S-8

As filed with the Securities and Exchange Commission on December 18, 2003

Registration No. 333-          

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM S-8

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

JACADA LTD.

(Exact Name of Registrant as Specified in Its Charter)

Israel	Not applicable
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

11 Galgalei Haplada Street

Herzliya, Israel 46722

(Address of Principal Executive Offices) (Zip Code)

Jacada Ltd. 2003 Share Option and Incentive Plan

(Full Titles of the Plan)

Jacada Inc.

400 Perimeter Center Terrace, Suite 100

Atlanta, Georgia 30346

(770) 352-1300

(Name, Address and Telephone Number, Including Area Code, of Agent for Service)

Copies to:

Arthur Jay Schwartz, Esq. Smith, Gambrell & Russell, LLP 1230 Peachtree Street, N.E. Suite 3100 Atlanta, Georgia 30309-3592 (404) 815-3500 Dan Geva, Adv. David S. Glatt, Adv. Meitar Liquornik Geva & Leshem Brandwein 16 Abba Hillel Silver Road Ramat Gan 52506, Israel 972-3-610-3100

CALCULATION OF REGISTRATION FEE

Title of Securities to be Registered	Amount to be Registered(1)	Proposed Maximum Offering Price Per Share(2)	Proposed Maximum Aggregate Offering Price(2)	Amount of Registration Fee
Ordinary Shares, par value NIS 0.01 per share	2,000,000	$3.04	$6,080,000	$492
Total	2,000,000	$3.04	$6,080,000	$492

(1) This registration statement covers ordinary shares, par value NIS 0.01 per share of the Registrant (“Ordinary Shares”) consisting of the aggregate number of shares which may be sold upon the exercise of options which have been granted and/or may hereafter be granted under the Jacada Ltd. 2003 Share Option and Incentive Plan (the “Plan”). The maximum number of shares which may be sold upon the exercise of such options granted under the Plan are subject to adjustment in accordance with certain provisions of the Plan. Accordingly, pursuant to Rule 416 under the Securities Act of 1933, as amended, this registration statement includes, in addition to the number of shares stated above, an indeterminate number of shares which may be subject to grant or otherwise issuable after the operation of any such adjustment and other provisions.

(2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(h)(1) under the Securities Act of 1933 as follows: (i) in the case of Ordinary Shares which may be purchased upon exercise of outstanding options, the fee is calculated on the basis of the price at which the options may be exercised; and (ii) in the case of Ordinary Shares for which options have not yet been granted and the option price of which is therefore unknown, the fee is calculated on the basis of the average of the high and low sale prices per share of the Ordinary Shares as quoted on the Nasdaq National Market on December 16, 2003 (within 5 business days prior to filing this registration statement).

PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. Incorporation of Documents by Reference.

The following documents, which have been filed by the registrant, Jacada Ltd., a company organized under the laws of the State of Israel (the “Company” or the “Registrant”), with the Securities and Exchange Commission (the “Commission”) pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are incorporated by reference in this registration statement as of their respective dates:

(a) The Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2002 filed with the Commission on June 4, 2003;

(b) The Company’s Reports on Form 6-K dated May 9, 2003, May 12, 2003, July 21, 2003, August 1, 2003, August 29, 2003, October 3, 2003 and October 31, 2003; and

(c) The description of the Company’s Ordinary Shares contained in the Company’s Registration Statement on Form 8-A (File No. 333-10882), filed with the Commission on October 8, 1999, as amended.

All documents filed or subsequently filed by the Registrant pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, after the date of this registration statement and prior to the filing of a post-effective amendment which indicates that all securities registered hereby have been sold or which deregisters all such securities then remaining unsold, shall be deemed to be incorporated by reference in this registration statement and to be a part hereof from the date of filing of such documents with the Commission. Any statement contained in a document incorporated by reference herein shall be deemed to be modified or superseded for purposes of this registration statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this registration statement.

Item 4. Description of Securities.

Not applicable.

Item 5. Interests of Named Experts and Counsel.

None.

