Document:

EXHIBIT 10.5

                       LIPMAN ELECTRONIC ENGINEERING LTD.
                          (HEREINAFTER: "THE COMPANY")

                                STOCK OPTION PLAN

IN ACCORDANCE WITH CLAUSE 15b(1)(a) OF THE SECURITIES LAW 5728-1968 AND OF THE
SECURITIES REGULATIONS (DETAILS OF A PLAN OF AN OFFER OF SECURITIES TO
EMPLOYEES), 5760-2000.

                                       OF

UP TO 320,000 OPTIONS (NON-TRANSFERABLE) (HEREINAFTER: "THE OPTIONS") WHICH ARE
OFFERED WITHOUT CONSIDERATION, EXERCISABLE INTO UP TO 320,000 ORDINARY SHARES,
REGISTERED ON NAME, OF 1 NEW SHEKEL, PAR VALUE, EACH, BY THE COMPANY TO THE
EMPLOYEES, AS DEFINED BELOW, INCLUDING THE CEO OF THE COMPANY.

                        (HEREINAFTER: "THE OPTION PLAN")

Date: August 28th, 2003

                                TABLE OF CONTENTS

PAGE       NAME OF CHAPTER AND CLAUSE                                                       THE CHAPTER
----                                                                                        AND THE CLAUSE

           INTRODUCTION                                                                     Chapter 1
2          General                                                                          1.1
2          The required permits and approvals and the powers of the Securities  Authority   1.2

           DETAILS OF THE OFFER                                                             Chapter 2
3          The offered securities                                                           2.1
4          The determination manner of the distribution of the Options among the Offerees   2.2
4          The Trustee                                                                      2.3
4          The times of entitlement for the exercise of the Options                         2.4
4          Exceptions Committee                                                             2.5
5          The manner and the date of the exercise                                          2.6
5          Notice to the Offerees and the Options allotment Date                            2.7
5          The  exercise price                                                              2.8

           THE TERMS OF THE  OFFERED SECURITIES                                             Chapter 3
6          Rights of the Exercise Shares                                                    3.1
6          Dividend                                                                         3.2
6          Adjustments for  distribution of bonus shares or share split during the term of  3.3
           the Options Plan
6          Provisions in respect of Rights Issues during the term of the Option Plan        3.4
7          Protection of the Offerees during the term of the Option Plan                    3.5
7          Registration of the Exercise Shares in the name of the Trustee                   3.6
7          The voting rights of the Exercise Shares                                         3.7
7          Limitations of transfer of the Options                                           3.8
8          The manner and the date of the exercise                                          3.9
8          Registration for trading on the Stock Exchange                                   3.10
8          The restrictions which shall apply to the allotment of Options to Employees of   3.11
           the subsidiaries of the Company outside of Israel, who are not Israeli citizens

           ASPECTS OF TAXATION                                                              Chapter 4
           The taxation which applies to the Shares                                         4.1
           Tax aspects and obligatory payments                                              4.2

           RATES OF THE STOCK EXCHANGE OF THE SHARES OF THE COMPANY                         Chapter 5

           ADDITIONAL DETAILS                                                               Chapter 6

           Referral to Financial Reports and to Immediate Reports                           6.1
           Notices                                                                          6.2

                                       1

1. INTRODUCTION

1.1      GENERAL

1.1.1    Up to 320,000 Options (non-transferable) which are offered without
         consideration, exercisable into up to 320,000 ordinary shares,
         registered on name, of 1 New Israeli Shekel, par value, each
         (hereinafter: "the Options")

1.1.2    Each Option is exercisable into an ordinary shares of 1 New Israeli
         Shekel par value of the Company. Accordingly, on the assumption of
         exercise of all the Options and the allotment of all of the exercised
         shares the Exercise Shares shall consist of approximately 2.8% of the
         issued and the paid up share capital of the Company after the allotment
         and approximately 2.57% of the issued and the paid up share capital of
         the Company on a fully diluted basis(1)

1.1.3    Out of the total amount of the Options which are offered in accordance
         with the plan for the benefit of the Employees (hereinafter: "THE
         OPTION PLAN") 120,000 options (non-transferable) are offered to the
         chief executive officer of the Company, Mr. Yitzhak Angel,
         (hereinafter: "the CEO OF THE COMPANY") without consideration, which
         are exercisable into 120,000 ordinary shares, registered on name, of 1
         New Israeli Shekel, par value, each. The remainder of the options which
         are offered, up to 200,000 options (non-transferable) are offered
         without consideration, to up to 130 Employees or the Company including
         up to 65 Employees of the Company in Israel and up to 65 Employees of
         the subsidiaries of the Company outside of Israel, which are not
         Israeli citizens, and provided that they are not and shall not become
         interested parties in the Company as such term is defined in the
         Securities Law 5728-1968 (hereinafter: "SECURITIES Law"), with the
         exception of the CEO of the Company, who is an interested party in the
         Company, by virtue of his office. The quantity of the Options which are
         offered to each one of the Employees of the Company who are entitled in
         accordance with the Option Plan, is determined by a committee of the
         board of directors, which is comprised of two directors and the CEO of
         the Company. These Options are exercisable to up to 200,000 ordinary
         shares, registered on name, of 1 New Israeli Shekel, par value, each.

1.1.4    The aforementioned securities shall be offered to Employees in
         accordance with the Securities Regulations (details of Plan of an offer
         of securities to Employees), 5760-2000 (hereinafter: "THE REGULATIONS")
         not before fourteen business days after the submission of the Plan
         (hereinafter: "THE COMMENCEMENT DATE OF THE GRANT PERIOD OF THE
         SECURITIES") and not later than the time of the submission of the
         annual report of the Company for the year 2003 or from the time in
         which the submission of the said report is due, in accordance with the
         law, the earlier of the two (hereinafter: "EXPIRATION OF THE GRANT
         PERIOD OF THE SECURITIES").

1.1.5    The purpose of the Option Plan is to let the Employees participate in
         the equity capital of the Company as reward for their activity and
         their contribution to the Company, with the

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(1) On the assumption of complete exercise of the Options which the company
issued in previous plans in which Options were issued to employees and on the
assumption of exercise of the option deeds which the company issued to the
company Perry Jaacov Management Services Ltd. during the course of the month of
March, 2003

                                       2

         purpose of creating an incentive for them and to let them participate
         in the success of the Company and in its future achievements.

