Document:

EXHIBIT 10.6

                                 POWERDSINE LTD.

                                STOCK OPTION PLAN

                    (INCENTIVE AND RESTRICTED STOCK OPTIONS)

1.      PURPOSE. The PowerDsine Ltd. (the "COMPANY") Stock Option Plan
(Incentive and Restricted Stock Options) (the "PLAN") is intended to provide a
method whereby employees (including officers and directors), non-employee
directors, consultants and other service providers of the Company and its
subsidiaries (the "PARTICIPANTS") who are making and are expected to continue
making substantial contributions to the successful management and growth of the
Company and its subsidiaries may be offered an opportunity to acquire Ordinary
Shares, of nominal value NIS 0.10 per share, subject to adjustments for stock
splits and combinations (the "ORDINARY SHARES"), of the Company, in order to
increase their proprietary interests in the Company and their incentive to
remain in and advance in the employ of the Company and its subsidiaries and to
attract and retain personnel of experience and ability by granting such persons
an opportunity to acquire a proprietary interest in the Company. Accordingly,
the Company may, from time to time, grant to such Participants as may be
selected in the manner hereinafter provided, incentive stock options, as defined
in Section 422 of the Internal Revenue Code of 1986 (the "CODE") ("INCENTIVE
STOCK OPTIONS"), and/or restricted stock options ("RESTRICTED STOCK OPTIONS") to
purchase Ordinary Shares of the Company on the terms and conditions hereinafter
established. The Incentive Stock Options and Restricted Stock Options sometimes
are referred to herein individually as an "OPTION" and collectively as the
"OPTIONS". A Participant to whom an Option has been duly granted in accordance
with the provisions of this Plan may sometimes be referred to herein as an
"OPTION HOLDER".

2.      ADMINISTRATION. The Plan shall be administered by a Stock Option
Committee (the "COMMITTEE") appointed by the Board of Directors of the Company
(the "BOARD"). The Committee shall consist of no fewer than three (3) members
who may also be members of the Board and participate in the Plan. Should the
Company become subject to the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT") the Committee shall consist solely of two (2) or more "Non
Employee Directors", as that term is defined in subparagraph (b)(3)(i) of Rule
16b-3 ("RULE 16b-3") under the Exchange Act. Members of the Committee then will
not be able to participate in the Plan or become members if one (1) year prior
to an occurrence whereby the Company becomes subject to Rule 16b-3 they received
an option under any plan of the Company.

        Subject to: (i) the terms and conditions of the Plan; (ii) relevant
commitments of the Company; and (iii) provisions of the Israeli Companies Law
5759-1999, as same may be amended or replaced from time to time (the "COMPANIES
LAW"), the Committee shall have full power and authority, in its discretion,
from time to time, and at any time, to recommend to the Board or subject to any
applicable law to determine on the following matters: (a) designation of
Participants to whom Options shall be granted; (b) the type of Options being
granted pursuant hereto as either Restricted Stock Options or Incentive Stock
Options; (c) the terms and provisions of the Notice of Grant of an Option to be
executed by the Company and by each Participant receiving an Option under this
Plan (the "NOTICE OF GRANT"); (d) compliance by the Company with the Code; (e)
the number of Ordinary Shares to be covered by each Option; (f) provisions
concerning the time(s) at which and the extent to which an Option shall be
granted, any conditions upon which the vesting of an Option may be accelerated,
and the nature and duration of restrictions as to transferability or
restrictions constituting substantial risk of forfeiture; (g) acceleration of
the right of a Participant to exercise, in whole or in part, any previously
granted Option; (h) except as hereinafter provided, the Option exercise price
and the term during which the Options may be exercised; (i) interpretation of
the provisions and supervision over the

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administration of the Plan; (j) determine the Fair Market Value (as defined
below) of the Ordinary Shares; and (k) any other matter which is necessary or
desirable for, or incidental to administration of the Plan.

        Appointment and removal of members of the Committee and the work
procedures of the Committee, including but not limited to, convening meetings,
quorum for meetings, adjournment and majority provisions shall be as for other
committees of the Company's Board, as same are set forth in the Company's
Articles of Association, as same may be in effect from time to time (the
"ARTICLES").

3.      INTERPRETATION AND AMENDMENT. The interpretation, construction or
determination of any provisions of the Plan by the Committee shall be final and
conclusive. No member of the Board or the Committee shall be liable for any
action or determination made in good faith with respect to the Plan.

        The Board may, at any time, amend, alter, suspend or terminate the Plan;
provided, however, that any such action shall not impair any Options previously
granted under the Plan, and provided further that without the approval of the
holders of at least the majority of the voting shares of the Company voting at a
duly held meeting: (i) the total number of Ordinary Shares that may be purchased
under the Plan shall not be increased (except as permitted by Paragraph 11);
(ii) the minimum Option exercise price shall not be decreased (except as
permitted by Paragraph 11); (iii) the Option period during which outstanding
Options granted under the Plan may be exercised shall not be extended; and (iv)
the class of individuals eligible to receive Options under the Plan shall not be
altered.

4.      PARTICIPANTS. Options may be granted under the Plan to key employees (as
determined by the Committee or the Board), including officers and directors,
non-employee directors, consultants and other service providers of the Company
and its subsidiaries. The status of an Option as either an Incentive Stock
Option or a Restricted Stock Option will be clearly set forth in the Notice of
Grant of the Option. The term "SUBSIDIARY" shall mean "subsidiary corporation"
as defined in Section 424 of the Code. No Incentive Stock Option shall be
granted to a Participant who, at the time the Incentive Stock Option is granted,
owns stock possessing more than ten percent (10%) of the total combined voting
power of all classes of share capital of the Company or any subsidiary of the
Company; provided, however, that an Incentive Stock Option may be granted to
such a Participant if, at the time such Incentive Stock Option is granted, the
exercise price for each Ordinary Share subject to the Option is at least 110
percent (110%) of the Fair Market Value of such Ordinary Shares, and such
Incentive Stock Option is by its terms not exercisable after the expiration of
five (5) years from the date such Incentive Stock Option is granted.

        Subject to the preceding paragraph, receipt of stock options under any
other stock option plan maintained by the Company or any subsidiary shall not,
for that reason, preclude a Participant from receiving an Option under the Plan.

5.      ORDINARY SHARES. The Ordinary Shares which may be issued and sold
pursuant to Options granted under the Plan from time to time shall determined by
the Board from time to time and approved by the Company's shareholders as and to
the extent required pursuant to the Code. The Ordinary Shares issued and sold
under the Plan may be the Company's authorized but unissued shares or shares
issued to a trustee and held by same for later transfer as optioned shares as a
result of the grant and exercise of an Option. Shares issued to the trustee
under the Plan may be voted by the trustee pursuant to instructions of the Board
until such shares are optioned shares as a result of

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the exercise of an Option but such shares shall not be entitled to dividend or
distribution in liquidation unless and until an Option therefor is granted and
exercised.

        Should any Option expire or terminate for any reason without having been
exercised in full, the portion of the Option that remained un-exercised shall be
added to the shares otherwise available for Options hereunder.

        The Company shall at all times during the term of any outstanding Option
under the Plan, reserve and keep available, such number of Ordinary Shares as
will be sufficient to satisfy the requirements of all outstanding Options. The
Company shall pay all original issue taxes, if any, with respect to the issuance
of the Ordinary Shares pursuant to an exercise of an Option and all other fees
and expenses necessarily incurred by the Company in connection with such
exercise. The Company shall use its best efforts to comply with all laws and
regulations which, in the opinion of its legal counsel, shall be applicable to
Company in connection with the Plan.

        All share certificates issued upon a valid exercise of an Option under
the Plan shall be endorsed with the following legend, or with a legend
substantially similar hereto:

        "The shares represented by this certificate, have not been
        registered under the Securities Act of 1933 or under the
        securities laws of any state. These shares have been acquired
        for investment and not with a view to distribution or resale,
        and may not be sold, transferred, pledged or hypothecated in the
        absence of an effective registration statement for such shares
        under the Securities Act of 1933 and such state securities laws
        as maybe applicable or the delivery to POWERDSINE LTD. of an
        opinion of counsel, reasonably acceptable to it, to the effect
        that registration is not required under such Act or such state
        securities laws.

        The foregoing restrictions terminate when the shares may be
        freely transferred without restriction under Rule 144, under the
        Securities Act of 1933, or any successor thereto, and may be
        disregarded thereafter.

        Any disposition of any interest in the securities represented by
        this certificate is subject to certain restrictions, and the
        securities represented by this certificate are subject to an
        option and option terms, contained in PowerDsine Ltd.'s stock
        option plan and notice of grant between the record holder hereof
        and the Company, a copy of which will be mailed to any holder of
        this certificate without charge within five (5) days of receipt
        by the Company of a written request therefore".

