EXHIBIT 10.1

COMMTOUCH SOFTWARE LTD.

1996 CSI STOCK OPTION PLAN

COMMTOUCH SOFTWARE LTD.

1996 CSI STOCK OPTION PLAN

1. Purposes of the Plan. The purposes of this Plan are to attract and retain the best available personnel, to provide additional incentive to Employees and Consultants of the Company and its Subsidiary and to promote the success of the Company and the Subsidiary's business. Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant of an Option and subject to the applicable provisions of Section 422 of the Code and the regulations promulgated thereunder. Shares Purchase Rights may also be granted under the Plan. The Options and Shares Purchase Rights offered pursuant to the Plan are a matter of separate inducement and are not in lieu of salary or other compensation.

2. Definitions. As used herein, the following definitions shall apply:

(a) "Administrator" means the Board or any of its Committees appointed pursuant to Section 4 of the Plan, in its capacity as an administrator of the Plan.

(b) "Board" means the Board of Directors of the Company.

(c) "Code" means the Internal Revenue Code of 1986, as amended.

(d) "Committee" means a Committee appointed by the Board in accordance with Section 4 of the Plan.

(e) "Company" means CommTouch Software Ltd., an Israeli company.

(f) "Consultant" means any person who is not an Employee and who is engaged by the Company or the Subsidiary to render consulting or advisory services and is compensated for such services, and any Director of the Company or the Subsidiary whether compensated for such services or not. If the Company registers any class of any equity security pursuant to the Exchange Act, the term Consultant shall thereafter not include Directors who are not compensated for their services or are paid only a Director's fee.

(g) "Continuous Status as an Employee or Consultant" means that the employment or consulting relationship with the Company or the Subsidiary is not interrupted or terminated. Continuous Status as an Employee or Consultant shall not be considered interrupted in the case of (i) any leave of absence approved by the Company or the Subsidiary or (ii) transfers between locations of the Company or the Subsidiary or between the Subsidiary and the Company or any successor. A leave of absence shall include sick leave, military leave, or any other personal leave approved by an authorized representative of the Company or the Subsidiary, as applicable. For purposes of Incentive Stock Options, no such leave may exceed 90 days, unless reemployment upon expiration of such leave is guaranteed by statute or contract, including policies of the Company or the Subsidiary, as applicable. If reemployment upon expiration of a leave of absence approved by the Company or the Subsidiary is not so guaranteed, on the 181st day of such leave any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option.

(h) "CSI" means CommTouch Software, Inc., a California corporation.

(i) "Director" means a member of either of the boards of directors of the Company or the Subsidiary.

(j) "Employee" means any person, including Officers and Directors, employed by the Company or the Subsidiary. The payment of a Director's fee by the Company or the Subsidiary shall not be sufficient to constitute "employment."

(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended.

(l) "Fair Market Value" means, as of any date, the value of the Ordinary Shares determined as follows:

(i) If the Ordinary Shares are listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market of the National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination and reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(ii) If the Ordinary Shares are quoted on the NASDAQ System (but not on the Nasdaq National Market thereof) or regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for the Ordinary Shares on the last market trading day prior to the day of determination; or

(iii) In the absence of an established market for the Ordinary Shares, the Fair Market Value thereof shall be determined in good faith by the Administrator.

(m) "Incentive Stock Option" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

(n) "Nonstatutory Stock Option" means an option not intended to qualify as an Incentive Stock Option.

(o) "Officer" means a person who is an officer of the Company or the Subsidiary within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

(p) "Option" means a stock option granted pursuant to the Plan.

(q) "Optioned Stock" means the Ordinary Shares subject to an Option or a Shares Purchase Right.

(r) "Optionee" means an Employee or Consultant who receives an Option or Shares Purchase Right.

(s) "Ordinary Shares" means the Ordinary Shares of stock of the Company.

(t) "Plan" means the 1996 CSI Stock Option Plan.

(u) "Restricted Shares" means each of the Ordinary Shares acquired pursuant to a grant of a Shares Purchase Right under Section 11 below.