1.1.6    120,000 of the options which are offered to the CEO of the Company and
         99,000 of the options which are offered to the Israeli Employees of the
         Company (altogether 219,000 options) (hereinafter: "THE ISRAELI
         OPTIONS"), are offered in accordance with clause 102 of the Income Tax
         Ordinance (New Version) 5721-1961 (hereinafter: "THE INCOME TAX
         ORDINANCE"), in the scheme of capital gains tax. The remaining 101,000
         options are offered to the Employees of the subsidiaries of the
         Company, which are registered in the United States and in Turkey, which
         are not citizens of the State of Israel. It is made clear that the
         allotment of the 101,000 options to Employees of the Company and of the
         subsidiaries outside of Israel, is a private offering which is not
         substantive, per its definition in the Securities Regulations (a
         private offering of securities in a registered Company) 5760-2000,
         accordingly these securities constitute part of the Option Plan of the
         Company.

1.2      THE  REQUIRED PERMITS AND APPROVALS AND THE POWERS OF THE SECURITIES
         AUTHORITY

1.2.1    The Company has received all the permits, the approvals and the
         licenses which are required in accordance with every law for the offer
         of the securities in accordance with this Plan, for the issue of the
         securities and for the publication of the Plan.

1.2.2    Notwithstanding the above said it is the intention of the Company to
         approach the Tel- Aviv Stock Exchange Ltd. (hereinafter: "THE STOCK
         EXCHANGE") in order to obtain its approval to register for trading
         therein the shares to be issued as result of the exercise of the
         Options which are offered in accordance with this Plan.

1.2.3    Notwithstanding the above said, in accordance with the Income Tax Rules
         (Tax Reliefs in the Issue of Shares to Employees), 5763-2003, it is the
         intention of the Company to apply to the Income Tax Commission, to
         obtain its approval that the allotment of the Israeli Options to
         Employees of the Company shall be carried out in accordance with the
         provisions of clause 102 of the Income Tax Ordinance in the scheme of
         capital gains tax. The time of the allotment of the Israeli Options
         shall be not prior to the expiration of thirty days from the time of
         the dispatch of the application to the Income Tax Commission.

1.2.4    On the 24th of August, 2003, the board of directors of the Company has
         decided upon the submission of this Plan.

1.2.5    In accordance with Regulation 9 of the Regulations the Securities
         Authority (hereinafter: "THE AUTHORITY") is entitled, within fourteen
         business days from the time of the submission of this Option Plan, to
         instruct the Company to provide an explanation, details, information
         and documentation with regard to the Option Plan and also to instruct
         the Company upon amendment of the Option Plan within such period of
         time as it shall determine. In the event that the Authority has
         instructed upon the amendment of the Option Plan, it is entitled to
         direct a postponement of the commencement of the period for granting
         securities to a time which shall commence not prior to the expiration
         of three

                                       3

         business days and not later than fourteen business days from the day of
         the publication of the amended Option Plan.

1.2.6    The amendment of the Option Plan and postponement of the time of the
         commencement of the period for the granting of the Options shall be
         carried out in accordance with that which is stated in the Regulations.

          2. DETAILS OF THE OFFER

2.1 THE OFFERED SECURITIES

2.1.1    Up to 320,000 Options (non-transferable) which are offered without
         consideration, and which are exercisable into up to 320,000 ordinary
         shares, registered on name of 1 New Israeli Shekel, par value, each are
         offered as follows:

         a.   120,000 options (non-transferable) are offered, without
              consideration to the CEO of the Company Mr. Yitzhak Angel.(2)
              These options are exercisable into 120,000 ordinary shares
              registered on name, of 1 New Israeli Shekel, par value, each.

         b.   Up to 200,000 options (non-transferable) are offered, without
              consideration to up to 130 Employees of the Company who include up
              to 65 Employees of the Company in Israel and up to 65 Employees of
              the subsidiaries of the Company outside of Israel, and this in
              accordance with the distribution which shall be decided upon by a
              committee which shall be comprised of two members of the board of
              directors and of the CEO of the Company. These options are
              exercisable to up to 200,000 ordinary shares, registered on name,
              of 1 New Israeli Shekel, par value, each.

2.1.2    None of the Employees, with the exception of the CEO of the Company,
         who is an office holder in the Company, per the definition in the
         Securities Law, by virtue of his office, shall not become an interested
         party as a result of exercise of the options, and none of the Employees
         are offered options the exercise of which shall accord to the employee
         5% or more of the share capital of the Company.

2.1.3    Every Option may be exercised into one ordinary share of the nominal
         value of 1 New Israeli Shekel of the Company in consideration to
         payment in New Israeli Shekels which is equivalent to the sum of 22
         United States Dollars per share (calculated in accordance with the
         representative rate of the dollar which is known at the date of the
         exercise).

2.1.4    The price of the share of the Company on the Stock Exchange on August
         24th 2003, was 105.10 New Israeli Shekels. The price of a share of the
         Company on the Stock Exchange at the expiration of trading on the 27th
         of August 2003, was 113.20 New Israeli Shekels.

2.1.5    Upon the assumption of complete exercise of the Options and allotment
         of the exercise shares thereof, all the exercise shares shall accord
         approximately 2.8% of the issued and

---------------------
(2) Contemporaneously with the publication of the Option Plan, the Company shall
publish an immediate report with regard to a substantive private offer to the
CEO of the Company.

                                       4

         paid up share capital of the Company after the allotment and
         approximately 2.57% of the issued and paid up share capital of the
         Company on the assumption of a fully diluted basis(3).

2.2 THE DETERMINATION MANNER OF THE DISTRIBUTION OF THE OPTIONS AMONG THE
    OFFEREES

2.2.1    "THE OFFEREES" and/or "THE EMPLOYEES" - 131 Employees of the Company
         and of its subsidiaries in the United States and in Turkey, including
         the CEO of the Company.

2.2.2    The quantity of the Options which is offered to each one of the
         Employees of the Company who are entitled in accordance with the Option
         Plan is determined by a committee of the board of directors, which is
         comprised of two directors and the CEO of the Company.