6.      TERMS AND CONDITIONS OF OPTIONS. Options granted pursuant to the Plan
        shall be in such form and on such terms as the Committee shall, from
        time to time, approve, but subject, nevertheless, to the following terms
        and conditions:

        (a)     The Notice of Grant of an Option shall state (i) the total
number of Ordinary Shares to which it relates and no fractional Ordinary Shares
shall be issued, and (ii) the time or times at which it may be exercised in
whole or in part.

        (b)     Subject to sub-paragraphs (i) and (ii) herein, the Option
exercise price shall be determined by the Board or the Committee.

                (i)     In the case of an Incentive Stock Option, the exercise
        price per Option share shall equal the Fair Market Value of the Ordinary
        Shares covered by such Option at the date such Option is granted, or, in
        the case of a Participant who at the time the Incentive Stock

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        Option is granted owns, shares possessing more than ten percent (10%) of
        the total combined voting power of all classes of share capital of the
        Company or any subsidiary of the Company, the Option exercise price
        shall be not less than one hundred and ten percent (110%) of the Fair
        Market Value of the Ordinary Shares covered by such Option.

                (ii)    In the case of a Restricted Stock Option, the exercise
        price per Option share shall be determined by the Committee but shall be
        not less than the lower of (x) fifty percent (50%) of the book value of
        such Ordinary Shares as of the end of the fiscal year immediately
        preceding the date of such grant, or (y) fifty percent (50%) of the Fair
        Market Value of the Ordinary Shares on the date of such grant.

        (c)     Notwithstanding any other provision of the Plan, the term of an
Incentive Stock Option and the term of a Restricted Stock Option shall be for a
period of not more than ten (10) years from the date such Option is granted.
This term may be shortened by the Board in its sole discretion for individual
Participants.

        (d)     An Option must be granted within ten (10) years of the date the
Plan is adopted by the Board in accordance with Paragraphs 17 and 21 below.

        (e)     No individual shall be given the opportunity, under this Plan,
to exercise Incentive Stock Options for the purchase of Ordinary Shares valued
(at the time of grant of the Incentive Stock Options) in excess of $100,000, in
any calendar year, unless and to the extent that said Options shall have first
become exercisable in the preceding year. No Incentive Stock Option shall be
granted hereunder in such a manner as would cause the foregoing restrictions to
be violated.

        (f)     Except as provided for in Paragraph 9 below, if the Participant
is an employee and/or a consultant of the Company or of any of its subsidiaries,
an Option may not be exercised unless, at the time the Option is exercised and
at all times from the date the Option was granted, the Option Holder shall then
be and shall have been an employee or consultant of the Company or of any of its
subsidiaries.

7.      RESTRICTIONS ON DISPOSITION AND VESTING OF INTEREST IN PARTICIPANT.

        (a)     Ordinary Shares acquired by an Option Holder pursuant to the
exercise of a Restricted Stock Option under the Plan shall not be sold,
transferred, or otherwise disposed of and shall not be pledged or otherwise
hypothecated, except as provided in Paragraph 12 and in this Paragraph 7. Any
sale, transfer, pledge, hypothecation or other disposition shall hereinafter be
referred to as a "DISPOSITION"). Shares as to which the restrictions against
Disposition have not lapsed and the Option Holder's interest has not vested as
provided below shall be referred to as "RESTRICTED SHARES". Restrictions against
Disposition shall lapse and the Option Holder's interest in the shares
underlying the Option shall vest according to the vesting schedule set forth in
the Option Holder's Notice of Grant of Option, provided that, if the Option
Holder is an employee or consultant of the Company, the Option Holder continues
to be engaged by the Company through the end of the period for which vesting is
claimed to have occurred.

        Upon the earlier to occur of: (i) the death of the Option Holder, the
retirement of the Option Holder with the consent of the Company, or the
attainment by the Option Holder of the age of 65 (whether or not the Option
Holder then retires), the restrictions against Disposition which have not lapsed
under the Plan shall immediately lapse.

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        (b)     The Committee may provide for the issuance of restricted shares
subject to this Paragraph to a trustee (the "TRUSTEE") for the benefit of the
Option Holder until such time as the Option Holder acquires a vested interest in
accordance with the provisions of this Paragraph 7.

        (c)     If the Option Holder is an employee and/or consultant of the
Company or of any one of its subsidiaries, upon termination of engagement under
conditions disallowing the vesting of rights in the Option Holder, partially or
wholly, shares issued and subject to restrictions hereunder shall, except as
provided below, be held by the Trustee free of any rights of the Option Holder
and the Trustee shall make payment to the Option Holder of the original exercise
price of that portion of the Restricted Stock Option which said Option Holder
duly exercised.

        (d)     Ordinary Shares, exercised pursuant to an Option and as to which
the restrictions against Disposition have lapsed and the Option Holder's
interest has vested in accordance with the provisions set forth below shall be
referred to as "FREE SHARES". Holders of restricted shares may vote their shares
in any meeting of holders of Ordinary Shares.

        (e)     Any provision for the lapse of the restrictions against
Disposition and the vesting of the Option Holder's interest shall apply with
respect to shares subject to an Option whether or not the Option has been
exercised in whole or part on the date of lapse or vesting.

        (f)     For Option Holders who are employees and/or consultants of the
Company or any of its subsidiaries, upon termination of engagement for any
reason, shares issued to the Participant pursuant to the exercise of a
Restricted Stock Option under the Plan, which shares have not as of the date of
termination, become free shares as defined above, shall not be subject to any
further right or interest of the Participant. Within sixty (60) days following
the lapse of the Option Holder's right to acquire a vested interest, the Company
shall direct the Trustee, to the extent the exercised shares have been issued to
the Trustee, to compensate the Participant (at the original acquisition price)
for such number of shares as the Company determines and shall direct the Trustee
to release to the Participant any shares for which no such payment has been
directed. Nothing in this Paragraph 7 shall require the Company or the Trustee
to make payment for shares issued to Participants under the Plan.

        (g)     Notwithstanding any of the foregoing restrictions, any
restricted shares acquired under the Plan may at any time be pledged or
otherwise hypothecated to secure borrowing by the Participant to obtain the
acquisition price to be paid by the Participant for such shares, provided,
however, that the amount of such borrowing may not exceed the acquisition price
of such shares.

        (h)     The provisions of this Paragraph 7 and the provisions of any
Notice of Grant of an Option, relating to the restrictions against Disposition
and the vesting of the Participant's interest shall be applied according to
their terms or according to such other terms and conditions, or at such other
time and dates, as the Board or the Committee may from time to time establish.

7A.     LIMITATIONS AND RESTRICTIONS ON ORDINARY SHARES. Unless otherwise
expressly provided in the Notice of Grant of an Option, the Participant shall
have no rights of a shareholder with respect to the Ordinary Shares to be
acquired by the exercise of the Option until a certificate(s) representing such
shares is issued to him/her or the Trustee for his/her benefit, as the case may
be, and the Ordinary Shares are free shares. Upon issuance of a share
certificate(s), the Participant shall have the rights of a shareholder and shall
be subject to the terms and conditions that apply to holders of the Company's
shares as same are contained in the Company's Articles.

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8.      NOTICE OF ELECTION UNDER SECTION 83(B). With respect to the exercise of
Restricted Stock Options, each Participant making an election under Section
83(b) of the Code and the Regulations and Rulings promulgated thereunder will
provide a copy thereof to the Company within thirty (30) days of the filing of
such election with the Internal Revenue Service. Any insider acquiring Options
after the Company becomes subject to Rule 16b-3 who elects the election under
Section 83(b) of the Code and the Regulations promulgated thereunder, shall
notify the Company within thirty (30) days of filing such election.

9.      TERMINATION OF OPTIONS.

Where the Option Holder is an employee and/or consultant of the Company:

        (a)     DISABILITY AND RETIREMENT.If the Option Holder ceases to be
engaged by the Company or any subsidiary as a result of his/her Disability or
his/her retirement with the consent of the Company, then any portion of the
Option that is exercisable by him/her at the time he/she ceases to be engaged by
the Company or its subsidiaries, and only to the extent such portion of the
Option has vested and is exercisable as of such time, may be exercised by
him/her within: (i) in the case of Disability - two (2) years after the date of
Disability for a Restricted Stock Option and three (3) months after the date of
Disability for an Incentive Stock Option, and (ii) in the case of retirement
with the consent of the Company - one (1) year after the date of retirement for
a Restricted Stock Option and three (3) months after the date of retirement for
an Incentive Stock Option. As used herein, "DISABILITY" shall mean any physical
or mental illness or injury as a result of which the Option Holder remains
absent from work or is otherwise prevented from rendering his services to the
Company for: (x) a period of two consecutive months; or (y) an aggregate of two
(2) months in any twelve (12) month period. Disability shall occur upon the end
of such period.