(v) "Section 16(b)" means Section 16(b) of the Exchange Act.

(w) "Shares Purchase Right" means a right to purchase Ordinary Shares pursuant to Section 11 below.

(x) "Subsidiary" means CommTouch Software, Inc., a California corporation, the Company's wholly-owned U.S. subsidiary.

3. Shares Subject to the Plan. Subject to the provisions of Section 13 of the Plan, the aggregate number of Ordinary Shares that may be subject to option and sold under this Plan is 5,000,000, unless amended by the shareholders of the Company. The Ordinary Shares may be authorized but unused, or reacquired Ordinary Shares.

If an Option or Shares Purchase Right expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an option exchange pursuant to Section 4(c)(viii) or otherwise, the unpurchased Ordinary Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated). However, Ordinary Shares that have actually been issued under the Plan, upon exercise of either an Option or Shares Purchase Right, shall not be returned to the Plan and shall not become available for future distribution under the Plan.

4. Administration of the Plan.

(a) Initial Plan Procedure. Prior to the date, if any, upon which the Company becomes subject to the Exchange Act, the Plan shall be administered by the Board or a Committee appointed by the Board.

(b) Plan Procedure After the Date, if any, upon which the Company becomes Subject to the Exchange Act.

(i) Multiple Administrative Bodies. If permitted by Rule 16b-3, the plan may be administered by different bodies with respect to Directors, Officers and Employees who are neither Directors nor Officers.

(ii) Administration With Respect to Directors and Officers. With respect to grants of Options and Shares Purchase Rights to Employees who are also Officers or Directors, the Plan shall be administered by (A) the Board if the Board may administer the Plan in compliance with applicable Israeli securities laws, the rules under Rule 16b-3 promulgated under the Exchange Act or any successor thereto ("Rule 16b-3") relating to the disinterested administration of employee benefit plans under which Section 16(b) exempt discretionary grants and awards of equity securities are to be made, or (B) a Committee designated by the Board to administer the Plan, which Committee shall be constituted to comply with the applicable laws of Israel, rules under Rule 16b-3 relating to the disinterested administration of employee benefit plans under which Section 16(b) exempt discretionary grants and awards of equity securities are to be made. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of the Committee and

appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by applicable laws of Israel, the rules under Rule 16b-3 relating to the disinterested administration of employee benefit plans under which Section 16(b) exempt discretionary grants and awards of equity securities are to be made.

(iii) Administration With Respect to Other Employees and Consultants. With respect to grants of Options and Shares Purchase Rights to Employees or Consultants who are neither Directors nor Officers, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which committee shall be constituted in such a manner as to satisfy the legal requirements relating to the administration of incentive stock option plans, if any, of the laws and regulations of Israel, of California laws and regulations, of the Code, and of any applicable stock exchange (collectively, the "Applicable Laws"). Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by the Applicable Laws.

(iv) Compliance with Section 162(m). If, at any time, awards made under the Plan shall be subject to Section 162(m) of the Code, the Plan shall be administered by a committee comprised solely of "outside directors" (within the meaning of Prop. Treas. Reg. Section 1.162-27(e)(3)) or such other persons as may be permitted from time to time under Section 162(m) of the Code and the Treasury Regulations promulgated thereunder.

(c) Powers of the Administrator. Subject to the provisions of the Plan and, in the case of a Committee, the specific duties delegated by the Board to such Committee, and subject to the approval of any relevant authorities, including the approval, if required, of any stock exchange upon which the Ordinary Shares are listed, the Administrator shall have the authority in its discretion:

(i) to determine the Fair Market Value of the Ordinary Shares, in accordance with Section 2(1) of the Plan;

(ii) to select the Consultants and Employees to whom Options and Shares Purchase Rights may from time to time be granted hereunder;

(iii) to determine whether and to what extent Options and Shares Purchase Rights or any combination thereof are granted hereunder;

(iv) to determine the number of Ordinary Shares to be covered by each such award granted hereunder;

(v) to approve forms of agreement for use under the Plan;

(vii) to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Ordinary Shares covered by such Option has declined since the date the Option was granted; and

(viii) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan.