2.2.3    Securities are not offered and shall not be offered to the Offerees who
         are interested parties in the Company per the definition of this
         expression in clause 270(5) of the Companies Law, 5759 -1999
         (hereinafter: "THE COMPANIES LAW").

2.3 THE TRUSTEE (see clause 3.6 below)

    The Options shall be allotted on the name of the Trustee, Advocate David
    Gotlieb, (hereinafter: "THE TRUSTEE"), for the purpose of their transfer in
    the future, in whole or in part, to the employees who are the Offerees which
    are employed by the Company as mentioned in sub-clause 2.2.1 above.

2.4 THE TIMES OF ENTITLEMENT FOR THE EXERCISE OF THE OPTIONS

2.4.1    The Offerees shall be entitled to exercise the options which are
         offered to them in accordance with the Option Plan in three stages, as
         follows:

         a.   50% of the Options shall be exercisable at the expiration of 24
              (twenty four) months from the granting date of the option.

         b.   25% of the Options shall be exercisable at the expiration of 36
              (thirty six) months from the granting date of the option.

         c.   25% of the Options shall be exercisable at the expiration of 48
              (forty eight) months from the granting date of the option.

2.4.2    The Options which will not be exercised at the expiration of 60 (sixty)
         months from the time of the grant shall expire and shall not accord any
         right whatsoever to the Offerees.

--------------------------
(3) On the assumption of complete exercise of the Options which the company has
issued in the previous plans of granting of option deeds to employees and on the
assumption of exercise of the Options which the company issued to the company
Perry Jaacov Management Services Ltd. during the course of the month of March,
2003.

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2.4.3    A condition precedent to the exercise of each one of the quantities of
         the Options as specified in this clause, is that the Offerees shall be
         Employees of the Company or of a subsidiary of the Company during the
         period which preceded the possible time for exercising such quantity of
         Options and provided that employer-employee relationships prevailed at
         the time of entitlement which is relevant to the exercise of such
         quantity of Options. In the event that any of the Offerees shall not be
         an employee of the Company or of a subsidiary of the Company at the
         times which are specified above, the employee shall not be entitled to
         exercise such quantity of Options which has been granted to him, unless
         that which is stated in clauses 2.5.1 and 2.5.2 below, shall apply.

2.5 EXCEPTIONS COMMITTEE

2.5.1    The board of directors of the Company shall appoint an Exceptions
         Committee the function of which shall be to discuss and to decide upon
         exceptional matters which are connected with the Option Plan and
         amongst other things, in cases of resignation of Offerees. The
         composition of the Exceptions Committee shall be identical to the
         composition of the audit committee of the Company, as it shall be from
         time to time.

2.5.2    Upon the occurrence of one of the following events, the Offerees shall
         be entitled to exercise the Options which are granted to them, subject
         to the provisions of clause 102 of the Income Tax Ordinance:

         a.   In the event that an Offeree has been dismissed in circumstances
              which in accordance with the Severance Pay Law, he is entitled to
              severance payment.

         b.   In the event that the work of an Offeree has been terminated as a
              result of death or disability, the Options which have been
              allotted to him shall be exercisable by his legal successors or by
              himself (in accordance with the circumstances).

2.6 THE MANNER AND THE TIME OF THE EXERCISE

   2.6.1 The Offerees who wish to exercise the Options granted to them into
         ordinary shares and who are entitled to their exercise, are obliged to
         submit the notice of exercise in writing to the Company Secretary.

   2.6.2 The time of the exercise of the Option shall be deemed to be the
         day upon which a written exercise notice of the Offeree(4) has reached
         the Company, of his wish to exercise same, together with the payment of
         the exercise price as mentioned in clause 2.8 below.

2.7 NOTICE TO THE OFFEREES AND THE OPTIONS ALLOTMENT DATE

   2.7.1 Within seven business days from the publication of this Option Plan,
         the Company shall submit to each of the Offerees a notice in writing of
         the quantity of the Options which he is entitled to receive in
         accordance with this Option Plan, together with a copy of this Option
         Plan. A copy of the annual report of the Company for the year 2002 and
         of the immediate reports which shall have been submitted by the Company
         after the time of the publication of the above said annual report,
         shall be made available for study by the

------------------------
(4) The "Offeree", above and below, is anyone of the offerees, as per their
definition in clause 2.2.1 above.

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         Offerees at the offices of the Company at 11 Ha'Amal St. Rosh Ha'Ayin,
         at the customary working hours.

2.7.2    As a condition to the allotment of the Options, each one of the
         Offerees shall be required to sign, not later than the expiration of 14
         business days from the time of the submission of this Option Plan, a
         letter of undertaking (hereinafter: "THE LETTER OF UNDERTAKING") which
         shall be deposited at the offices of the Company and which shall
         include, amongst other things, the following principal provisions:

         2.7.2.1  A declaration of the Offeree that he has read and has
                  understood the terms of the Option Plan and that he agrees to
                  accept the Options which have been offered to him in
                  accordance with their terms as specified in the Option Plan.

         2.7.2.2  The undertaking of the Offeree to act in accordance with the
                  provisions of the Israeli law in everything which relates to
                  prohibition of the use of insider information of the Company.

         2.7.2.3  The undertaking of the Offeree to pay all the taxes and the
                  obligatory payments to every authority, which shall apply as a
                  consequence and in respect of the allotment of the Options in
                  accordance with this Option Plan.

         2.7.2.4  With regard to Employees who are citizens of the State of
                  Israel - the undertaking of the employee to comply with the
                  provisions of clause 102 of the Income Tax Ordinance, in the
                  scheme of capital gains taxation including the regulations
                  which have been promulgated there under and with the rules
                  which have been determined in accordance therewith.

         2.7.2.5  The signature of an Offeree upon the Letter of Undertaking
                  shall confirm the consent of the Offeree to receive the
                  Options which shall be offered to him in accordance with this
                  Option Plan and his obligation to pay the consideration to the
                  Company.

         2.7.2.6  As is stated in clause 2.3 above, all of the Options shall be
                  registered on the name of the Trustee on behalf of the
                  Offerees. The registration of the Options on the name of the
                  Trustee shall be carried out after the expiration of at least
                  14 business days from the time of the submission of this
                  Option Plan, in accordance with the Regulations.