        (b)     DISMISSAL WITHOUT CAUSE. If the Option Holder ceases to be
engaged by the Company or any subsidiary as a result of his/her dismissal
without cause, then any portion of the Option that is exercisable by him/her at
the time he/she ceases to be engaged by the Company or its subsidiaries, and
only to the extent such portion of the Option has vested and is exercisable as
of such time, may be exercised by him/her within sixty (60) days after the date
he/she ceases to be engaged by the Company or its subsidiaries.

        (c)     DISMISSAL WITH CAUSE. If the Option Holder ceases to be engaged
by the Company or any subsidiary as a result of his/her dismissal for cause (as
such term is defined in the Option Holder's individual employment and/or
consultant agreement with the Company, OR if there is no such employment or
consultant agreement, then cause shall mean termination of engagement which
under Israeli law or the law applicable to the Option Holder denies such
holder's entitlement to severance pay or similar payment), then the rights of
the Option Holder under the Option terminate and become void and null with no
further effect. However, the Board may, in its sole discretion, determine that
the Option, to the extent that it has vested and is exercisable by the Option
Holder at the time he/she ceases to be engaged by the Company or any of its
subsidiaries, and only to the extent that the Option has vested and is
exercisable as of such time, may be exercised by him/her within thirty (30) days
after such termination of engagement.

        (d)     OTHER CIRCUMSTANCES. Subject to the foregoing, if the Option
Holder ceases to be employed or engaged by the Company or any subsidiary for any
reason other than Disability, death, retirement with the consent of the Company
or any subsidiary or dismissal without cause, the Option shall terminate
immediately.

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        (e)     TRANSFER BETWEEN COMPANIES. Solely for purposes of the Plan, the
transfer of an Option Holder from the employ of the Company to a subsidiary of
the Company, or vice-versa, shall not be deemed a termination of engagement.

9A.     DEATH. If the Option Holder dies while in the engagement of the Company
or any subsidiary, his/her estate, personal representative, or beneficiary shall
have the right, subject to the provisions Paragraph 6(c) above, to exercise the
Option (to the extent that the Option Holder would have been entitled to do so
at the time of his/her death) at any time within two (2) years from the date of
his/her death.

10.     LEGAL PROCEEDINGS. In the event of institution of any legal proceedings
directed to the validity of the Plan or the Option, the Company may, in its sole
discretion, and without incurring any liability therefore to the Option Holder,
terminate the Option.

11.     STOCK SPLITS, MERGERS, ETC. In case of any Change in Capitalization (as
defined below), appropriate adjustments shall be made by the Board of Directors,
whose determination shall be final, to the number of shares which may be
purchased under the Plan, and the number of shares and Option exercise price per
share which may be purchased under outstanding Options. The Company may provide
for immediate maturity of all outstanding Options prior to the effectiveness of
such merger, sale of assets or similar transaction, with all Options not being
exercised within the time period specified by the Board being terminated. Solely
for purposes of the Plan, "CHANGE IN CAPITALIZATION" shall mean any increase,
reduction or change or exchange of shares for a different number or kind of
shares or other securities by reason of a reclassification, recapitalization,
merger, consolidation, reorganization, issuance of warrants or rights, dividend
or other distribution (whether in the form of cash, stock or other property),
stock split, spin-off, combination or exchange of shares, repurchase of shares,
change in corporate structure or otherwise.

12.     TRANSFERABILITY. Options are not assignable or transferable, except by
will or the laws of descent and distribution to the extent set forth in
Paragraph 10 and, during an Option Holder's lifetime, may be exercised only by
Option Holder. More particularly (but without limiting the generality of the
foregoing), the Option, may not be subject to a Disposition (except as provided
above), shall not be assignable by operation of law, and shall not be subject to
execution, attachment or similar process. Any attempted Disposition contrary to
the provisions of this Plan, and the levy of any execution, attachment, or
similar process upon the Option, shall be null and void and not given effect.
Notwithstanding the foregoing, if the Option Holder is an employee and/or
consultant of the Company and any of its subsidiaries, and such Option Holder
dies while being engaged by the Company and any of its subsidiaries, then the
estate, personal representative or beneficiary of such Option Holder shall have
the right to exercise the Option to the extent provided for in Paragraph 9A
above.

13.     EXERCISE OF OPTIONS. An Option may be exercised by written notice to the
Company at its offices. The notice of exercise shall refer to the Option being
exercised (specific reference to the Notice of Grant of Option and its date) and
the number of shares in respect of which the Option is being exercised. The
exercise notice shall be signed by the Option Holder and accompanied by payment
in full of the exercise price stated in the Notice of Grant of Option.

        If the shares being exercised are free shares (as defined above), the
Company shall issue the shares and share certificate(s) with respect to the
shares so exercised in the name of the person(s) exercising the Option. If the
shares are restricted shares (as defined above), the Company shall issue

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the shares and share certificate(s) with respect to the shares so exercised in
the name of the Trustee. Issuance of shares and delivery of share certificates
as aforesaid shall be done by the Company as soon as practicable following the
exercise by the Option Holder and payment of the exercise price to the Company.

        If the Option is being exercised by a person(s) other than the Option
Holder, pursuant to Paragraph 9A above, such notice shall be accompanied by
appropriate proof of the right of such person(s) to exercise the Option.

        All shares issued by the Company upon a valid exercise of an Option
shall be fully paid and non-assessable.

14.     NOTICE OF GRANT OF OPTION.Notice of Grant of Options under the Plan
shall be in writing, duly executed and delivered by or on behalf of the Company
and the Option Holder, shall contain such terms and conditions as the Committee
deems advisable, and shall specify its application to a Restricted Stock Option
or Incentive Stock Option. If there is any conflict between the terms and
conditions of any Notice of Grant of Option and of the Plan, the terms and
conditions of the Plan shall prevail.

15.     PAYMENT. Payment of the Option exercise price in respect of the Option
being exercised shall be in cash or by certified check, in U.S. dollars or NIS,
and if payment is made in NIS, the amount shall be calculated at the
representative rate of exchange known on the date of payment. The Board, in its
sole discretion, may allow payment in cash, at the minimum nominal value of the
Ordinary Shares being exercised and execution of a recourse promissory note for
the balance of the Option exercise price, provided that, said note shall bear
interest in the case of Incentive Stock Options, at a rate which is no less than
the lowest applicable U.S. federal rate required to be charged to preclude the
recharacterization of any amount of stated principal as interest for U.S.
federal tax purposes. In the case of Restricted Stock Options, the interest rate
will be determined by the Board or the Committee.

16.     WITHHOLDING TAX AND OTHER RESTRICTIONS ON ISSUING SHARES. The exercise
of each Option shall be subject to the condition that if at any time the Company
shall determine in its discretion that the satisfaction of withholding tax or
other withholding liabilities, or that the listing, registration, or
qualification of any shares otherwise deliverable upon such exercise upon any
securities exchange or under any state or federal law, or that the consent or
approval of any regulatory body, is necessary or desirable as a condition of, or
in connection with, such exercise in the delivery or purchase of shares pursuant
thereto, then in any such event, such exercise shall not be effective unless
such withholding, listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Company.

        The Company may require an additional payment equal to all applicable
withholding taxes which may be imposed on the difference between the exercise
price of the Ordinary Shares issuable upon the exercise of an Option and the
Fair Market Value of such shares as of the date of exercise (which sum will be
paid in due course by the Company to the applicable agencies as income taxes
withheld on income resulting from the exercise of the Option).

17.     TERM OF PLAN. The Plan shall terminate ten (10) years after the Plan is
adopted by the Board of Directors, and no Option shall be granted pursuant to
the Plan after that date, subject to earlier termination as provided in
Paragraph 10 above.

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18.     APPLICATION OF FUNDS. The proceeds received by the Company from the sale
of Ordinary Shares pursuant to the exercise of Options granted under the Plan
will be used for general corporate purposes.

19.     OBLIGATION TO EXERCISE OPTION. The granting of an Option shall impose no
obligation on the Option Holder to exercise such Option.

20.     CONTINUANCE OF  EMPLOYMENT.  Neither the Plan nor the grant of an Option
in a Notice of Grant of Option shall impose any  obligation on the Company or on
any  subsidiary of the Company to continue the  engagement of any Option Holder,
and nothing in the Plan or the grant of an Option in a Notice of Grant of Option
shall confer upon any Option  Holder any right to continue  engagement  with the
Company or any subsidiary of the Company or conflict with the right of either to
terminate such engagement at any time.