Item 6. Indemnification of Directors and Officers

The Company’s Articles of Association provide that, subject to the provisions of the Companies Law 5759-1999 (the “Companies Law”), the Company may enter into a contract for the insurance of the liability of its “office holders” (defined under the Companies Law to include a director, general manager, chief business manager, deputy general manager, vice general manager or any other manager directly subordinate to the general manager and any other person assuming the responsibilities of the foregoing positions without regard to such person’s title) with respect to:

• a breach of his duty of care to the Company or to another person;

• a breach of his duty of loyalty to the Company, provided that the office holder acted in good faith and had reasonable grounds to assume that his act would not prejudice the Company’s interests; or

• a financial liability imposed upon him in favor of another person concerning an act performed by him in his capacity as an office holder.

The Company’s Articles of Association provide that, to the extent permitted by the Companies Law, the Company may indemnify and undertake to indemnify an office holder against:

• a financial liability imposed on him in favor of another person by any judgement, including a settlement or an arbitrator’s award approved by a court concerning an act performed in his capacity as an office holder; and

• reasonable litigation expenses, including attorneys’ fees, expended by the office holder or imposed on him by a court, in proceedings the Company institutes against the office holder or instituted on the Company’s behalf or by another person, or in a criminal charge from which the office holder was acquitted or in a criminal proceedings in which the office holder was convicted of a criminal offense that does not require proof of criminal intent.

The Company’s Articles of Association also include a provision authorizing the Company to indemnify or undertake in advance to indemnify an office holder in respect of all or part of the office holder’s liability to the Company for the liabilities and expenses described in the preceding paragraph, provided that any advance undertaking to indemnify is limited to those categories of events, and to such amounts, as the Company’s board of directors may, at the time of the giving of such undertaking to indemnify, deem to be reasonable under the circumstances.

In addition, the Company may, pursuant to its Articles of Association, release, in advance, all or part of an office holder’s liability to the Company for damages which arise from the breach of the office holder’s duty of care to the Company.

However, under the Companies Law, an Israeli company may not exempt an office holder from liability with respect to a breach of his duty of loyalty. In addition, the Companies Law prohibits a company from indemnifying an office holder, absolving him from liability towards the company, or entering into an insurance contract which would provide coverage for any monetary liability incurred as a result of any one of the following:

• a breach by the office holder of his duty of loyalty unless the office holder acted in good faith and had reasonable grounds to assume that his act would not prejudice the company’s interests;

• a breach by the office holder of his duty of care if such breach was intentional or the result of reckless behavior;

• any act or omission done with the intent to derive an illegal personal gain; or

• any fine or ransom levied against the office holder.

The Company has entered into agreements with certain of its office holders pursuant to which the Company is obligated to indemnify such office holders, to the fullest extent permitted by applicable law, against liability and expenses incurred by such person by reason of an act or omission in its capacity as a office holder.

The Companies Law provides that indemnification of an office holder or the procurement of insurance coverage for an office holder, must be approved by the Company’s audit committee and its board of directors, as well as by the Company’s shareholders in certain circumstances.

The Company has procured insurance covering the liability of its office holders, in accordance with, and subject to, the relevant provisions of the Companies Law and the Company’s Articles of Association.

Item 7. Exemption from Registration Claimed.

Not applicable.

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Item 8. Exhibits.

4.1	Specimen Ordinary Share.*
5.1	Opinion of Meitar Liquornik Geva & Leshem Brandwein.
23.1	Consent of Kost, Forer & Gabbay, a Member of Ernst & Young Global.
23.2	Consent of Meitar Liquornik Geva & Leshem Brandwein (contained in Exhibit 5.1).
24.1	Powers of attorney of certain officers and directors of the Company (included in signature page).
99.1	Jacada Ltd. 2003 Share Option and Incentive Plan.

* Incorporated by reference to the Company’s Registration Statement on Form F-1 (Registration Number 333-10882), filed with the Commission on October 13, 1999.

Item 9. Undertakings.

(a) The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the “Securities Act”);

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

(iii) To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement;

provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bonafide offering thereof.

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(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act, (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Atlanta, the State of Georgia, on the 16^th day of December, 2003.