         2.7.3    The period for the granting of the Options in accordance with
                  this Option Plan is not before the first day of October 2003
                  and which shall terminate at the date of the submission of the
                  first periodical report following the submission of the Option
                  Plan, or at the time which is determined for the submission of
                  such report, the earlier of the two.

2.8      THE EXERCISE PRICE

         2.8.1    At the time at which a notice of exercise of the Option shall
                  be delivered to the Company by the Offeree (hereinafter: "THE
                  EXERCISE DATE OF THE OPTION"), the Offeree

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                  shall pay to the Company "the Exercise Price" (per its
                  definition in clause 2.8.2 below), in respect of every Option.

         2.8.2    Every Option may be exercised into one ordinary share of 1 New
                  Israeli Shekel of the Company, par value, in return for
                  payment in New Israeli Shekels which is equivalent to the sum
                  of 22 United States Dollars for every share (calculated in
                  accordance with the representative rate of the dollar which is
                  known at the time of the exercise) (hereinafter: "THE EXERCISE
                  PRICE")

         2.8.3    In the event that the Company shall distribute a dividend in
                  cash, the exercise price shall be the Exercise Price as per
                  its definition above, with the deduction of the gross amount
                  cash dividend which shall be paid to the shareholders of the
                  Company in respect of any exercise share (hereinafter: "THE
                  NEW EXERCISE PRICE"). In any event the New Exercise Price
                  shall not be less than 1 New Israeli Shekel. The New Exercise
                  Price shall apply to all the Options which have been granted
                  and which have not yet been exercised, also in the event that
                  the Offerres are not entitled to exercise the Options at the
                  time of the distribution of the cash dividend.

         3. THE TERMS OF THE OFFERED SECURITIES

3.1      RIGHTS OF THE EXERCISE SHARES

         The ordinary shares which evolve from the exercise of the Options shall
         be identical in all their rights to the ordinary shares of the Company,
         immediately upon their allotment.

3.2      DIVIDEND

3.2.1    The shares which shall evolve from the exercise of the Options shall be
         entitled to every dividend or other benefit, whenever date of
         entitlement to receive such right falls on the date of the exercise or
         thereafter.

3.2.2    The Offerees shall be entitled to receive a dividend in accordance with
         the quantity of shares which they hold and subject to taxation which
         applies to the distribution of dividends as mentioned.

3.2.3    Dividend in relation to the exercise shares which are registered on the
         name of the Trustee, shall be paid directly to the Offerees, after any
         tax deduction required by law.

3.2.4    The Company or the Trustee shall be entitled to set-off and to withhold
         at source, from any dividend which shall be declared and distributed as
         mentioned, any sum which the Offerees owe to the Company or to the
         Trustee, and also every amount which is liable to tax, levy or any
         other obligatory payment.

                                        8

3.3      ADJUSTMENTS FOR DISTRIBUTION OF BONUS SHARES OR SHARE SPLIT DURING THE
         TERM OF THE OPTION PLAN

         In the event that the Company shall distribute bonus shares, and the
         date of entitlement for the receipt of such bonus shares shall fall
         after the day of the allotment of the Options but prior to the date of
         the exercise, the number of the shares to which the Offerees are
         entitled shall be increased at the time of the exercise by the number
         of the shares to which the Offerees would have been entitled in the
         event that they had exercised the Option prior to the date of the
         bonus. The Exercise Price of every Option shall not change as a result
         of the increase of the number of the shares which the Offerees are
         entitled to as a result of the distribution of the bonus shares.
         Similar adjustments shall be made in the event of a split (or
         consolidation) of the shares of the Company.

3.4      PROVISIONS IN RESPECT OF THE RIGHTS ISSUES DURING THE TERM OF THE
         OPTION PLAN

3.4.1    In any case of a rights issue by the Company to the shareholders, in
         the event the Offerees shall hold Options which were allotted to them
         and which have not yet been exercised, the Offerees shall be offered
         identical rights in the same quantities which would have been offered
         to them, would they have prior to the date of entitlement for the
         participation in the rights issue.

         In the event that exploitation of the rights shall be conditioned upon
         a payment, the price of exploitation of the rights, shall be paid at
         the time of the exercise of the Options, and shall be linked to the
         cost of living index, from the index which is known at the time
         determined in the prospectus as the last time for exploitation of the
         rights by the shareholders, until the index which is known at the date
         of the exercise of the Options.

3.4.2    In the event that the rights issue shall include any convertible
         securities which last date of its exercise shall be prior to the last
         date for the exercise of the Options in accordance with the Option
         Plan, the Offerees shall be entitled to exercise the rights in respect
         of the convertible securities as mentioned, also prior to the exercise
         of the Options which have been issued to them in accordance with this
         Option Plan, provided that they have exploited all of the rights to
         which they are entitled by virtue of such rights issue and that they
         have paid the entirety of the price in respect of the exploitation of
         these rights.

3.5      PROTECTION OF THE OFFEREES DURING THE TERM OF THE OPTION PLAN

         Subject to that which is stated in clause 3.4.2 above, the entitlement
         of the Offerees to securities of the Company in the event of
         distribution of bonus shares and/or rights issue, as mentioned in
         clauses 3.3 and 3.4 above, shall be preserved until the time of the
         exercise of the Options and shall be carried out only at the time of
         the exercise, and in accordance with the number of the Options which
         have actually been exercised at such time.

         In order to secure the rights of the Offerees as mentioned, the Company
         shall reserve securities in an appropriate number which will enable the
         Offerees to exercise their rights as mentioned above.

                                        9

3.6      REGISTRATION OF THE EXERCISE SHARES ON THE NAME OF THE TRUSTEE

3.6.1    The Trustee who is appointed by the board of directors for the purpose
         of the execution of the Option Plan and who has been approved by the
         tax authorities, is Advocate David Gotlieb. The Trustee shall be
         empowered with all the powers in accordance with clause 102 of the
         Income Tax Ordinance and in accordance with the Income Tax Rules (Tax
         Reliefs in Allotment of Shares to Employees), 5763 - 2003 (hereinafter:
         "THE RULES"), and the provisions which have been promulgated thereunder
         (clause 102, the rules and the provisions hereby mentioned shall be
         jointly referred to hereinafter: "CLAUSE 102"), in everything which
         relates to the Options which are granted to the Offerees who are
         employed in Israel in accordance with this clause, and every other
         power which shall be agreed upon between himself and the Company in the
         trust agreement, to be entered among the Trustee and the Company.