21.     EFFECTIVENESS  OF THE PLAN. The Plan shall become  effective on the date
of its adoption by the Board, but subject, nevertheless, to (1) approval, within
twelve (12) months thereof, by shareholders  representing at least a majority of
the voting shares of the Company or by such greater  percentage as may from time
to time be  required  under  the  laws of the  State  of  Israel,  and (2)  such
approvals as may be required by any other public authorities. Options under this
Plan may be granted but not  exercised  until it is  approved  by the  Company's
shareholders.  If the Plan is not  approved,  the Plan shall  terminate  and all
Options granted shall be void and have no force or effect.

22.     LOCK-UP. In any registration of the Company's shares, any Option Holder
shall abide by a "lock-up" period of up to one hundred and eighty (180) days, if
requested by the underwriter of the Company in such registration.

23.     NOTICES. Each notice relating to the Plan and the Notice of Grant of
Option shall be in writing and delivered in person or by first class mail,
postage prepaid, to the address last known of the person/entity to be notified.
Each notice shall be deemed given on the date it is received. The Company's
address is: 1 Hanagar Street, Neve Neeman B Industrial Zone, P.O.B. 7220, Hod
Hasharon 45421, Israel.

24.     ENFORCEABILITY. The provisions of this Plan shall be binding upon the
Option Holder, his/her estate, personal representatives and beneficiaries.

25.     GOVERNING LAW. This Plan and the Notice of Grant shall be governed by
and construed under the laws of the State of Israel without giving effect to
principles of conflict of laws.EXHIBIT 10.7

                  Schedules to Exhibit 10.7 have been omitted.

                                    AGREEMENT

                  AGREEMENT, dated as of May 12, 2004 (this "AGREEMENT"), among
PowerDsine Ltd., a private company organized under the laws of the State of
Israel (the "COMPANY"), General Atlantic Partners 78, L.P., a Delaware limited
partnership ("GAP LP"), General Atlantic Partners (Bermuda), L.P., a Bermuda
limited partnership ("GAP BERMUDA"), GAP-W International LLC, a Delaware limited
liability company ("GAP-W INTERNATIONAL"), GapStar, LLC, a Delaware limited
liability company ("GAPSTAR"), GAP Coinvestments III, LLC, a Delaware limited
liability company ("GAPCO III"), GAP Coinvestments IV, LLC, a Delaware limited
liability company ("GAPCO IV"), and GAPCO GmbH & Co. KG, a German limited
partnership ("GAPCO KG" and, collectively, with GAP LP, GAP Bermuda, GAP-W
International, GapStar, GAPCO III and GAPCO IV, the "PURCHASERS").

                  WHEREAS, pursuant to the Securities Purchase Agreement, dated
as of May __, 2004 (the "SECURITIES PURCHASE AGREEMENT"), by and among the
shareholders of the Company listed on Schedule I thereto (the "SELLING
SHAREHOLDERS") and the Purchasers, the Selling Shareholders have agreed to sell
to the Purchasers (i) Preferred Shares (as defined below) of the Company and
(ii) warrants to purchase, subject to the terms and conditions thereof,
Preferred Shares of the Company;

                  WHEREAS, the Company is prepared to enter into this Agreement
at the request of the Purchasers and the Selling Shareholders; and

                  WHEREAS, the Company's determination to enter into this
Agreement is premised, to a large extent, on its understanding that the
Purchasers have expressed their willingness to have the current senior
management of the Company continue to manage and operate the Company as in the
past, subject to the oversight of the Board of Directors.

                  NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto agree as
follows:

                  Section 1. DEFINITIONS. As used in this Agreement, and unless
the context requires a different meaning, the following terms have the meanings
indicated:

                  "AFFILIATE" means any Person who is an "affiliate" as defined
in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.

                  "AGREEMENT" means this Agreement as the same may be amended,
supplemented or modified in accordance with the terms hereof.

                  "ARTICLES OF ASSOCIATION" means the Articles of Association of
the Company as in effect on the date hereof, as amended and restated from time
to time.

                  "BOARD OF DIRECTORS" means the Board of Directors of the
Company.

<PAGE>

                                                                               2

                  "BUSINESS DAY" means any day other than a Saturday, Sunday or
other day on which commercial banks in the State of Israel or the State of New
York are authorized or required by law or executive order to close.

                  "CLOSING DATE" has the meaning set forth in Securities
Purchase Agreement.

                  "COMPANY" has the meaning set forth in the preamble to this
Agreement.

                  "DISPOSITION" has the meaning set forth in Section 5 of this
Agreement.

                  "EXCHANGE ACT" means the United States Securities Exchange Act
of 1934, as amended and the rules and regulations of the United States
Securities and Exchange Commission thereunder.

                  "EXCESS VOTING POWER" has the meaning set forth in Section 7.2
of this Agreement.

                  "GAP BERMUDA" has the meaning set forth in the preamble to
this Agreement.

                  "GAP LP" has the meaning set forth in the preamble to this
Agreement.

                  "GAPCO III" has the meaning set forth in the preamble to this
Agreement.

                  "GAPCO IV" has the meaning set forth in the preamble to this
Agreement.

                  "GAPCO KG" has the meaning set forth in the preamble to this
Agreement.

                  "GAPSTAR" has the meaning set forth in the preamble to this
Agreement.

                  "GAP-W INTERNATIONAL" has the meaning set forth in the
preamble to this Agreement.

                  "GENERAL ATLANTIC DESIGNEE" has the meaning set forth in
Section 4(a) of this Agreement.

                  "GOVERNMENTAL AUTHORITY" means the government of any nation,
state, city, locality or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.

                  "IPO" has the meaning set forth in Section 4(a) of this
Agreement.

                  "LIEN" means any mortgage, deed of trust, pledge,
hypothecation, assignment, encumbrance, voting restriction (statutory or other),
lien (statutory or other) or preference, priority, right or other security
interest or preferential arrangement of any kind or nature whatsoever.

<PAGE>

                                                                               3

                  "NIS" means New Israeli Shekels.

                  "ORDINARY SHARE EQUIVALENTS" means any security or obligation
which is by its terms convertible, exchangeable or exercisable into or for
Ordinary Shares, and any option, warrant or other subscription or purchase right
with respect to Ordinary Shares or any Ordinary Share Equivalent.

                  "ORDINARY SHARES" means the Ordinary Shares of nominal value
NIS 0.01 each of the Company.

                  "PERSON" means any individual, firm, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, limited liability company, Governmental Authority or other entity of
any kind, and shall include any successor (by merger or otherwise) of such
entity.

                  "PREFERRED SHARES" means, as the context requires, the Series
A Preferred Shares, the Series B Preferred Shares, the Series C Preferred
Shares, the Series D Preferred Shares, the Series E Preferred Shares, the Series
F Preferred Shares, the Series G Preferred Shares and/or the Series H Preferred
Shares.

                  "PURCHASED SECURITIES" means the Purchased Shares and
Purchased Warrants, and the Ordinary Shares and Preferred Shares issuable upon
the conversion or exercise of such Purchased Shares and Purchased Warrants, as
applicable.

                  "PURCHASED SHARES" means the Preferred Shares purchased by the
Purchasers pursuant to the Securities Purchase Agreement.

                  "PURCHASED WARRANTS" means the warrants to purchase Preferred
Shares purchased by the Purchasers pursuant to the Securities Purchase
Agreement.

                  "PURCHASERS" has the meaning set forth in the preamble to this
Agreement.

                  "QUALIFIED SALE TRANSACTION" has the meaning set forth in
Section 7.2 of this Agreement.

                  "SALE TRANSACTION" means (a)(i) the merger or consolidation of
the Company into or with one or more Persons, (ii) the merger or consolidation
of one or more Persons into or with the Company or (iii) a tender offer or other
business combination if, in the case of (i), (ii) or (iii), the shareholders of
the Company immediately prior to the consummation of such merger, consolidation,
tender offer or business combination do not retain at least a majority of the
voting power of the surviving Person or (b) the voluntary sale, conveyance,
exchange or transfer to another Person or Persons of all or substantially all of
the assets of the Company.

                  "SECURITIES ACT" means the United States Securities Act of
1933, as amended, and the rules and regulations of the United States Securities
and Exchange Commission thereunder.

                  "SECURITIES PURCHASE AGREEMENT" has the meaning set forth in
the recitals to this Agreement.

<PAGE>

                                                                               4

                  "SELLING SHAREHOLDERS" has the meaning set forth in the
recitals to this Agreement.