JACADA LTD.
By:	/s/ Robert C. Aldworth
Name:	Robert C. Aldworth
Title:	Chief Financial Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Robert C. Aldworth as such individual’s true and lawful attorney-in-fact and agent, with full power of substitution, resubstitution and revocation, for such individual and in the individual’s name, place and stead, in any and all capacities, to sign on such individual’s behalf, individually and in each capacity stated below, any and all amendments (including post-effective amendments) to this registration statement and all additional registration statements relating to the same offering of securities as this registration statement that are filed pursuant to Rule 462(b) of the Securities Act, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Commission, granting unto said attorney-in-fact and agent, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully and to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This power of attorney may be executed in counterparts.

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Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Gideon Hollander	Chief Executive Officer and Member of the Board of Directors (principal executive officer)	December 16, 2003
/s/ Robert C. Aldworth	Chief Financial Officer (principal financial and accounting officer)	December 16, 2003
/s/ Yossie Hollander	Chairman of the Board of Directors	December 16, 2003
/s/ Naomi Atsmon	Member of the Board of Directors	December 16, 2003
/s/ Amnon Shoham	Member of the Board of Directors	December 16, 2003
/s/ Ohad Zuckerman	Member of the Board of Directors	December 16, 2003

Authorized Representative in the United States:

JACADA INC.
By:	/s/ Robert C Aldworth
Name:	Robert C. Aldworth
Title:	Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
4.1	Specimen Ordinary Share.*
5.1	Opinion of Meitar Liquornik Geva & Leshem Brandwein.
23.1	Consent of Kost, Forer & Gabbay, a Member of Ernst & Young Global.
23.2	Consent of Meitar Liquornik Geva & Leshem Brandwein (contained in Exhibit 5.1).
24.1	Powers of attorney of certain officers and directors of the Company (included in signature page).
99.1	Jacada Ltd. 2003 Share Option and Incentive Plan.

* Incorporated by reference to the Company’s Registration Statement on Form F-1 (Registration Number 333-10882, filed with the Commission on October 13, 1999.

EX-5.1

Exhibit 5.1

[Letterhead of Meitar, Liquornik, Geva & Leshem, Brandwein]

December 11, 2003

Jacada Ltd.

11 Galgalei Haplada St.

Herzliya 46722

Israel

Ladies and Gentlemen:

We have acted as Israeli counsel to Jacada Ltd., an Israeli company (the “Company”), in connection with the preparation and filing of the Registration Statement of the Company on Form S-8 under the Securities Act of 1933, as amended (the “Registration Statement”). Capitalized terms defined in the Registration Statement and used herein (but not otherwise defined herein) are used herein as so defined.

In so acting, we have examined originals or copies (certified or otherwise identified to our satisfaction), of such corporate records, agreements, documents and other instruments, and such certificates or comparable documents of public officials and of officers and representatives of the Company, and have made such inquiries of such officers and representatives, as we have deemed relevant and necessary as a basis for the opinions hereinafter set forth.

In such examination, we have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of documents submitted to us as certified or conformed copies and the authenticity of the originals of such latter documents. As to all questions of fact material to this opinion that have not been independently established, we have relied solely upon certificates or comparable documents of officers and representatives of the Company. In making our examination of documents executed by parties other than the Company, we have assumed that such parties had the power, corporate or other, to enter into and perform all obligations thereunder and have also assumed the due authorization by all requisite action, corporate or other, and due execution and delivery by such parties of such documents and the validity and binding effect thereof.

Based on the foregoing, and subject to the qualifications stated herein, we are of the opinion that the 2,000,000 Ordinary Shares, par value NIS 0.01 per share, of the Company (the “Ordinary Shares”), to be issued by the Company as contemplated by the Registration Statement, have been duly authorized for issuance and, when issued and paid for in full as contemplated by the Registration Statement and in accordance with the terms of the Company’s 2003 Share Option and Incentive Plan, will be validly issued, fully paid and nonassessable.

This opinion is subject to the following qualifications:

This opinion is based on the facts existing on the date hereof and of which we are aware without making any special investigation.

Members of our firm are admitted to the Bar in the State of Israel, and we do not express any opinion as to the laws of any other jurisdiction.