3.6.2    In accordance with the provisions of clause 102 of the Income Tax
         Ordinance, the Trustee shall hold the Options and the shares which
         shall evolve from their exercise for a period which shall not be less
         than 24 months (unless the approval shall be received from the Income
         Tax Commissioner for a shorter restricting period) from the expiration
         of the tax year in which they were allotted, that is to say at least
         until the 31st of December, 2005.

3.6.3    The remainder of the Options which shall be allotted to Employees who
         are entitled outside of Israel, not in accordance with the provisions
         of clause 102 of the Income Tax Ordinance, shall also be registered on
         the name of the Trustee, and they shall be released by him in
         accordance with the terms which apply to every employee.

3.7      THE VOTING RIGHTS OF THE EXERCISE SHARES

3.7.1    An Offeree who has acquired shares in accordance with clause 102 of the
         Income Tax Ordinance, shall not be entitled, for so long as the shares
         are held with the Trustee, unless it is stated otherwise expressly in
         the Option Plan, to any rights whatsoever as a shareholder in the
         Company in connection with these shares.

3.7.2    Notwithstanding the above mentioned, in the event that shares shall be
         held by the Trustee until the time of their transfer to the Offerees,
         the Offerees shall be entitled to receive from the Trustee a power of
         attorney enabling them to vote in general meetings in respect of the
         shares which are held in trust for them. It is clarified that for so
         long as the times of the entitlement have not occurred including the
         termination of the restricting period, as specified in clause 2.4.1
         above, the Offerees shall not be entitled to receive a power of
         attorney from the Trustee to vote in the general meetings.

3.8      LIMITATIONS OF TRANSFER OF THE OPTIONS

3.8.1    The rights of the Offerees in respect of the Options, in their entirety
         or part thereof, for so long as the Options and/or the exercise shares
         have not been transferred to them by the Trustee and have been
         registered on their name, are personal are not capable of being: split,
         waived in favor of another, transferred, assigned, pledged, encumbered,
         subjuct to a lien, an attachment or some other charge, voluntarily or
         by virtue of any law, with the exception of transfer by virtue of a
         will or the laws of inheritance, and no power of attorney or deed of
         transfer is to be rendered in respect of them, whether valid

                                       10

         immediately or valid at a future date, with the exception stated
         expressly in this Option Plan.

3.8.2    Any such transfer, direct or indirect, whether carried out in order to
         obtain immediate validity or carried out in order to obtain future
         validity, shall be null and void.

3.9      MANNER AND DATE OF THE EXERCISE (See clause 2.6 above).

3.9.1    Offerees interested to exercise the Options which have been granted to
         them, subject to their right to exercise of the Options to ordinary
         shares, shall submit a written exercise notice to the Company
         Secretary.

3.9.2    The exercise date of the Option shall be deemed to be the date in which
         a written notice of the Offeree has reached the Company, of the
         offerees wish to exercise the Option, together with the payment of the
         Exercise Price as mentioned in clause 2.8 above.

3.10     REGISTRATION FOR TRADING ON THE STOCK EXCHANGE

         The Options which shall be granted in accordance with the Option Plan
         to the Employees shall not be registered for trading. Registration of
         the shares which have evolved from the exercise of the Options for
         trading on the Tel-Aviv Stock Exchange shall be carried out shortly
         after the allotment of the exercise shares by the Company, and subject
         to the approval of the Tel-Aviv Stock Exchange as specified above.

3.11     THE RESTRICTIONS WHICH SHALL APPLY TO THE ALLOTMENT OF OPTIONS TO
         EMPLOYEES OF THE SUBSIDIARIES OF THE COMPANY OUTSIDE OF ISRAEL, WHO ARE
         NOT ISRAELI CITIZENS

         In accordance with the best of the knowledge of the Company, the
         Options and the shares which shall evolve from the exercise of the
         Options to be allotted to Employees of the subsidiaries of the Company
         outside of Israel, that is to say to Employees who are not citizens of
         Israel, will be subject to restrictions (blocking provisions) in
         accordance with the Securities Law and the Securities Regulations
         (Details for the Matter of Clauses 15a to 15c of the Law), 5760 - 2000,
         according to which:

3.11.1   All the Employees are prohibited to offer for sale the shares exercised
         shares throughout three months from the day of the allotment of the
         Options.

3.11.2   Throughout the four consecutive quarters, each one of these Employees
         shall be able to offer during every day of trading, a quantity of
         shares which shall not exceed the daily average of the trading turnover
         in shares of the Company on the Tel-Aviv Stock Exchange in a period of
         eight weeks which preceded the day of the offer, and provided that he
         shall not offer during one quarter a quantity of shares which exceeds
         one per cent of the issued and paid up share capital of the Company at
         such time.

                                       11

4.       ASPECTS OF TAXATION

4.1  THE TAXATION WHICH APPLIES TO THE SHARES

4.1.1    The Israeli Options which are offered in accordance with the Option
         Plan will be taxed in accordance with clause 102 of the Income Tax
         Ordinance in the scheme of capital gains taxation. The remainder of the
         Options (101,000) are granted to the Employees of the subsidiaries of
         the Company which are registered in the United States and in Turkey,
         who are not citizens of the State of Israel.

4.1.2    In accordance with the Income Tax Rules (Tax Reliefs in the Allotment
         of Shares to Employees), 5763 - 2003, the Company shall apply to the
         Income Tax Commission, to obtain its approval that the allotment of the
         Options which are granted to the Israeli Employees shall be carried out
         in the framework of the provisions of clause 102 of the Income Tax
         Ordinance in the scheme of capital gains taxation. The time of the
         allotment of the Israeli Options shall be not before the expiration of
         30 days from the time of the submission of the application to the
         Income Tax Commission. In the event that a contradiction exists between
         the clauses of the Option Plan, its appendices and the documents which
         shall be prepared in the framework thereof with the Employees and
         between the provisions of clause 102 of the Income Tax Ordinance, the
         provisions of clause 102 of the Income Tax Ordinance shall prevail, and
         the required adjustments shall be made by the board of directors of the
         Company, in accordance with its absolute discretion.