                  "SERIES A PREFERRED SHARES" means the Series A Preferred
Shares of nominal value NIS 0.01 each of the Company.

                  "SERIES B PREFERRED SHARES" means the Series B Preferred
Shares of nominal value NIS 0.01 each of the Company.

                  "SERIES C PREFERRED SHARES" means the Series C Preferred
Shares of nominal value NIS 0.01 each of the Company.

                  "SERIES D PREFERRED SHARES" means the Series D Preferred
Shares of nominal value NIS 0.01 each of the Company.

                  "SERIES E PREFERRED SHARES" means the Series E Preferred
Shares of nominal value NIS 0.01 each of the Company.

                  "SERIES F PREFERRED SHARES" means the Series F Preferred
Shares of nominal value NIS 0.01 each of the Company.

                  "SERIES G PREFERRED SHARES" means the Series G Preferred
Shares of nominal value NIS 0.01 each of the Company.

                  "SERIES H PREFERRED SHARES" means the Series H Preferred
Shares of nominal value NIS 0.01 each of the Company.

                  "SHARE OPTION PLANS" means, collectively, the 2003 Israeli
Share Option Plan of the Company, the 1996 Section 102 Stock Option Plan of the
Company and the 2002 Stock Option Plan (Incentive and Restrictive Stock Options)
of the Company.

                  "SHARE SPLIT AND BONUS ISSUANCE" has the meaning set forth in
Section 2(a) of this Agreement.

                  "STANDSTILL PERIOD" has the meaning set forth in Section 7.3
of this Agreement.

                  Section 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents and warrants to each of the Purchasers on the date of
this Agreement and as of the Closing Date as follows:

                           (a) The authorized share capital of the Company
consists solely of (i) 41,900,000 Ordinary Shares, of which 1,682,850 Ordinary
Shares are issued and outstanding, (ii) 1,019,250 Series A Preferred Shares, of
which 989,280 Series A Preferred Shares are issued and outstanding, (iii)
750,000 Series B Preferred Shares, of which 705,465 Series B Preferred Shares
are issued and outstanding, (iv) 270,000 Series C Preferred Shares, of which
253,935 Series C Preferred Shares are issued and outstanding, (v) 45,750 Series
D Preferred Shares, of which 45,675 Series D Preferred Shares are issued and
outstanding, (vi) 1,095,000 Series E Preferred Shares, of which 1,080,030 Series
E Preferred Shares are issued and outstanding, (vii) 360,000 Series F Preferred
Shares, of which 333,330 Series F Preferred Shares are issued and

<PAGE>

                                                                               5

outstanding, (viii) 2,910,000 Series G Preferred Shares, of which 2,551,005
Series G Preferred Shares are issued and outstanding, and (xi) 5,700,000 Series
H Preferred Shares, of which 4,566,855 Series H Preferred Shares are issued and
outstanding. The foregoing references to number of shares are stated to give
effect to the Company's ten-for- one share split and the contemplated increase
in the authorized share capital of the Company scheduled to occur on or about
May 7, 2004, and the immediate issuance thereafter of 0.5 fully paid bonus
shares, par value NIS 0.01 per share, for each outstanding Ordinary Share
(collectively, the "SHARE SPLIT AND BONUS ISSUANCE"). All of the foregoing
references to number of shares are also subject to adjustment to reflect any
share splits, share combinations, share dividends, recapitalizations,
reorganizations and the like occurring after the date hereof. (

                           b) (i) One Series A Preferred Share is convertible
into one Ordinary Share, (ii) one Series B Preferred Share is convertible into
one Ordinary Share, (iii) one Series C Preferred Share is convertible into one
Ordinary Share, (iv) one Series D Preferred Share is convertible into one
Ordinary Share, (v) one Series E Preferred Share is convertible into one
Ordinary Share, (vi) one Series F Preferred Share is convertible into one
Ordinary Share, (vii) one Series G Preferred Share is convertible into 1.096867
Ordinary Shares, and (viii) one Series H Preferred Share is convertible into 1.1
Ordinary Shares. The foregoing references to number of shares are stated to give
effect to the Share Split and Bonus Issuance. All of the foregoing references to
number of shares are also subject to adjustment to reflect any share splits,
share combinations, share dividends, recapitalizations, reorganizations and the
like occurring after the date hereof.

                           (c) SCHEDULE 2(C) hereto sets forth a true and
complete list of (i) the shareholders of the Company (including any trust or
escrow agent arrangement created in connection with any employee share option
plan) and, opposite the name of each shareholder, the amount of all outstanding
Ordinary Shares and Ordinary Share Equivalents owned by such shareholder and
(ii) the holders of Ordinary Share Equivalents and, opposite the name of each
such holder, the amount of all Ordinary Share Equivalents owned by such holder.
The Board of Directors has also authorized an automatic increase, to occur on
January 1st of each year, of the Company's aggregate pool of stock options
available under the Company's Share Option Plans. Such yearly increase shall be
in an amount equal to three percent (3%) of the Company's then outstanding share
capital. Under the Share Option Plans, there are 3,814,290 Ordinary Shares
issuable upon exercise of options outstanding as of March 31, 2004. The Company
has reserved 765,000 Ordinary Shares for future grants to be granted under the
Share Option Plans. The Company has reserved an aggregate of 11,229,401 Ordinary
Shares for issuance upon conversion of the Preferred Shares (excluding any
Preferred Shares issuable upon exercise of warrants for Preferred Shares) and an
aggregate of 1,230,141 Preferred Shares for issuance upon exercise of warrants
for Preferred Shares. The Company has adequate authorized but unissued Ordinary
Shares available for issuance upon conversion of the Preferred Shares issuable
upon exercise of all warrants for Preferred Shares. Except as set forth on
SCHEDULE 2(C), there are no options, warrants, conversion privileges,
subscription or purchase rights or other rights presently outstanding to
purchase or otherwise acquire (i) any authorized but unissued, unauthorized or
treasury shares of the Company's share capital, (ii) any Ordinary Share
Equivalents or (iii) any other securities of the Company, and there are no
commitments, contracts, agreements, arrangements or understandings by the
Company to issue any shares of the Company's share capital or any Ordinary Share
Equivalents or other securities of the Company. The foregoing

<PAGE>

                                                                               6

references to number of shares are stated to give effect to the Share Split and
Bonus Issuance. All of the foregoing references to number of shares are also
subject to adjustment to reflect any share splits, share combinations, share
dividends, recapitalizations, reorganizations and the like occurring after the
date hereof.

                           (d) All of the issued and outstanding Ordinary Shares
and Preferred Shares are duly authorized, validly issued, fully paid and
non-assessable, and were issued in compliance with the laws of the State of
Israel. The execution, delivery and performance of the Securities Purchase
Agreement and the consummation of the transactions contemplated thereby
(including, without limitation, the sale and delivery of the Purchased Shares
and Purchased Warrants to the Purchasers) comply with the registration and
qualification requirements of all applicable securities laws of the United
States, the States of the United States and the State of Israel. The Ordinary
Shares issuable upon conversion of the Preferred Shares (including, without
limitation, any Preferred Shares issuable upon exercise of any warrants for
Preferred Shares) have been duly reserved for issuance upon conversion of the
Preferred Shares and, when issued in compliance with the provisions of the
Articles of Association (or, in the case of any warrants, with the provisions of
such warrants), will be validly issued, fully paid and non-assessable and not
subject to any preemptive rights or similar rights that have not been satisfied
and will be free and clear of all Liens other than Liens imposed by the
Purchasers. The Preferred Shares issuable upon exercise of any warrants for
Preferred Shares have been duly reserved for issuance upon exercise of such
warrants and, when issued in compliance with the provisions of such warrants,
will be validly issued, fully paid and non-assessable and not subject to any
preemptive rights or similar rights that have not been satisfied and will be
free and clear of all Liens other than Liens imposed by the Purchasers.

                           (e) The Company has full right, power, authority and
capacity to enter into this Agreement and to consummate the transactions
contemplated hereby and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement. Upon the execution and
delivery of this Agreement, this Agreement shall constitute a valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors' and
contracting parties' rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

                  Section 3. REPRESENTATIONS AND WARRANTIES OF EACH OF THE
PURCHASERS. Each of the Purchasers hereby represents and warrants, severally and
not jointly, to the Company on the date of this Agreement and as of the Closing
Date as follows:

                           (a) Such Purchaser (i) is acquiring the number of
Purchased Securities to be acquired by such Purchaser pursuant to the Securities
Purchase Agreement for its own account for investment only and with no present
intention of distributing any of such Purchased Securities or any arrangement or
understanding with any other Persons regarding the distribution of such
Purchased Securities; (ii) will not, directly or indirectly, offer, sell,
pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of) any of the Purchased Securities except
in compliance with the Securities Act and any applicable state securities or
Blue Sky laws; (iii) is an "accredited investor" under Rule 501 of

<PAGE>

                                                                               7

the Securities Act; and (iv) understands that the Purchased Shares will contain
a legend to the following effect:

         THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITY HAS BEEN
         ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN
         THE ABSENCE OF EITHER AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
         SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL THAT
         REGISTRATION IS NOT REQUIRED UNDER SAID ACT.