We render no opinion in relation to any representation made or given in the Registration Statement.

This opinion is furnished to you solely in connection with the Registration Statement and is not to be used, circulated, quoted or otherwise referred to for any other purpose without our express prior written permission.

We hereby consent to the filing of this opinion with the Commission as Exhibit 5.1 to the Registration Statement.

Very truly yours,

/s/ Meitar Liquornik Geva & Leshem Brandwein

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EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement (Form S-8), pertaining to the Jacada Ltd. 2003 Share Option and Incentive Plan, of our report dated, January 26 2003 with respect to the consolidated financial statements of Jacada Ltd. included in its Annual Report (Form 20-F) for the year ended December 31, 2002, filed with the Securities and Exchange Commission.

	/s/ KOST, FORER and GABBAY
Tel-Aviv, Israel	KOST, FORER and GABBAY
December 15, 2003	A member of Ernst & Young Global

EX-99.1

JACADA LTD.

2003 SHARE OPTION AND INCENTIVE PLAN

Adopted as of February 4, 2003

1. NAME

This plan, as amended from time to time, shall be known as the Jacada Ltd. 2003 Share Option and Incentive Plan.

2. PURPOSE OF 2003 PLAN

The Jacada Ltd. 2003 Share Option and Incentive Plan (the “2003 Plan”) is intended as an incentive to retain, on the Board of Directors (the “Board”) and in the employ of Jacada Ltd. (the “Company”) and its Subsidiaries, persons of training, experience, and ability, to attract new directors, employees, consultants and advisors whose services are considered unusually valuable, to encourage the sense of proprietorship of such persons, and to stimulate the active interest of such persons in the development and financial success of the Company by providing them with opportunities to purchase shares in the Company. The 2003 Plan was approved by the Board of the Company as of February 4, 2003. If the Company Shareholders do not approve the Plan within twelve months of the Board’s adoption of the Plan, no Option shall constitute an ISO. The 2003 Plan includes incentives designed to benefit from the provisions of Section 102 of the Israeli Income Tax Ordinance [New Version] 1961 (the “Ordinance”), including without limitation the revisions that became effective on January 1, 2003 and any other future amendments thereof (“New Section 102”) and any regulations, rules, orders or procedures promulgated thereunder. The 2003 Plan is intended to enable the Company to issue stock options and other awards under varying tax regimes, including, without limitation (i) incentive stock options (“ISOs”) within the meaning of Section 422(b) of the United States Internal Revenue Code of 1986, as amended (the “Code”), (ii) non-qualified stock options, (iii) options pursuant to the provisions of New Section 102 (“New 102 Stock Options”), and (iv) options pursuant to Section 3(I) (“3(I) Stock Options”) of the Ordinance (all New 102 Stock Options, 3(I) Stock Options, ISOs and non-qualified stock options are referred to collectively as the “Options”) and (v) shares of restricted stock under the 2003 Plan. Apart from issuance under the relevant tax regimes of the United States and the State of Israel, the 2003 Plan contemplates issuances to optionees in other jurisdictions with respect to which the Committee (as defined below) is empowered to make the requisite adjustments in the 2003 Plan and set forth the relevant conditions in the Company’s agreement with the optionee in order to comply with the requirements of the tax regimes in any such jurisdictions. For purposes of this 2003 Plan, “Subsidiary” shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of the granting of an Option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

For the avoidance of doubt, from January 1, 2003 and thereafter, all Options granted to employees and Office Holders (in Hebrew “Nosei Misra”, as such term is defined in the Israeli Companies Law – 1999 (“Office Holders”)) of the Company in Israel (not including “controlling persons” as such term is defined in the Ordinance) shall be New 102 Stock Options under the rules of New Section 102 and the regulations promulgated thereunder. “Controlling Persons” as such term is defined in the Ordinance may not be granted any New 102 Stock Options but may be granted any other options/stock under this Plan.