4.1.3    The Trustee shall hold the Options and the shares which shall evolve
         from their exercise for a period which shall not be less than 24 months
         (unless approval shall be received from the Income Tax Commission for a
         shorter restricting period) from the expiration of the tax year in
         which they were allotted, that is to say at least until the 31st of
         December 2005.

4.1.4    The income of the Offerees from the allotment of the Options shall not
         be liable for tax at the time of the allotment, but rather at the time
         of the sale of the shares which are held by the Trustee or their
         transfer from the Trustee to the Offerees, whichever the earlier
         (hereinafter: "THE TIME OF THE TAX EVENT").

4.1.5    The balance of the consideration or the value which shall accrue to the
         Israeli Employee at the Time of the Tax Event shall be taxed as capital
         gain of the Israeli Employees at the Time of the Tax Event, at tax at
         the rate of 25%.

4.1.6    Notwithstanding that which is stated above, in the event that the
         Israeli Employees shall have exercised the Options prior to the
         expiration of the restricting period as mentioned in clause 4.1.3
         above, all the consideration or the value which shall accrue to the
         Israeli Employees at the time of the exercise shall be deemed an income
         from labor and it shall be taxed in accordance with the marginal rate
         of tax which shall apply to the employee at the time of the exercise.

                                       12

4.1.7    In respect of the balance of the consideration or the value which shall
         accrue to the Employee as mentioned in clause 4.1.5 above, the Company
         shall not be permitted to use the expense for tax purposes.

4.1.8    Every Offeree to whom Options have been allotted in accordance with
         clause 102 of the Income Tax Ordinance shall undertake in the framework
         of the letter of undertaking not to apply for tax exemption in
         accordance with clauses 104(a) and (b) or 97(a) of the Income Tax
         Ordinance.

4.2      TAX ASPECTS AND OBLIGATORY PAYMENTS

         4.2.1    The Options shall be granted in the framework of the employer
                  - employee relationships which exist between the Company and
                  each one of the Offerees who are participating in the Option
                  Plan. The Offerees shall bear all the tax liabilities, the
                  levies and the obligatory payments which shall be imposed by
                  the tax authorities (whether in Israel or outside of Israel)
                  and every other obligatory payment, in respect of the Options,
                  the exercise shares, the dividend or any other benefit in
                  respect of thereof, in connection with the allotment of the
                  Options on the name of the Offerees and/or other liabilities
                  which shall accrue to the Offerees and/or and to the Trustee
                  in connection with the Option Plan.

         4.2.2    The Company and/or the Trustee shall deduct in accordance with
                  the law all the taxes and the levies, including withholding
                  tax, in the manner derived by the provisions of the Option
                  Plan and in accordance with the provisions of any law and the
                  Offerees agree to indemnify the Company and the Trustee and to
                  exempt them from any tax payment obligations, interest and
                  fines and from any other payment including in respect of
                  liabilities originating from the omission of the Company and
                  of the Trustee to deduct any tax out of any payment which has
                  been transferred to the Offerees.

         4.2.3    The Trustee and/or the Company shall not transfer the
                  certificate of the exercised shares to the Offerees until all
                  the obligatory payments as mentioned above are paid in full.

         4.2.4    In the event that at any stage of the execution of the Option
                  Plan the Company shall be required to pay tax in connection
                  with the allotment of the Options to the Offerees, and the
                  Company shall not be in the possession of amounts which are
                  required to carry out the tax deduction out of the amount
                  which is due to the Offerees, the Company shall be entitled to
                  refrain from carrying out such stage and/or part of the Option
                  Plan, unless the Offerees shall make available to the Company,
                  immediately upon its demand, the amounts which are required to
                  make the tax payment as mentioned.

         4.2.5    The Company and the Trustee shall not bear any liability and
                  they shall be indemnified by the Offerees in respect of any
                  expense or loss which shall be inflicted on them in respect of
                  all tax payments which shall be made by them, including
                  payments in respect of failure to deduct withholding tax in
                  connection

                                       13

                  with allotment of the Options or the transfer of the Options
                  and/or the exercise shares onto the name of the Offerees,
                  payment of dividends etc.

         4.2.6    The income which shall be credited to any of the Offerees as a
                  result of allotment of the Options, their transfer and/or
                  transfer of the exercise shares onto their name and/or
                  everything which is connected with them, shall not be taken
                  into account at the time of the calculation of the basis for
                  the entitlement of the Offerees to any social rights. Without
                  derogation from the generality of the above said, these
                  revenues shall not be taken into account for the purpose of
                  the calculation of social security, managers' insurance, study
                  fund, benefit fund, severance pay, vacation pay and so forth.
                  In the event that in accordance with any law the Company shall
                  be compelled to take into account the components which are
                  mentioned above as income or profit which shall be actually or
                  abstractedly credited to the Offeree, then the Offeree shall
                  indemnify the Company in respect of any expense which shall be
                  caused to it in this matter.

         THE OFFEREES MUST CONSIDER THE TAX IMPLICATIONS WHICH ARE CONNECTED
         WITH PARTICIPATION IN THE OPTION PLAN. THE DATA WHICH IS STATED ABOVE
         DOES NOT PURPORT TO CONSTITUTE AUTHORIZED OR EXHAUSTIVE INTERPRETATION
         OF THE PROVISIONS OF THE LAWS WHICH ARE MENTIONED ABOVE OR AN
         EXHAUSTIVE DESCRIPTION OF THE TAX PROVISIONS WHICH RELATE TO THE OPTION
         PLAN, AND IT DOES NOT REPLACE PROFESSIONAL ADVICE IN THIS MATTER. IT IS
         PROPOSED THAT THE EMPLOYEES WHO SHALL PARTICIPATE IN THE OPTION PLAN
         SHALL SEEK PROFESSIONAL ADVICE IN ACCORDANCE WITH THE SPECIAL
         CIRCUMSTANCES OF EVERY OFFEREE.

 5.      RATES OF THE STOCK EXCHANGE OF THE SHARES OF THE COMPANY

5.1      All the shares which exist in the issued and paid up share capital of
         the Company, are registered for trading on the Tel-Aviv Stock Exchange.