(d) Effect of Administrator's Decision. All decisions, determinations and interpretations of the Administrator shall be final and binding on all Optionees and any other holders of any Options or Shares Purchase Rights.

5. Eligibility.

(a) Nonstatutory Stock Options and Shares Purchase Rights may be granted to Employees and Consultants. Incentive Stock Options may be granted only to Employees. An Employee or Consultant who has been granted an Option or Shares Purchase Right may, if otherwise eligible, be granted additional Options or Shares Purchase Rights.

(b) Each Option shall be designated in the written option agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Ordinary Shares with respect to which Incentive Stock Options are exercisable for the first time by any particular Optionee during any calendar year (under all plans of the Company and the Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Ordinary Shares shall be determined as of the time the Option with respect to such Ordinary Shares is granted.

(c) Neither the Plan nor any Option or Shares Purchase Right shall confer upon any Optionee any right with respect to continuation of his or her employment or consulting relationship with the Company or the Subsidiary, as applicable, nor shall it interfere in any way with his or her right or the Company or the Subsidiary's right to terminate his or her employment or consulting relationship at any time, with or without cause.

6. Term of Plan. The Plan shall become effective upon the earlier to occur of its adoption by the Board or its approval by the shareholders of the Company, as described in Section 18 of the Plan. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 14 of the Plan.

7. Term of Option. The term of each Option shall be the term stated in the option agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. In the case of an Incentive Stock Option granted to an Optionee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or the Subsidiary, the term of the Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the option agreement.

8. Option Exercise Price and Consideration.

(a) The per share exercise price for the Ordinary Shares to be issued upon exercise of any Option shall be such price as is determined by the Administrator, but shall be subject to the following:

(i) In the case of an Incentive Stock Option

(A) granted to an Employee who, at the time of grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or of the Subsidiary, the per share exercise price shall be no less than 110% of the Fair Market Value per Ordinary Share on the date of grant.

(B) granted to any other Employee, the per share exercise price shall be no less than 100% of the Fair Market Value per Ordinary Share on the date of grant.

(ii) In the case of a Nonstatutory Stock Option

(A) granted to a person who, at the time of grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or of the Subsidiary, the per share exercise price shall be no less than 110% of the Fair Market Value per Ordinary Share on the date of the grant.

(B) granted to any other person, the per share exercise price shall be no less than 85% of the Fair Market Value per Ordinary Share on the date of grant.

(b) The consideration to be paid for the Ordinary Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant). Such consideration may consist of (1) cash, (2) check, (3) promissory note (to the extent permitted by Applicable Laws) in the form attached hereto as Exhibit A, secured by a pledge of the shares issued pursuant to a share pledge in the form attached hereto as Exhibit B, or (4) any combination of the foregoing methods of payment. In making its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company. Optionee shall also deliver a properly executed exercise notice together with such other documentation as the Administrator and a broker, if applicable, shall require to effect an exercise of the Option.

9. Exercise of Option.

(a) Procedure for Exercise: Rights as a Shareholder. Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator, including performance criteria with respect to the Company and/or the Optionee, and as shall be permissible under the terms of the Plan, but in no case at a rate of less than 20% per year over five (5) years from the date the Option is granted.

An Option may not be exercised for a fraction of an Ordinary Share.

An Option shall be deemed to be exercised when written notice of such exercise in the form attached hereto as Exhibit C has been given to the Company in accordance with terms of the Option by the person entitled to exercise the Option and full payment for the Ordinary Shares with respect to which the Option is exercised has been received by the Company. Full payment may, as authorized by the

Administrator, consist of any consideration and method of payment allowable under Section 8(b) hereof. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Ordinary Shares, no right to vote, receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly upon exercise of the Option. No adjustment shall be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 13 hereof.

Exercise of an Option in any manner shall result in a decrease in the number of Ordinary Shares which thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Ordinary Shares as to which the Option is exercised.