3. ADMINISTRATION OF 2003 PLAN

The Board or the Compensation Committee of the Company (the “Committee”) shall have the power to administer the 2003 Plan. Any member of such Committee shall be eligible to receive Options under the 2003 Plan while serving on the Committee. The Board or the Committee shall have full power and authority: (i) to designate participants; (ii) to designate Options or any portion thereof as ISOs; (iii) to determine the terms and provisions of respective option agreements (which need not be identical) including, but not limited to, the number of shares in the Company to be covered by each Option, provisions concerning the time or times when and the extent to which the options may be exercised and the nature and duration of restrictions as to transferability or restrictions constituting substantial risk of forfeiture; (iv) to accelerate the right of an optionee to exercise, in whole or in part, any previously granted Option or ISO; (v) to interpret the provisions and supervise the administration of the 2003 Plan; (vi) to determine any other matter which is necessary or desirable for, or incidental to administration of the 2003 Plan, and (vii) to decide which route - the capital gains (in Hebrew – “honi”) route or the work income (in Hebrew – “pairoti”) route or any other route available under the New Section 102 shall be adopted for the purpose of New 102 Stock Options.

The Board or the Committee shall have the authority to grant in its discretion to the holder of an outstanding Option, in exchange for the surrender and cancellation of such Option, a new Option (in the discretion of the Board or the Committee, the grant of the new Option and the surrender of the outstanding Option may, but need not, occur simultaneously) having a purchase price lower than provided in the Option so surrendered and canceled and containing such other terms and conditions as the Board or the Committee may prescribe in accordance with the provisions of the 2003 Plan.

The Board or the Committee may grant to any eligible person shares of Stock or a right to receive shares of Stock (or their cash equivalent or a combination of both) in the future. Each restricted stock award shall be evidenced by a restricted stock award agreement and shall be subject to such conditions, restrictions and contingencies (such as continuous service and/or the achievement of performance measures) as the Board or the Committee shall determine

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Except as otherwise provided herein, all decisions and selections made by the Board or the Committee pursuant to the provisions of the 2003 Plan shall be made by a majority of its members except that no member of the Board or Committee shall vote on, or be counted for quorum purposes, with respect to any proposed action of the Board or Committee relating to any Option to be granted to that member. Any decision reduced to writing and signed by a majority of the members who are authorized to make such decision shall be fully effective as if it had been made by a majority at a meeting duly held.

Each member of the Board or the Committee shall be indemnified and held harmless by the Company against any cost or expense (including counsel fees) reasonably incurred by him, or liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with the 2003 Plan unless arising out of such member’s own fraud or bad faith, to the extent permitted by applicable law. Such indemnification shall be in addition to any rights of indemnification the member may have as directors or otherwise under the articles of association of the Company, any agreement, any vote of stockholders or disinterested directors, or otherwise.

4. DESIGNATION OF PARTICIPANTS

The persons eligible for participation in the 2003 Plan as recipients of Options or restricted stock awards shall include any employees of the Company or of any Subsidiary of the Company. Directors of the Company or of any Subsidiary of the Company who are not employees of the Company or its Subsidiaries and, additionally, consultants or advisors of the Company or its Subsidiaries who provide bona fide services to the Company other than in connection with the offer or sale of securities in a capital-raising transaction shall also be eligible for participation in the 2003 Plan as recipients of Options (but not ISOs). New 102 Stock Options may be granted only to Israeli employees and Office Holders excluding a “controlling person” as such term is defined in the Ordinance. A person who has been granted an Option hereunder may be granted additional Options, if the Board or the Committee shall so determine. Options shall be granted pursuant to option agreements between the optionee and the Company.

5. TRUSTEE

The New 102 Stock Options which shall be granted to employees and Office Holders of the Company or, if required by law, shall be issued to a trustee nominated by the Board or the Committee (in accordance with the provisions of New Section 102) and approved by the tax authorities in accordance with the provisions of the Ordinance (the “Trustee”) and held for the benefit of the optionees for such period of time as is required by the Ordinance. The Trustee may also hold in trust any shares issued upon exercise of such New 102 Stock Options pursuant to the provisions of New Section 102.

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With respect to all Shares (in contrast to unexercised New 102 Stock Options) issued upon the exercise of New 102 Stock Options purchased by the optionee and held by the Trustee, the optionee shall be entitled to the voting rights in general meetings in accordance with the quantity of such shares.