                           (b) Such Purchaser has full right, power, authority
and capacity to enter into this Agreement and to consummate the transactions
contemplated hereby and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement. Upon the execution and
delivery of this Agreement, this Agreement shall constitute a valid and binding
obligation of such Purchaser enforceable against such Purchaser in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).

                           (c) Such Purchaser (i) has received, carefully read
and reviewed and is familiar with the Securities Purchase Agreement and this
Agreement and all other information provided to it by or on behalf of the
Company, and confirms that all requested documents pertaining to such
Purchaser's investment in the Company have been made available to it and/or its
representatives; (ii) and/or its advisors, have had the opportunity to ask
questions of, and receive answers from, the Company, or a person or persons
acting on its behalf, concerning the terms of an investment in the Company and
additional information, to the extent that the Company possesses such
information or could acquire it without unreasonable effort or expense, and all
such questions have been answered to the full satisfaction of such Purchaser;
(iii) is not subscribing for the Purchased Securities to be acquired by such
Purchaser pursuant to the Securities Purchase Agreement as a result of or
subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio, any seminar or meeting, or any solicitation of a
subscription by a Person not previously known to it in connection with
investments in securities generally; (iv) is not relying on the Company, its
officers, directors and advisors or any Person with respect to the legal, tax
and other economic or technical considerations of such Purchaser relating to
this investment other than its own advisors and in regard to such
considerations, such Purchaser has relied on the advice of, or has consulted
with, only its own advisors; and (v) has read the Company's Articles of
Association and understands the transfer restrictions applicable to the
Purchased Securities to be acquired by it.

                  Section 4.  CORPORATE GOVERNANCE.

                           (a) The Company shall cause one vacancy to be created
on its Board of Directors and cause to be elected to the Board of Directors,
either at a meeting of the Board of Directors or by written resolution in lieu
of a meeting of the Board of Directors, on the Closing

<PAGE>

                                                                               8

Date, one person designated by GAP LP who shall initially be Philip P. Trahanas
(the "GENERAL ATLANTIC DESIGNEE") as one of the "industry experts" contemplated
by Article 69(A)(VII) of the Articles of Association. The General Atlantic
Designee shall serve as one of the "industry experts" in accordance with the
Articles of Association until the earlier of (i) the consummation by the Company
of a firm commitment underwritten initial public offering pursuant to an
effective registration statement under the Securities Act (an "IPO"), whereupon
the Company shall use its reasonable best efforts to cause the General Atlantic
Designee to be one of the members of the Board of Directors as of the
consummation of such IPO, as contemplated by Section 4(b) and (ii) the amendment
of the Articles of Association contemplated by Section 4(c), whereupon GAP LP
shall have the right to appoint a single General Atlantic Designee to the Board
of Directors pursuant to the Articles of Association. In the event that the
General Atlantic Designee shall cease to serve as director for any reason, the
Company shall use its reasonable best efforts to cause the vacancy resulting
thereby to be filled by another designee of GAP LP. The Company shall use its
best efforts to cause the Board of Directors to consist solely of the following
six members on the Closing Date: Kenneth Levy, Igal Rotem, R. William Burgess,
Jr., Philip P. Trahanas, Michael Anghel and Glen I. A. Schwaber.

                           (b) In the event that the Company consummates an IPO,
the Company shall use its reasonable best efforts to cause a single General
Atlantic Designee to be one of the members of the Board of Directors as of the
consummation of such initial public offering.

                           (c) In the event that the Company does not consummate
an IPO on or prior to June 21, 2004, then the Company shall use its reasonable
best efforts to convene a meeting of the shareholders and the Board of Directors
in order to amend the Articles of Association as soon as practicable thereafter
(but in any event not later than July 15, 2004) to provide GAP LP with the right
to appoint the General Atlantic Designee to the Board of Directors, so long as
the Purchasers, together with their Affiliates, own, in the aggregate, at least
10% of the outstanding share capital of the Company on an as-converted basis. In
order to effectuate the foregoing provision, the Company agrees to (i) use its
reasonable best efforts to convince the Board of Directors to consider and vote
upon the adoption, either at a meeting of the Board of Directors or by written
resolution in lieu of a meeting of the Board of Directors, of all the
resolutions necessary to effectuate such action, including, without limitation,
recommending the approval of such amendment by the Company's shareholders, (ii)
use its reasonable best efforts to call a meeting of the Company's shareholders
to consider and vote upon the adoption of such action, and (iii) vote any
proxies it holds, and to use its reasonable best efforts to cause any officers
of the Company who hold proxies to vote such proxies in favor of such action,
except, in either case, as otherwise directed by the shareholder who submitted
such proxy, either at a meeting of the shareholders or by written resolution of
the shareholders in lieu of a meeting.

                           (d) At the first meeting of the shareholders of the
Company after the IPO at which directors of the class of which the General
Atlantic Designee is a member are elected (and for the avoidance of doubt, none
of the other classes), GAP LP shall be entitled to designate to the Board of
Directors the General Atlantic Designee to serve as one of the directors of the
Company, which designee shall be reasonably acceptable to a majority of the
other members of the Board of

<PAGE>

                                                                               9

Directors. The Company shall use its reasonable best efforts to cause such
General Atlantic Designee to be included in the slate of nominees recommended by
the Board of Directors to the Company's shareholders for election as directors,
and the Company shall use its reasonable best efforts to cause the election of
such General Atlantic Designee, including, without limitation, voting any
proxies it holds, and using its reasonable best efforts to cause any officers of
the Company who hold proxies to vote such proxies, except, in either case, as
otherwise directed by the shareholder who submitted such proxy, in favor of the
election of such General Atlantic Designee.

                           (e) The Company shall provide such reimbursement to
the General Atlantic Designee as is consistent with the reimbursement provided
to other members of the Board of Directors in their capacities as directors of
the Company.

                           (f) From and after the date hereof, at any regular or
special meeting of the Board of Directors or shareholders of the Company, or by
any written resolution in lieu of any such meeting, the Company shall use its
reasonable best efforts to give effect to the specific terms and provisions of
this Agreement (including, without limitation, Sections 4(a), 4(b), 4(c) and
4(d)).

                           (g) If GAP LP chooses a General Atlantic Designee
other than Philip P. Trahanas, GAP LP agrees to obtain the approval of the Chief
Executive Officer of the Company with respect to such proposed General Atlantic
Designee prior to undertaking any steps necessary under the Articles of
Association and under applicable law to appoint such designee to the Board of
Directors of the Company; provided, however, that any General Atlantic Designee
who is a managing member or senior executive of General Atlantic Partners, LLC
shall be deemed to be acceptable to the Chief Executive Officer.

                           (h) Section 4(d) shall terminate and be of no further
force and effect at such time as the Purchasers, together with their Affiliates,
own, in the aggregate, less than 10% of the outstanding share capital of the
Company on an as-converted basis.

                  Section 5. LOCK-UP. Prior to eighteen (18) months following
the earlier of the consummation of an IPO or July 31, 2004, the Purchasers will
not, directly or indirectly, without the prior written consent of the Company,
offer, sell, contract to sell, pledge or otherwise dispose of, (each such
transaction, a "DISPOSITION") or announce any such Disposition of, any Purchased
Securities; PROVIDED, HOWEVER, that nothing in this Section 5 shall prevent or
restrict (a) the Purchasers from Disposing of their Purchased Securities in
connection with a Sale Transaction, (b) the Purchasers from transferring their
Purchased Securities to any Affiliate thereof (provided that any such transferee
agrees to be bound by the terms of the Articles of Association and this
Agreement, including this Section 5) or (c) GapStar from pledging and granting a
security interest in its Purchased Securities to a financial institution to
secure its obligations to such financial institution (provided that such
financial institution takes its security interest subject to this Section 5).

                  Section 6.   COVENANTS AND AGREEMENTS.