(b) Termination of Employment or Consulting Relationship. In the event of termination of an Optionee's Continuous Status as an Employee or Consultant (but not in the event of an Optionee's change of status from Employee to Consultant (in which case an Employee's Incentive Stock Option shall automatically convert to a Nonstatutory Stock Option on the date three (3) months and one day following such change of status) or from Consultant to Employee), such Optionee may, but only within such period of time as is determined by the Administrator, of at least thirty (30) days, with such determination in the case of an Incentive Stock Option not exceeding three (3) months after the date of such termination (but in no event later than the expiration date of the term of such Option as set forth in the option agreement), exercise his or her Option to the extent that the Optionee was entitled to exercise it at the date of such termination. To the extent that the Optionee was not entitled to exercise the Option at the date of such termination, or if the Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate.

(c) Disability of Optionee. In the event of termination of an Optionee's Continuous Status as an Employee or Consultant as a result of his or her disability, the Optionee may, but, only within twelve (12) months from the date of such termination (and in no event later than the expiration date of the termination of such Option as set forth in the option agreement), exercise the Option to the extent otherwise entitled to exercise it at the date of such termination. However, in the event of termination of an Optionee's Continuous Status as an Employee or Consultant as a result of his or her "permanent disability" as such term is defined in Section 22(e)(3) of the Code, the Optionee shall be entitled, but only within twelve (12) months from the date of such termination (and in no event later than the expiration date of the term of such Option as set forth in the option agreement), to exercise all Options such Employee or Consultant would have been entitled to exercise had such Employee or Consultant remained employed for two (2) years from the date of such termination. If such disability is not a "permanent disability," in the case of an Incentive Stock Option such Incentive Stock Option shall automatically cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option on the day three months and one day following such termination. If the Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate, and the Ordinary Shares covered by such Option shall revert to the Plan.

(d) Death of Optionee. In the event of the death of an Optionee, the Optionee's estate or any person who acquired the right to exercise the Option by bequest or inheritance shall be entitled, but only within twelve (12) months from the date of such termination (and in no event later than the expiration date of the term of such Option as set forth in the option agreement), to exercise all Options such Employee or Consultant would have received had such Employee or Consultant remained employed for two (2) years from the date of such termination. All remaining Ordinary Shares covered by the unexercisable portion of

the Option shall immediately revert to the Plan. If, after the Optionee's death, the Optionee's estate or a person who acquires the right to exercise the Option by bequest or inheritance does not exercise the Option within the time specified herein, the Option shall terminate, and the Ordinary Shares covered by such Option shall revert to the Plan.

(e) Rule 16b-3. Options granted to a person subject to Section 16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such additional conditions or restrictions as may be required thereunder to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions.

10. Non-Transferability of Options and Shares Purchase Rights. Options and Shares Purchase Rights may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee.

11. Restricted Shares.

(a) Awards of Restricted Shares.

The Committee may, in its discretion, permit an Optionee to exercise an Option prior to the time the Option would otherwise be exercisable under Section 9. Without limiting the generality of the foregoing, the Committee may provide that if an Option is exercised prior to satisfaction of the vesting requirements of Section 9, the Shares issued upon such exercise shall remain subject to vesting as described in Section 11(c) and shall be subject to a right, but not an obligation, of repurchase by the Company with respect to all unvested Shares if the Optionee ceases to be an Employee for any reason.

(b) Restrictions.

(i) Restricted Shares may not be sold, assigned, transferred, pledged, encumbered, or otherwise disposed of, either voluntarily or involuntarily, until the release of such Shares from the Company's repurchase option under Section 11(c), other than by will or the laws of descent and distribution.

(ii) Optionees receiving Restricted Shares shall be entitled to dividend and voting rights for the Restricted Shares even though they are not vested, provided that such rights shall terminate immediately as to any Restricted Shares that are repurchased by the Company.

(iii) With respect to each receipt of Restricted Shares by an Optionee, such Optionee shall execute a Restricted Share Purchase Agreement in the form attached hereto as Exhibit D.

(c) Vesting.