6. SHARES RESERVED FOR 2003 PLAN

Subject to adjustment as provided in Paragraph 8 hereof, an initial number of 2,000,000 Ordinary Shares, NIS 0.01 par value per share, of the Company (“Shares”) shall be subject to the 2003 Plan. The Shares subject to the 2003 Plan hereby are reserved for sale for such purpose. Any of such Shares which may remain unsold and which are not subject to outstanding options at the termination of the 2003 Plan shall cease to be reserved for the purpose of the 2003 Plan, but until termination of the 2003 Plan the Company shall at all times reserve a sufficient number of shares to meet the requirements of the 2003 Plan. Should any Option for any reason expire or be canceled prior to its exercise or relinquishment in full, the shares theretofore subject to such Option may again be subjected to an Option under the 2003 Plan.

7. OPTION PRICE

(a) The purchase price of each Share subject to an Option or any portion thereof (which is not designated as an ISO) shall be determined by the Committee in its sole and absolute discretion in accordance with applicable law, subject to guidelines as shall be suggested by the Board from time to time. The purchase price of each Share subject to an ISO shall not be less than 100% (or 110% if at the time of grant the optionee (after taking into account the attribution rules set forth in Code Section 424(d)) owns more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary (a “10% shareholder”)) of the Fair Market Value of such Share on the date the ISO is granted. For these purposes, “Fair Market Value” shall be defined as the closing price as of the close of business for the Shares as reported by NASDAQ (if the Shares are then listed on NASDAQ) or other national quotation service, or if the Shares are registered on a national securities exchange, “Fair Market Value” shall mean the closing price of the Shares on such national securities exchange. If the Shares are not listed on a national securities exchange or NASDAQ, “Fair Market Value” shall mean the fair market value of the Shares as determined by the Board acting in good faith through any reasonable valuation method.

(b) The option price shall be payable upon the exercise of the Option in cash, by check, or other form satisfactory to the Board or the Committee.

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(c) The proceeds received by the Company from the sale of Shares subject to an Option granted under the 2003 Plan will be added to the general funds of the Company and used for its corporate purposes.

8. ADJUSTMENTS

Upon the occurrence of any of the following described events, an optionee’s rights to purchase Shares under the 2003 Plan shall be adjusted as hereinafter provided:

(a) If the Company is separated, reorganized, merged, consolidated or amalgamated with or into another corporation while unexercised Options remain outstanding under the 2003 Plan, there shall be substituted for the Shares subject to the unexercised portions of such outstanding Options an appropriate number of shares of each class of shares or other securities of the separated, reorganized, merged, consolidated or amalgamated corporation which were distributed to the shareholders of the Company in respect of such shares, and appropriate adjustments shall be made in the purchase price per share to reflect such action, in each case, except as otherwise determined by the Board or the Committee, in a manner intended to comply with the requirements of Code Section 424(a) and the regulations issued thereunder.

(b) If the Company is liquidated or dissolved while unexercised Options remain outstanding under the 2003 Plan, then all such outstanding Options may be exercised in full by the optionees as of the effective date of any such liquidation or dissolution of the Company without regard to the installment exercise provisions of Paragraph 9(b), by the optionees giving notice in writing to the Company of their intention to so exercise, and otherwise complying with the requirements of Paragraph 9(a).

(c) If the outstanding shares of the Company shall at anytime be changed or exchanged by declaration of a stock dividend, stock split, combination or exchange of shares, re-capitalization, or any other like event by or of the Company, and as often as the same shall occur, then the number, class and kind of Shares subject to this 2003 Plan or subject to any Options theretofore granted, and the option prices, shall be appropriately and equitably adjusted so as to maintain the proportionate number of Shares without changing the aggregate option price; provided, however, that no adjustment shall be made by reason of the distribution of subscription rights on outstanding stock. Upon the happening of any of the foregoing, the class and aggregate number of shares issuable pursuant to the 2003 Plan (as set forth in paragraph 6 hereof), in respect of which Options have not yet been exercised, shall be appropriately adjusted.

