Disposition  contrary to the  provisions of this
Plan,  and the levy of any  execution,  attachment  or similar  process  upon an
Option, whether directly or indirectly, shall be null and void.

15.2    SHARES

        (a)     For as long as the Company is a private  company,  as defined in
applicable Law, no Disposition of the Underlying  Shares issued upon exercise of
a Granted Option, may be effected for a period of six (6) months and one (1) day
following the date on which the Underlying  Shares have been exercised (the "SIX
& DAY PERIOD").

        (b)     In addition to the foregoing and unless otherwise  determined by
the  Administrator,  prior to the earlier to occur of: (1) the Company's IPO; or
(2) the end of a four (4) year  period  commencing  on the date such  Underlying
Shares were issued to the  Trustee as a result of the  exercise of Options  (the
"RESTRICTION  PERIOD"),  no Disposition of the Shares may be effected  except in
the manner  described in the  provisions  of this Section 15.  Unless  otherwise
determined by the  Administrator,  any Underlying Shares issued upon exercise of
Options,  will be held by the Trustee until the earlier to occur of a Merger, as
detailed in Section 15.3 below, an IPO or the end of the Restriction Period.

Following  the end of the  Restriction  Period  and the  Six & Day  Period,  any
Disposition  of  Underlying  Shares  shall be subject to the  provisions  of the
Articles.

                                       11
<PAGE>


15.3    MERGERS

In a Merger  Transaction,  subject to obtaining the applicable  approvals of the
Israeli Tax Authorities,  the Administrator in its sole discretion,  may, but is
not obligated to decide:

        (A)     If, and to what  extent the vesting  period of unvested  Options
                shall be accelerated;

        (B)     If, and how vested  Options,  including  Options with respect to
                which the  vesting  period  has been  accelerated  according  to
                Section 15.3(A) above, may be exercised, replaced and/or sold by
                the Trustee or the Company, as the case may be, on the behalf of
                Participants; and

        (C)     The manner in which  Underlying  Shares  issued upon exercise of
                the Options  and held by the Trustee on behalf of  Participants,
                shall be  replaced  and/or  sold by the Trustee on behalf of the
                Participant.

15.4    ACCELERATION PROVISION

The  Administrator  may, in its sole  discretion,  include in  individual  Grant
Letters,  provisions  according to which, in Merger Transaction,  all or some of
the unvested Options, shall automatically accelerate.

15.5    BRING ALONG PROVISIONS

Prior to an IPO, the bring along  provisions  contained  in the  Articles  shall
apply to the  Participants  with  respect to the  Underlying  Shares held by the
Trustee on their behalf.

15.6    LOCK UP

In addition to any Holding Period,  in any  registration of the Company's shares
on any stock  exchange,  including  an IPO,  all  Participants  shall abide by a
lock-up period of up to one hundred and eighty (180) days, or such longer period
of time, all to the extent required by the  underwriter(s) in such registration.
For removal of doubt, extension of the period stated herein will not require the
individual  consent of each  Participant and shall be automatic upon the request
of said underwriter(s), in the sole discretion of the underwriter(s).

15.7    RIGHTS OF ORDINARY SHARES

Unless  specifically  restricted by this Plan and/or the provisions of the Grant
Letter, the Shares issuable to a Participant upon a due exercise of an Option or
any other securities of the Company so issuable, shall have the rights set forth
in the  Articles,  and  shall be  subject  to the  obligations  set forth in the
Articles for holders of the same class of securities. Upon the registration of a
Participant in the Share Register,  the Participant shall be entitled to receive
a copy of the Articles at his/her request.

16.     TAX MATTERS

        (a)     This Plan shall be governed  by, and shall  conform  with and be
interpreted in compliance  with, the requirements of Section 102 and any written
approval  from the  Israeli  Tax  Authorities.  All tax  consequences  under any
applicable  law  (other  than  stamp  duty)  which may  arise  from the Grant or
Allocation of Options,  from the exercise thereof or from the holding or sale of
Underlying  Shares (or other securities  issued under this Plan) by or on behalf
of the  Participant,  shall  be the  sole  liability  of  the  Participant.  The
Participant  shall indemnify the Company and/or  Affiliate,  as the case may be,
and hold them  harmless,  against and from any liability for any such tax or any
penalty, interest or indexing.

                                       12
<PAGE>


        (b)     If the  Company  elects to  Allocate  Options  according  to the
provisions  of the  Income  Tax Track  Without a Trustee  (Section  11.2 of this
Plan),  and if prior to the  exercise of any and/or all of these  Options,  such
Participant ceases to be an employee,  director, or officer of the Company or an
Affiliate,  the Participant  shall deposit with the Company a guarantee or other
security as required by law, in order to ensure the payment of applicable  taxes
upon the exercise of such Options.

17.     WITHHOLDING TAXES

        (a)     Whenever an amount  constitutes  withholding tax and such amount
relates to Options Granted to a Participant and/or Underlying Shares issued upon
the exercise thereof,  is due from the Participant  and/or the Company and/or an
Affiliate  and/or the Trustee,  the Company  and/or an Affiliate  shall have the
right to require payment of such withholding tax from a Participant in an amount
sufficient  to satisfy  any  applicable  withholding  tax  requirements  related
thereto.  Furthermore,  whenever  Shares or any other non-cash  assets are to be
delivered pursuant to the exercise of an Option, or transferred thereafter,  the
Company and/or an Affiliate  shall have the right to require the  Participant to
remit to the  Company  and/or to the  Affiliate,  or to the Trustee an amount in
cash sufficient to satisfy any applicable  withholding tax requirements  related
thereto. If such amount is not timely remitted, the Company and/or the Affiliate
shall have the right to withhold or set-off  (subject  to  applicable  Law) such
Shares or any other non-cash assets,  pending payment by the Participant of such
amounts.