If the Optionee ceases to be an Employee for any reason, the Company shall have the right, but not the obligation, to repurchase certain of the Shares at their original Exercise Price. The Company's right to repurchase the Shares at their original Exercise Price shall lapse, unless the stock option agreement provides otherwise, as to one-fourth (1/4) of the Shares at the end of the first year of continuous employment and as to one forty-eighth (1/48) of the Shares per month of continuous

employment over the next thirty-six (36) months. Shares that are subject to repurchase at their original Exercise Price are referred to as "Restricted Shares."

(d) Section 83(b) Election.

Within 30 days after the issuance of Restricted Shares to an Optionee under the Plan, the Optionee shall decide whether or not to file an election pursuant to Section 83(b) of the Code and Treasury Regulation section 1.83-2 (and state law counterparts) with respect to the Restricted Shares. If the Optionee does file such an election, the Optionee shall promptly furnish a copy of such election to the Company.

12. Shares Purchase Rights.

(a) Rights to Purchase. Shares Purchase Rights may be issued either alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Shares Purchase Rights under the Plan, it shall advise the offeree in writing of the terms, conditions and restrictions related to the offer, including the number of Ordinary Shares that such person shall be entitled to purchase, the price to be paid, and the time within which such person must accept such offer, which shall in no event exceed thirty (30) days from the date upon which the Administrator makes the determination to grant the Shares Purchase Right. The offer shall be accepted by execution of a Restricted Stock purchase agreement in the form determined by the Administrator.

(b) Other Provisions. The Restricted Stock purchase agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion. In addition, the provisions of Restricted Stock purchase agreements need not be the same with respect to each purchaser.

(c) Rights as a Shareholder. Once the Shares Purchase Right is exercised, the purchaser shall have rights equivalent to those of a shareholder of the Company and shall be a shareholder of the Company when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment shall be made for a dividend or other right for which the record date is prior to the date the Shares Purchase Right is exercised, except as provided in Section 13 of the Plan.

13. Adjustments Upon Changes in Capitalization or Merger.

(a) Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number of Ordinary Shares covered by each outstanding Option or Shares Purchase Right, and the number of Ordinary Shares which have been authorized for issuance under the Plan but as to which no Options or Shares Purchase Rights have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option or Shares Purchase Right, as well as the price for each Ordinary Share covered by each such outstanding Option or Shares Purchase Right, shall be proportionately adjusted for any increase or decrease in the number of issued Ordinary Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Ordinary Shares, or any other increase or decrease as determined by the Administrator. The conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no

adjustment by reason thereof shall be made with respect to, the number of Ordinary Shares subject to an Option or Shares Purchase Right.

(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify the Optionee at least fifteen (15) days prior to such proposed action. To the extent it has not been previously exercised, the Option or Shares Purchase Right shall terminate immediately prior to the consummation of such proposed action.

(c) Merger. In the event of a merger of the Company with or into another corporation, each outstanding Option or Shares Purchase Right may be assumed or an equivalent option or right may be substituted by such successor corporation or a parent or subsidiary of such successor corporation. If, in such event, an Option or Shares Purchase Right is not assumed or substituted, the Option or Stock Purchases Right shall terminate as of the date of the closing of the merger. For the purposes of this paragraph, the Option or Shares Purchase Right shall be considered assumed if, following the merger, the Option or Shares Purchase Right confers the right to purchase or receive, for each share of Optioned Stock subject to the Option or Shares Purchase Right immediately prior to the merger, the consideration (whether stock, cash, or other securities or property) received in the merger by holders of Ordinary Shares for each share held on the effective date of the transaction (and if the holders are offered a choice of consideration, the type of consideration received in the merger is not solely common stock of the successor corporation or its parent). The Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option or Shares Purchase Right, for each share of Optioned Stock subject to the Option or Shares Purchase Right, to be solely common stock of the successor corporation or its parent equal in fair market value to the per share consideration received by holders of Ordinary Shares in the merger.

(d) Compliance with Incentive Stock Option Provisions. Notwithstanding anything to the contrary herein, each adjustment made to an Incentive Stock Option pursuant to this Section 13 shall comply with the rules of Section 424(a) of the Code, and no adjustment shall be made that would cause any Incentive Stock Option to become a Nonstatutory Stock Option.