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(d) In the event of a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), the Committee may adjust Options to facilitate the transaction or to preserve the benefits or potential benefits of the Options. Action by the Committee may include adjustment of: (i) the number and kind of securities which may be delivered under the 2003 Plan, but only if and to the extent that such adjustment may be effected without shareholder approval of the 2003 Plan as so adjusted being required in order for Options issued after the adjustment to be eligible for qualification as incentive stock options under Code Section 422; (ii) the number and kind of securities subject to outstanding Options; (iii) the exercise price of outstanding Options; and (iv) acceleration of Options so that they vest prior to the transaction, with or without provision for the termination of Options not exercised prior to the transaction, as well as any other adjustments that the Committee determines to be equitable, including, without limitation, substitution of the securities of any other person for the securities of the Company.

9. TERM AND EXERCISE OF OPTIONS

(a) Options shall be exercised by the optionee by giving written notice to the Company, which exercise shall be effective upon receipt by the Secretary of the Company at its principal office of such notice along with payment for the number of Shares with respect to which the Option is being exercised. The notice shall specify the number of Shares with respect to which the Option is being exercised.

(b) Each Option granted under this 2003 Plan shall be exercisable on the date and for the number of shares as shall be provided in the option agreement evidencing the Option and setting forth the terms thereof. However, (i) no Option shall be exercisable after the expiration of ten years from the date of grant, and (ii) no ISO granted to a person who at the time of grant is a 10% shareholder may be exercisable after the expiration of five years from the date of grant.

(c) Options granted under the 2003 Plan shall not be transferable by optionees other than by will or the laws of descent and distribution, and during an optionee’s lifetime shall be exercisable only by that optionee.

(d) Options granted to employees, Office Holders or directors may not be exercised after the termination of employment and/or service as an Office Holder or director unless (i) prior to the date of such termination, the Board or the Committee shall authorize, in the relevant option agreement or otherwise, an extension of the term of all or part of the option beyond the date of such termination for a period not to exceed the period during which the Option by its terms would otherwise have been exercisable, or (ii) termination is without cause, in which event any options still in force and unexpired may be exercised within a period of 90 days from the date of such termination or such

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later date as is provided pursuant to clause (i) above, but only with respect to the number of shares purchasable at the time of such termination, or (iii) termination is the result of death or Disability, in which event any Options still in force and unexpired may be exercised within a period of six (6) months from the date of termination or such later date as is provided pursuant to clause (i) above, but only with respect to the number of shares purchasable at the time of such termination or (iv) termination of employment or service is the result of retirement under any deferred compensation agreement or retirement plan of the Company or of any Subsidiary of the Company or after age 60, in which event Options granted hereunder may be exercised while the Options are still in force and unexpired, in which case the Board or Committee shall have the discretion to permit any unmatured installments of the Options to be accelerated to the later of the date of retirement or a date one year following the date of grant, and the Options shall thereupon be exercisable in full, without regard to any installment exercise provisions in the option agreement. For purposes of this 2003 Plan, “Disability” shall mean “permanent and total disability” within the meaning of Section 22(e)(3) of the Code.

(e) The holders of Options shall not be or have any of the rights or privileges of shareholders of the Company in respect of any shares purchasable upon the exercise of any part of an Option unless and until, following exercise but subject always to the provisions of Section 5 above for New 102 Stock Options, certificates representing such shares shall have been issued by the Company and delivered to (or for the account of) such holders.

(f) Any form of option agreement authorized by the 2003 Plan may contain such other provisions not inconsistent with this 2003 Plan as the Board or the Committee may, from time to time, deem advisable. Without limiting the foregoing, the Board or the Committee may, with the consent of the optionee, from time to time cancel all or any portion of any Option then subject to exercise, and the Company’s obligation in respect of such Option may be discharged by (i) payment to the optionee of an amount in cash equal to the excess, if any, of the Fair Market Value of the shares at the date of such cancellation subject to the portion of the Option so canceled over the aggregate purchase price of such shares, (ii) the issuance or transfer to the optionee of Shares of the Company with a Fair Market Value at the date of such transfer equal to any such excess, or (iii) a combination of cash and shares with a combined value equal to any such excess, all as determined by the Board or the Committee in its sole discretion.