                  Section 6.1 ARTICLES OF ASSOCIATION. The Company hereby
acknowledges and agrees that, effective as of the Closing Date, all of the
Selling Shareholders' rights and obligations under the Articles of Association
with respect to the Purchased Securities are

<PAGE>

                                                                              10

assigned to the Purchasers, including, without limitation, the preemptive rights
arising under Article 14 of the Articles of Association and membership in the
"Investor Group" under Article 17 of the Articles of Association; provided that
the Selling Shareholders' rights with respect to the Ampal Director, the JVP
Director, the Challenge Director, the DB Director and the Additional H Director
(each as defined in the Articles of Association) under Article 69(a) of the
Articles of Association shall not be assigned to the Purchasers. The Company
hereby waives any notice requirements under the Articles of Association with
respect to the transfer of the Purchased Shares and Purchased Warrants to the
Purchasers pursuant to the Securities Purchase Agreement, and the assignment to
the Purchasers of the rights and obligations with respect to the Purchased
Securities; provided that each Purchaser must comply with the delivery
requirements of Articles 26 and 27 of the Articles of Association. The
Purchasers acknowledge that they have had an opportunity to review the amended
Articles of Association as approved by the Company's shareholders.

                  Section 6.2 RIGHTS AGREEMENT. The Company hereby acknowledges
and agrees that, effective as of the Closing Date, all of the Selling
Shareholders' rights and obligations under the Rights Agreement with respect to
the Purchased Securities are assigned to the Purchasers. The Company hereby
waives any notice requirements under the Rights Agreement with respect to the
transfer of the Purchased Shares and Purchased Warrants to the Purchasers
pursuant to the Securities Purchase Agreement, and the assignment of the rights
and obligations to the Purchasers with respect to the Purchased Securities.

                  Section 6.3 CERTAIN GOVERNMENTAL APPROVALS. The Company hereby
covenants and agrees with the Purchasers that the Company shall take such
actions and execute such documents as may be reasonably necessary or required to
obtain the approvals of the Investment Center and the Office of the Chief
Scientist of the Israeli Ministry of Commerce and Industry in connection with
the performance and consummation of the transactions contemplated by the
Securities Purchase Agreement.

                  Section 6.4 REGISTRATION OF TRANSFER. The Company hereby
covenants and agrees with the Purchasers that the Company shall register the
transfer of the Purchased Shares and the Purchased Warrants to the Purchasers on
the register of shareholders of the Company administered in accordance with
Section 130 of the Israeli Companies Law 5759-1999 and with the Registrar of
Companies of the State of Israel.

                  Section 6.5 CAPITALIZATION. The Company hereby covenants and
agrees with the Purchasers that, in the event of any breach of any
representation or warranty of the Company in Sections 2(a) and 2(b), the Company
shall promptly issue, at a purchase price equal to nominal value, a number of
Ordinary Shares to the Purchasers that, when aggregated with the Purchased
Shares and Purchased Warrants, represent the aggregate ownership interest in the
Company which would have been represented by the Purchased Shares and Purchased
Warrants on the date of this Agreement and as of the Closing Date had the
representations and warranties of the Company in Sections 2(a) and 2(b) been
true and accurate on and as of such dates, it being understood that the remedy
provided for under this Section 6.5 is the sole remedy available to the
Purchasers for a breach of any representation or warranty of the Company in
Sections 2(a) and 2(b).

<PAGE>

                                                                              11

                  Section 7.  STANDSTILL PROVISIONS.

                  7.1  SECURITIES.  None of the Purchasers shall, severally and
not jointly, take any of the following actions during the Standstill Period:

                           (a) purchase or otherwise acquire, or offer, seek,
propose or agree to acquire, ownership (including, but not limited to,
beneficial ownership as defined in Rule 13d-3 under the Exchange Act) of any
securities of the Company, or any direct or indirect rights or options to
acquire any such securities or any securities convertible into such securities
(assuming the conversion of such options, rights or securities), which, when
added to any other securities owned by the Purchasers and their Affiliates,
represent, in the aggregate, in excess of 35% of the outstanding voting
securities of the Company; provided, however, that upon consummation of the IPO,
such 35% threshold shall be reduced automatically to 26%; provided, further,
however, that in no event shall any Ordinary Shares or Ordinary Share
Equivalents that may be issued to the General Atlantic Designee in his capacity
as director be prohibited by this Section 7.1 or be included for purposes of
calculating whether or not the above threshold has been exceeded;

                           (b) "solicit" any "proxy" (as such terms are defined
in Rule 14a-1 under the Exchange Act) or the power to vote from shareholders of
the Company, or become a "participant" in any "election contest" (as such terms
are used in Rule 14a-11 under the Exchange Act) with respect to the Company, or
make a communication (other than as required by law) referred to in Rule
14a-1(l)(2)(iv) under the Exchange Act in connection with any such "election
contest" or other vote by shareholders of the Company; PROVIDED, HOWEVER, that
none of the Purchasers shall be deemed to have engaged in a "solicitation" or to
have become a "participant" by reason of the membership of the General Atlantic
Designee on the Board of Directors;

                           (c) seek or vote for the removal of any member of the
Board of Directors of the Company except for the removal "for cause," within the
contemplation of the Israeli Companies Law 5759-1999;

                           (d) call or seek to have called any meeting of the
shareholders of the Company; PROVIDED, HOWEVER, that nothing in this Section 7
shall prohibit or restrict the Purchasers or the General Atlantic Designee from
taking actions to give effect to the provisions in Section 4;

                           (e) otherwise act, alone or in concert with others to
(i) solicit, propose, seek to effect or negotiate with any other Person with
respect to (A) any business combination with the Company or (B) any
restructuring, recapitalization or similar transaction of the Company, (ii)
solicit, propose, seek to effect or negotiate with any other Person with respect
to, or announce an intent to make, any tender offer or exchange offer for any
voting securities of the Company, (iii) disclose an intent, purpose, plan or
proposal with respect to the Company or any voting securities of the Company
prohibited by the provisions of this Section 7, or (iv) assist, participate in,
facilitate or solicit any effort or attempt by any Person to do or seek any of
the foregoing; or

<PAGE>

                                                                              12

                           (f) form, join or participate in a "group" (within
the meaning of Section 13(d) (3) of the Exchange Act) with respect to the
matters described in clauses (a) through (e) above; PROVIDED, HOWEVER, that the
Purchasers and any of their Affiliates may form, join or participate in a
"group" with one another, including for the purpose of acquiring, holding,
voting or disposing of any of the Company's securities.

                  Section 7.2 VOTING OF PURCHASED SECURITIES. Until May __,
2009, if the approval of a Qualified Sale Transaction is submitted to a vote of
the Company's shareholders at a meeting thereof and the Purchasers, in the
aggregate, own voting securities that represent in excess of 20% of the
outstanding voting power of the Company entitled to vote at such shareholders
meeting (such excess, the "EXCESS VOTING POWER"), then the Purchasers shall,
with respect to such Qualified Sale Transaction, vote their voting securities
that represent the Excess Voting Power in the same proportion as the votes cast
by all other shareholders of the Company (excluding all of the votes cast by the
Purchasers and their Affiliates). For purposes of this Section 7.2, a "QUALIFIED
SALE TRANSACTION" means a Sale Transaction in which the holders of Ordinary
Shares of the Company receive at least US$ 13.34 per Ordinary Share (subject to
adjustment for any share splits, share combinations, share dividends, share
bonus issuances, recapitalizations, reorganizations and the like). For purposes
of calculating the price paid per Ordinary Share in the event that the
consideration paid in such Sale Transaction is securities, the US dollar value
of such securities shall be the value assigned thereto by the Company's
investment banking firm that delivers the fairness opinion to the Board of
Directors with respect to such Sale Transaction.

                  Section 7.3 The "STANDSTILL PERIOD" means the period from date
hereof through and until the earlier to occur of the following: (i) the
forty-eight (48) month anniversary of the consummation of the IPO, and (ii) July
31, 2008.

                  Section 8.  MISCELLANEOUS

                  Section 8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Notwithstanding any investigation made by any party to this Agreement, all
representations and warranties made by the Company and each Purchaser herein and
in the Securities Purchase Agreement shall survive the execution and delivery of
this Agreement until the first anniversary of the date hereof.

                  Section 8.2 NOTICES. All notices, demands and other
communications provided for or permitted hereunder shall be made in writing and
shall be by registered or certified first-class mail, return receipt requested,
telecopier, courier service or personal delivery:

                       (a)   if to the Company:

                             PowerDsine Ltd.
                             1 Hanagar Street
                             Industrial Zone Naveh Neeman B
                             Hod Hasharon, Israel 45421
                             Telecopy: (972-9) 775-5111
                             Attention:  David Goren, General Counsel

<PAGE>

                                                                             13

                       with a copy to:

                       Morrison & Foerster LLP
                       1290 Avenue of the Americas
                       New York, NY 10104
                       Attention:  James R. Tanenbaum, Esq.