5.2      The following are details regarding the high and the low rates of the
         shares of the Company on the Tel-Aviv Stock Exchange for the period
         which commences on January 1st, 2001 and up until the date of the
         Option Plan:

         --------------------------------------------------------------------------------------------------------------
         CLOSING RATE           THE YEAR 2001                    THE YEAR 2002                    THE YEAR 2003*
         --------------------------------------------------------------------------------------------------------------
                            DATE         NIS PER SHARE       DATE         NIS PER SHARE        DATE      NIS PER SHARE
         --------------------------------------------------------------------------------------------------------------

         THE HIGHEST        Dec 27       75.30               Dec 11       89.70                July 2    141.70
         --------------------------------------------------------------------------------------------------------------
         THE LOWEST         April 3      33.23               April 9      58.95                Jan 1     81.90
         --------------------------------------------------------------------------------------------------------------

         * until the dated of the Option Plan

5.3      The share rate of the Company on the Stock Exchange, on the 24th of
         August 2003, was 105.10 New Israeli Shekels. The share rate of the
         Company on the Stock Exchange at the end of the trading on the 27th of
         August 2003 was 113.20 New Israeli Shekels.

                                       14

6.       ADDITIONAL DETAILS

6.1      REFERRAL TO FINANCIAL REPORTS AND TO IMMEDIATE REPORTS

         The Company calls the attention of the Offerees to additional details
         about the Company, which can be found in the financial reports and in
         the annual report of the Company for the year 2002, which was published
         on the 24th of February 2003 and also to immediate reports which the
         Company had published after the annual report. The copies of these
         reports shall be made available for review by each one of the Offerees
         pursuant to this Option Plan at the registered office of the Company at
         the usual work hours.

6.2      NOTICES

         Every notice in accordance with the Option Plan shall be given in
         writing, and shall be deemed to have been delivered at the time of its
         submission to the addressee by hand or by fax, or 3 (three) business
         days after its dispatch by registered post to the address of the
         parties of the Option Plan.

                                                Yours faithfully,
                                               /s/ Hana Reller
                                       Lipman Electronic Engineering Ltd.
                                                By Hana Reller,
                                              Company Secretary

Signed today, 28th of August 2003

                                       15Exhibit 10.6

Confidential Treatment is requested

Confidential Portions indicated by "[***]" have been omitted and filed
separately with the Securities and Exchange Commission

[AVNET LOGO]  AVNET ASIC ISRAEL LTD
              Avnet Bldg, Dror South, P.O. Box 121, Tel Mond 40600, Israel
              TEL: 972-9-796-6966     INTERFAX: 972-3-760-1116

DATE:     April 29, 2003                      PAGES: 4
--------------------------------------------------------------------------------
TO:       ROY NEUMAN - LIPMAN                 PHONE: +972-3-902 9730
          BORIS GUTIN - WIZCOM                       +972-2-532 8222 ext. 210
--------------------------------------------------------------------------------
FROM:     Nadav Benezer                       PHONE: 09-7780626
          Avnet ASIC Israel (AAI)             FAX:   03-7601116
                                              EMAIL: nadav.benezer@avnet.com
--------------------------------------------------------------------------------
CC:       Vassil Karanov                      PHONE: 33-1-6919-7112
          Oren Bar-on                         FAX:   33-1-6919-7101
          Philips Semiconductors              EMAIL: vassil.karanov@philips.com
--------------------------------------------------------------------------------
SUBJECT:  FRAME AGREEMENT FOR CONTINUED MANUFACTURING OF QPEN - VY27329-2

================================================================================

Dear Sirs,

On behalf of Philips Semiconductors, and Avnet ASIC Israel (AAI) we are pleased
to present this 4-way Frame Agreement for continued manufacturing of QPEN
VY27329-2 under end-of-life (EOL) and Philips SA FAB Closure last-time-buy (LTB)
procedure announcements.

ASIC DETAILS:
Design Name         : Qpen
Part number         : VY27329-2
12 nc               : 935264718557
Technology used     : Philips 0.25 TLM
FSB / Analog / FB   : vvf7102_d(ARM7), vsc9wp101d_v0rld3 (PLL)
Die size            : 177.3 x 177.1 mils
Production Package  : LQFP 128
Package code        : SOT420

UNIT PRICE (STEP PRICING)
0-400K units        $[***] / unit
400K - 800K units   $[***] / unit
(greater than)
  800K units        $[***] / unit

FORECAST  (TOTAL = LIPMAN + WIZCOM) PROVIDED BY LIPMAN AND WIZCOM
2003 delivery       [***]k units = [***]k + [***]k
2004/2005 delivery  [***]k units = [***]k + [***]k
2005/2006 delivery  [***]k units = [***]k + [***]k

All items in this proposal are strictly confidential and                Page: 1
must not be disclosed wholly or in part to any third party
without express prior written consent of Philips Semi and
Avnet ASIC Israel.

[AVNET LOGO]  AVNET ASIC ISRAEL LTD
              Avnet Bldg, Dror South, P.O. Box 121, Tel Mond 40600, Israel
              TEL: 972-9-796-6966     INTERFAX: 972-3-760-1116

FRAME AGREEMENT DETAILS

1. LIPMAN/WIZCOM'S ENGAGEMENTS:

    1.1 Stick to the original contractual unit step pricing agreement, as above,
        and to the current terms of payment (net 30 days)

    1.2 Place orders to cover 2003 and Q1-2004 product needs
    - the orders should be placed under the terms of SA Fab Closure
      Notification: placed before May 1st 2003, non-cancelable
    - min quantity/latest delivery:
          Units for delivery in 2003 (on top of current Lipman's 50K units order
          backlog):
          Lipman - [***]k units
          Wizcom - [***]k units
          Units for delivery in 2004 up to end Q2-2004:
          Lipman - [***]k units
          Wizcom - [***]k units
    - delivery schedules to be determined by Lipman/Wizcom at order entry for
      2003 deliveries and by Sept 30 2003 for the 2004 deliveries.

    1.3 Place non-cancelable order to cover Q2-Q4 2004 product needs
    - required min quantity/delivery [***]k units for Q2 to Q4 2004 delivery
      Lipman - [***]k units
      Wizcom - [***]k units
    - order should be placed before May 30, 2003 - final delivery schedules to
      be confirmed by Sept 30, 2003.
    - no bank guarantee will be required.