10. MAXIMUM ISO AWARD

In case of ISOs granted to a U.S. employee, the aggregate Fair Market Value of Shares (determined as of the date of the grant of the ISO’s) with respect to which ISO’s are exercisable for the first time by the applicable optionee during any calendar year shall not exceed the limitation provided under Section 422(d) of the Code.

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11. PURCHASE FOR INVESTMENT

Unless Shares covered by the 2003 Plan have been registered with the SEC on Form S-8 or any successor form, or the Company has determined that such registration is unnecessary, each person exercising an Option under the 2003 Plan may be required by the Company to give representations in writing that, among other things, he is acquiring such Shares for his own account, for investment and not with a view to, or for sale in connection with, the distribution of any part thereof.

12. TERM DATE OF 2003 PLAN

The 2003 Plan shall be effective as of February 4, 2003, and shall terminate on December 31, 2012.

13. AMENDMENTS OR TERMINATION

The Board may, at any time and from time to time, amend, alter, or discontinue the 2003 Plan, except that no amendment or alteration shall be made which would impair the rights of the holder of any Option theretofore granted without his consent, and except that no amendment or alteration shall be made without the approval of the shareholders if such approval is required under the then current rules and regulations of NASDAQ or which would increase the total number of shares reserved for the purposes of the 2003 Plan, except as is provided in Section 6, or change the class of persons eligible to participate in the 2003 Plan as provided in Section 4.

14. GOVERNMENT REGULATIONS

The 2003 Plan, and the granting and exercise of Options hereunder, and the obligation of the Company to sell and deliver shares under such Options, shall be subject to all applicable laws, rules, and regulations, whether of the State of Israel or of the United States or any other State having jurisdiction over the Company and the optionee including the registration of the shares under the United States Securities Act of 1933, and to such approvals by any governmental agencies or national securities exchanges as may be required.

15. CONTINUANCE OF EMPLOYMENT

Neither the 2003 Plan nor the option agreement with the optionee shall impose any obligation on the Company or a Subsidiary thereof, to continue any optionee in its employ or service, and nothing in the 2003 Plan or in any Option granted pursuant thereto shall confer upon any optionee any right to continue in the employ of the Company or a Subsidiary thereof or restrict the right of the Company or a Subsidiary thereof to terminate such employment at any time.

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16. GOVERNING LAW

This 2003 Plan shall be governed by and construed and enforced in accordance with the laws of the State of Israel applicable to contracts made and to be performed therein, without giving effect to the principles of conflict of laws; provided that, to the extent that the tax, securities or other laws of a jurisdiction other than Israel shall be applicable to the grant or exercise of an Option granted under the 2003 Plan, the 2003 Plan shall, to the extent necessary, be construed and enforced in accordance with the applicable laws of such other jurisdiction.

17. TAX CONSEQUENCES

Any tax consequences (other than with respect to the employer portion of any employment taxes) arising from the grant or exercise of any Option, from the payment for Shares issued upon exercise thereof or from any other event or act (of the Company, the Trustee or the optionee), hereunder, shall be borne solely by the optionee. The Company and/or the Trustee (if applicable) shall withhold taxes according to the requirements under the applicable laws, rules, and regulations, including the withholding of taxes at source. Furthermore, the optionee shall agree to indemnify the Company and the Trustee (if applicable) and hold them harmless against and from any and all liability for any such tax or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to the Optionee.

The Board, the Committee and the Trustee shall not be required to release any shares and/or stock certificate representing shares issued upon exercise of an Option granted to an Optionee until all required payments have been fully made.

18. NON-EXCLUSIVITY OF THE 2003 PLAN

The adoption of the 2003 Plan by the Board shall not be construed as amending, modifying or rescinding any previously approved incentive arrangement or as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under the 2003 Plan, and such arrangements may be either applicable generally or only in specific cases.

19. MULTIPLE AGREEMENTS

The terms of each Option may differ from other Options granted under the 2003 Plan at the same time, or at any other time. The Committee may also grant more than one Option to a given Optionee during the term of the 2003 Plan, either in addition to, or in substitution for, one or more Options previously granted to that optionee.

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