              (b)      if to the Purchasers:

                       c/o General Atlantic Service Corporation
                       3 Pickwick Plaza
                       Greenwich, CT 06830
                       Telecopy: (203) 622-8818
                       Attention: Matthew Nimetz

                       with a copy to:

                       Paul, Weiss, Rifkind, Wharton & Garrison LLP
                       1285 Avenue of the Americas
                       New York, NY 10019-6064
                       Telecopy: (212) 757-3990
                       Attention:  Douglas A. Cifu, Esq.

                  All such notices, demands and other communications shall be
deemed to have been duly given (i) when delivered by hand, if personally
delivered; (ii) one Business Day after being sent, if sent via a reputable
nationwide overnight courier service guaranteeing next business day delivery;
(iii) five (5) Business Days after being sent, if sent by registered or
certified mail, return receipt requested, postage prepaid; and (iv) when receipt
is mechanically acknowledged, if telecopied. Any party may by notice given in
accordance with this Section 8.2 designate another address or Person for receipt
of notices hereunder. Any party may give any notice, request, consent or other
communication under this Agreement using any other means (including, without
limitation, personal delivery, messenger service, first class mail or electronic
mail), but no such notice, request, consent or other communication shall be
deemed to have been duly given unless and until it is actually received by the
party to whom it is given.

                  Section 8.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES.
This Agreement shall inure to the benefit of and be binding upon the successors
and permitted assigns of the parties hereto; PROVIDED that such successors and
assigns agree to be bound by the terms of this Agreement. Subject to applicable
securities laws and the terms and conditions thereof, the Purchasers may assign
any of their rights under this Agreement to any of their respective Affiliates.
No Person other than the parties hereto and their successors and permitted
assigns is intended to be a beneficiary of this Agreement.

                  Section 8.4  AMENDMENT AND WAIVER.

                           (a) No failure or delay on the part of the Company or
any Purchaser in exercising any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any

<PAGE>

                                                                              14

single or partial exercise of any such right, power or remedy preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.

                           (b) Any amendment, supplement or modification of or
to any provision of this Agreement, any waiver of any provision of this
Agreement, and any consent to any departure by the Company or the Purchasers
from the terms of any provision of this Agreement, shall be effective (i) only
if it is made or given in writing and signed by the Company and the Purchasers
and (ii) only in the specific instance and for the specific purpose for which
made or given. Except where notice is specifically required by this Agreement,
no notice to or demand on a party in any case shall entitle such party to any
other or further notice or demand in similar or other circumstances.

                  Section 8.5 TERMINATION. This Agreement shall terminate
automatically upon the termination of the Securities Purchase Agreement in
accordance with the terms of the Securities Purchase Agreement. If this
Agreement so terminates, it shall become null and void and have no further force
or effect (except for the provisions of Section 1 and Sections 8.2 through 8.12
(inclusive)), and none of the parties hereto shall have any liability for any
damages (including, without limitation, actual, compensatory, speculative,
indirect, unforeseeable or consequential damages or lost profits) resulting from
any termination of this Agreement.

                  Section 8.6 COUNTERPARTS. This Agreement may be executed in
any number of counterparts or by facsimile and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.

                  Section 8.7 SPECIFIC PERFORMANCE; REMEDIES CUMULATIVE. The
parties hereto intend that each of the parties have the right to seek damages or
specific performance in the event that any other party hereto fails to perform
such party's obligations hereunder. Therefore, if any party shall institute any
action or proceeding to enforce the provisions hereof, any party against whom
such action or proceeding is brought hereby waives any claim or defense therein
that the plaintiff party has an adequate remedy at law. The rights and remedies
provided in this Agreement are cumulative and not alternative.

                  Section 8.8 GOVERNING LAW; CONSENT TO JURISDICTION. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
The parties hereto irrevocably submit to the exclusive jurisdiction of any state
or federal court sitting in the County of New York, in the State of New York
over any suit, action or proceeding arising out of or relating to this
Agreement. To the fullest extent they may effectively do so under applicable
law, the parties hereto irrevocably waive and agree not to assert, by way of
motion, as a defense or otherwise, any claim that they are not subject to the
jurisdiction of any such court, any objection that they may now or hereafter
have to the laying of the venue of any such suit, action or proceeding brought
in any such court and any claim that any such suit, action or proceeding brought
in any such court has been brought in an inconvenient forum.

<PAGE>

                                                                              15

                  Section 8.9 WAIVER OF JURY TRIAL. EACH OF THE PURCHASERS AND
THE COMPANY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ITS RIGHT TO
A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS, ANY
RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS
AND OBLIGATIONS. EACH PARTY (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVERS AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.

                  Section 8.10 SEVERABILITY. If any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired,
unless the provisions held invalid, illegal or unenforceable shall substantially
impair the benefits of the remaining provisions hereof.

                  Section 8.11 ENTIRE AGREEMENT. This Agreement, together with
the exhibits and schedules hereto, is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. There are no restrictions,
promises, representations, warranties or undertakings, other than those set
forth or referred to herein or therein. This Agreement, together with the
exhibits and schedules hereto, supersedes all prior agreements and
understandings between the parties with respect to such subject matter.

                  Section 8.12 PUBLIC ANNOUNCEMENTS. Neither the Company nor the
Purchasers will make any public statements with respect to this Agreement or the
transactions contemplated hereby without the prior written consent of the other
parties hereto, except to the extent such party reasonably believes such public
statement is required by any requirement of law, including, without limitation,
any securities or stock market regulation, or to the extent required by the
Purchasers in connection with their customary internal reporting; PROVIDED,
HOWEVER, that General Atlantic Partners, LLC may disclose on its website,
www.gapartners.com, the name of the Company, a brief description of the
Company's business, which description shall be approved in writing by the
Company, a link to the Company's website and the Company's senior executive
officers. Notwithstanding the foregoing, the Company will not use or refer to
the name of any Purchaser in any public statement or disclosure without the
consent of such Purchaser except to the extent that such party reasonably
believes such statement or disclosure is required by applicable law or stock
market regulations.

<PAGE>

                                                                              16

                  Section 8.13 FURTHER ASSURANCES. Each of the parties shall
execute such documents and perform such further acts (including, without
limitation, obtaining any consents, exemptions, authorizations or other actions
by, or giving any notices to, or making any filings with, any Governmental
Authority or any other Person) as may be reasonably required or desirable to
carry out or to perform the provisions of this Agreement.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

                                                                              17

                  IN WITNESS WHEREOF, the undersigned have executed, or have
caused to be executed, this Agreement on the date first written above.

                                POWERDSINE LTD.

                                By:  /s/ IGAL ROTEM
                                   -------------------------------------------
                                     Name: Igal Rotem
                                     Title: Chief Executive Officer

                                GENERAL ATLANTIC PARTNERS 78, L.P.

                                By:  GENERAL ATLANTIC PARTNERS, LLC,
                                     its General Partner

                                By:  /s/ MATTHEW NIMETZ
                                   -------------------------------------------
                                     Name: Matthew Nimetz
                                     Title: A Managing Member

                                GENERAL ATLANTIC PARTNERS
                                     (BERMUDA), L.P.

                                By:  GAP (BERMUDA) LIMITED,
                                     its General Partner

                                By:  /s/ MATTHEW NIMETZ
                                   -------------------------------------------
                                     Name: Matthew Nimetz
                                     Title: Vice President

                                GAP-W INTERNATIONAL, LLC

                                By:  /s/ MATTHEW NIMETZ
                                   -------------------------------------------
                                     Name: Matthew Nimetz
                                     Title: Vice President

<PAGE>

                                                                              18

                                GAPSTAR, LLC

                                By:  GENERAL ATLANTIC PARTNERS, LLC,
                                     its Sole Member

                                By:  /s/ MATTHEW NIMETZ
                                   -------------------------------------------
                                     Name: Matthew Nimetz
                                     Title: A Managing Member

                                GAP COINVESTMENT III, LLC

                                By:  /s/ MATTHEW NIMETZ
                                   -------------------------------------------
                                     Name: Matthew Nimetz
                                     Title: A Managing Member

                                GAP COINVESTMENT IV, LLC

                                By:  /s/ MATTHEW NIMETZ
                                   -------------------------------------------
                                     Name: Matthew Nimetz
                                     Title: A Managing Member

                                GAPCO GMBH & CO. KG

                                By:  GAPCO MANAGEMENT GMBH,
                                     its General Partner

                                By:  /s/ MATTHEW NIMETZ
                                   -------------------------------------------
                                     Name: Matthew Nimetz
                                     Title: Managing Director

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