    1.4 Agree on participating to the funding of device transfer to alternative
        fab
    - fab to be defined, exact cost of transfer to be estimated
    - Lipman's participation will be limited to the actual mask cost charges for
      the alternative fab, up to a maximum of [***]k$ (UMC 0.25um TLM mask set
      = [***]k$). (see also paragraphs 2.3 and 2.4 below).
      Mask costs billing schedule:
                 o 70% on Tape-Out
                 o 30% Prototype Approval

    1.5 Starting from Q2-2003, provide regular, rolling 24 month forecast of
    Lipman's and Wizcom's cumulated demand for the VY27329-2 device.

All items in this proposal are strictly confidential and                Page: 2
must not be disclosed wholly or in part to any third party
without express prior written consent of Philips Semi and
Avnet ASIC Israel.

[AVNET LOGO]  AVNET ASIC ISRAEL LTD
              Avnet Bldg, Dror South, P.O. Box 121, Tel Mond 40600, Israel
              TEL: 972-9-796-6966     INTERFAX: 972-3-760-1116

2. PHILIPS/AAI'S ENGAGEMENTS:

     2.1 Continue to stick to the above contractual unit step pricing agreement
     and to the current payment terms (Net 30 days)

     2.2 - Maintain VY27329-2 device transferable to alternative fab
         - safeguard GDS2 files, mask sets, test h/w and s/w, and all other
           relevant files and material beyond the SA Fab Closure of Sept 30,
           2003.
     2.3 Provided Lipman executes the above engagements:
     - proceed during Q1-2004 to device manufacturing transfer to alternative
       Fab site (in-house Philips or external fab UMC).
     - inform and agree with Lipman on final transfer participation cost
       (limited to actual mask set cost, up to [***]k$ max)
     - alternative manufacturing site and release for mass production shall be
       completed by end Feb 2004.
     - 50 prototypes will be delivered no later than end of Feb 2004 (could be
       earlier depending on 2004 production forecast provided by Lipman/Wizcom
       by Sept 30, 2003 for the [***]k units per paragraph 1.3).
     - Philips/AAI commit that the new device is fully compatible with the
       existing device in terms of package, functionality and performance.
       Lipman/Wizcom have to evaluate the new device in their application and
       approve the new prototypes for production.

     2.4 Reimburse Lipman's participation to the fab transfer costs.
     - reimbursement will be started only after the full shipment in 2004 of the
       [***]k ordered per 1.2 & 1.3 above.
     - reimbursement will be done by discontinuing [***]$ per unit on ordered/
       shipped units until reaching the actual participation of Lipman to the
       transfer (i.e. [***]k$ max)
     - maximum quantity to discount over [***]k units delivered to Lipman.
     - this one-time operation shall not modify the agreed pricing scheme as
       given above.

     2.5 Rescheduling and Cancellation policy currently in force shall continue
         to apply to any additional and new orders (except for orders per
         paragraphs 1.2 and 1.3 above.)

3.  The undertakings of Lipman and those of Wizcom pursuant to this agreement
    are independent and separate and it is hereby provided that Philips/AAI will
    be obliged to perform all of its undertakings in accordance to this
    agreement as long as Lipman performs all of its undertakings to the latter.
    Without derogating from the aforesaid, it is clarified that both Lipman and
    Wizcom are permitted, but not obligated to, fulfill each other's
    undertakings, in the event that the other (Lipman or Wizcom respectively)
    does not fulfill its undertakings according to this Agreement.

All items in this proposal are strictly confidential and                Page: 3
must not be disclosed wholly or in part to any third party
without express prior written consent of Philips Semi and
Avnet ASIC Israel.

[AVNET LOGO]  AVNET ASIC ISRAEL LTD
              Avnet Bldg, Dror South, P.O. Box 121, Tel Mond 40600, Israel
              TEL: 972-9-796-6966     INTERFAX: 972-3-760-1116

4.  Subject to the terms of this agreement, the minimum obligation by
    Philips/AAI is to supply at least all orders and quantities specified in
    this agreement, including the [***]k units required to reimburse the mask
    cost. Should Philips/AAI fail to complete orders received from Lipman for
    the [***]k units, as stated in paragraph 2.4, Philips/AAI will reimburse
    Lipman the mask costs or the relative part of it which was not reimbursed.
    Of course this section refers only to the minimum obligation, and both sides
    recognize that the intention of this agreement is to provide continuous
    supply by Philips/AAI of VY27329-2 for several more years, as long as the
    products are alive and the business scenario justifies it (quantities needed
    and ordered are significant and Philips is able to continue manufacturing of
    the device).

5.  ORDER ENTRIES
    Order entry is as follows:
    - The Supplier is:         Avnet ASIC Israel. LTD (AAI)
                               Avnet Building, Dror South
                               P.O.B. 121, Tel-Mond 40600, Israel
                               Tel: 972-9-7966966
                               Fax: 972-3-7601116

6.  SIGNATURES

LIPMAN                                   WIZCOM

Name:      Roy Neuman                    Name:      Amit Ben-Zvi
      -------------------------------          ---------------------------------

Title:     Exec. VP Operations           Title:     CEO
       ------------------------------           --------------------------------

Signature: /s/ Roy Neuman                Signature: /s/ Amit Ben-Zvi
          ---------------------------              -----------------------------

Date:      15-5-03                       Date:      May 25, 2003
      -------------------------------          ---------------------------------

AVNET ASIC ISRAEL LTD. (AAI)             PHILIPS SEMICONDUCTORS
                                         A DIVISION OF PHILIPS FRANCE

Name:      Nadav Benezer                 Name:      Vassil Karanov
      -------------------------------          ---------------------------------

Title:     Managing Director             Title:     Sales Account Manager
       ------------------------------           --------------------------------

Signature: /s/ Nadav Benezer             Signature: /s/ Vassil Karanov
          ---------------------------              -----------------------------

Date:      May 1, 2003                   Date:      03 June 2003
      -------------------------------          ---------------------------------

All items in this proposal are strictly confidential and                Page: 4
must not be disclosed wholly or in part to any third party
without express prior written consent of Philips Semi and
Avnet ASIC Israel.

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