        (b)     Until all taxes have been paid in accordance  with Rule 7 of the
Section 102 Rules, no Disposition in the Options and/or Underlying Shares may be
effected,  and no power of  attorney  or  instrument  of  transfer,  whether for
immediate or future use may be validly given.  Notwithstanding the foregoing,  a
Disposition in the Options and/or  Underlying  Shares may be validly effected in
accordance  with  the  provisions  of  Section  19  below,  provided  that,  the
transferee  thereof  shall be subject to the  provisions  of Section 102 and the
Section 102 Rules as would have been applicable to the deceased Participant were
he or she to have survived.

18.     NO TRANSFER OF OPTIONS BY TRUSTEE

The  Trustee  is  prohibited  from  transferring  Options  to any  third  party,
including a Participant,  except in accordance with  instructions  received from
the Administrator.

19.     TRANSFER OF RIGHTS UPON DEATH OF A PARTICIPANT

No  transfer  of any right to an  Option or  Underlying  Share  issued  upon the
exercise  thereof by will or by the laws of descent and  distribution,  shall be
effective to bind the Company unless, the Company shall have been furnished with
the following signed and notarized documents:

        (A)     A  written  request  for such  transfer  and a copy of the legal
                documents creating and confirming the right of the person acting
                with respect to the Participant's estate and of the transferee;

        (B)     A  written  consent  by the  transferee  to pay any  amounts  in
                connection  with the Options and  Underlying  Shares any payment
                due according to the provisions of this Plan and otherwise abide
                by all the terms of this Plan; and

        (C)     Any such other evidence as the  Administrator may deem necessary
                to  establish  the  right  to  the  transfer  of the  Option  or
                Underlying  Share  issued  upon  the  exercise  thereof  and the
                validity of the transfer.

                                       13
<PAGE>


20.     NO RIGHT OF OTHERS TO OPTIONS

Subject to the provisions of this Plan, no person other than a Participant shall
have any right with  respect to Options  Granted to the  Participant  under this
Plan.

21.     EXPENSES AND RECEIPTS

The expenses incurred in connection with the  administration  and implementation
of this  Plan  (including  any  applicable  stamp  duty)  shall  be borne by the
Company. Any proceeds received by the Company in connection with the exercise of
any Option may be used for general corporate purposes.

22.     REQUIRED APPROVALS

The  effectiveness  of this Plan is  subject  to the  receipt  of all  approvals
required under Section 102 and the Law.

23.     GOVERNING LAW

This Plan and all documents delivered or executed by the Company or an Affiliate
in  connection  herewith  shall be governed by,  construed and  administered  in
accordance  with the Law. The  district  courts of Tel  Aviv-Jaffa  shall be the
appropriate and exclusive venue for any disputes arising under and in connection
with this Plan and any and all  documents  delivered  or executed in  connection
hereto.

24.     TREATMENT OF PARTICIPANTS

The Company and/or an Affiliate are under no obligation to treat Participants in
a uniform  manner.  Subject to the  requirements  of the Law resulting  from the
Company's  election  of a  particular  Tax Track,  the terms of each  Option may
differ, in the sole discretion of the Administrator,  from other Options Granted
under this Plan at the same time, or at any other time.  The  Administrator  may
also grant more than one (1)  Option to a given  Participant  during the term of
this Plan,  either in addition to, or in  substitution  for, one or more Options
previously Granted to that Participant.

25.     NO CONFLICTS

If there is a conflict  between the terms of this Plan and a Grant  Letter,  the
provisions of this Plan shall prevail.

26.     PARTICIPANT UNDERTAKINGS

By entering into this Plan,  the  Participant  shall (1) agree and  acknowledges
that he/she have received and read this Plan and the Grant Letter; (2) undertake
all the provisions set forth in: Section 102 (including provisions regarding the
applicable Tax Track that the Company has elected), the 102 Rules, the Plan, the
Grant  Letter and the Trust  Agreement;  and (3)  subject to the  provisions  of
Section  102 and the  Rules,  undertake  not to sell or release  the  Underlying
Shares from trust before the end of the Holding Period (if any).

27.     ENFORCEABILITY

The  provisions  of this Plan shall be  binding  upon the  Participant,  his/her
estate, personal representatives, heirs and beneficiaries.

                                       14
<PAGE>


28.     NOTICES

Each notice relating to this Plan and any Grant Letter issued hereunder shall be
in writing and delivered in person or by first class mail,  postage prepaid,  to
the address last known of the person to be notified. Each notice shall be deemed
given on the date it is received.  If  delivered  in person,  it shall be deemed
received upon such  delivery.  If sent by mail,  it shall be deemed  received no
later than five (5) business days following its mailing.  The Company's  address
for notice purposes is:

PowerDsine Ltd.
Attn: Sharon Eckstein, Vice President for Human Resources
and/or Geri Katz, Chief Financial Officer
1 Hanagar Street, P.O.B 7220
Hod Hasharon 45421
Israel