14. Time of Granting Options and Shares Purchase Rights. The date of grant of an Option or Shares Purchase Right shall, for all purposes, be the date on which the Administrator makes the determination granting such Option or Shares Purchase Right, or such other date as is determined by the Administrator. Notice of the determination shall be given to each Employee or Consultant to whom an Option or Shares Purchase Right is so granted within a reasonable time after the date of such grant.

15. Amendment and Termination of the Plan.

(a) Amendment and Termination. The Board may at any time amend, alter, suspend or discontinue the Plan, but no amendment, alteration, suspension or discontinuation shall be made which would impair the rights of any Optionee under any grant theretofore made, without his or her consent. In addition, to the extent necessary and desirable to comply with Rule 16b-3 under the Exchange Act or with Section 422 of the Code (or any other applicable law or regulation, including the requirements of the NASD or an established stock exchange), the Company shall obtain shareholder approval of any Plan amendment in such a manner and to such a degree as required.

(b) Effect of Amendment or Termination. Any such amendment or termination of the Plan shall not affect Options or Shares Purchase Rights already granted, and such Options and Shares Purchase Rights shall remain in full force and effect as if this Plan had not been amended or terminated,

unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company.

16. Conditions Upon Issuance of Ordinary Shares. Ordinary Shares shall not be issued pursuant to the exercise of an Option or Shares Purchase Right unless the exercise of such Option or Shares Purchase Right and the issuance and delivery of such Ordinary Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the laws of Israel, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Ordinary Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

As a condition to the exercise of an Option or Shares Purchase Right, the Company may require the person exercising such Option or Shares Purchase Right to represent and warrant at the time of any such exercise that the Ordinary Shares are being purchased only for investment and without any present intention to sell or distribute such Ordinary Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law.

17. Reservation of Ordinary Shares. During the term of this Plan, the Company shall at all times reserve and keep available such number of Ordinary Shares as shall be sufficient to satisfy the requirements of the Plan.

The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by Company counsel to be necessary to the lawful issuance and sale of any Ordinary Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Ordinary Shares as to which such requisite authority shall not have been obtained.

18. Agreements. Options and Shares Purchase Rights shall be evidenced by written agreements in such form as the Administrator shall approve from time to time.

19. Shareholder Approval. Continuance of the Plan shall be subject to approval by the shareholders of the Company within twelve (12) months before or after the date the Plan is adopted. Such shareholder approval shall be obtained in the degree and manner required under Applicable Laws.

20. Information to Optionees and Purchasers. The Company shall provide to each Optionee and to each individual who acquires Ordinary Shares pursuant to the Plan, not less frequently than annually during the period such Optionee has one or more Options or Shares Purchase Rights outstanding, and, in the case of an individual who acquires Ordinary Shares pursuant to the Plan, during the period such individual owns such Ordinary Shares, copies of annual financial statements. The Company shall not be required to provide such statements to key employees whose duties in connection with the Company assure their access to equivalent information.

Approved by the Board of Directors: January 1, 1996

Approved by the Shareholders: January 1, 1996

Amended by the Board of Directors: April 18, 1999

Amendment approved by the Shareholders: _________, 1999

COMMTOUCH SOFTWARE LTD.
1996 CSI STOCK OPTION PLAN

STOCK OPTION AGREEMENT

Capitalized terms used without definition in this Stock Option Agreement (the "OPTION AGREEMENT") shall have the meanings given such terms in the CommTouch Software Ltd. 1996 CSI Stock Option Plan (the "PLAN").

I.

Date of Grant:
                                                    --------------------

Exercise Price per Share:                           $
                                                    --------------------

Total Number of Ordinary Shares Granted:
                                                    --------------------

Total Exercise Price:                               $
                                                    --------------------

Type of Option:
                                                    --------------------

Expiration Date:                                                ,
                                                    ------------ -------

VESTING; TERMINATION. This Option will vest with respect to one fourth of the Ordinary Shares subject to the Option on the first anniversary of the Date of Grant, and with respect to an additional one thirty-sixth of the remaining Ordinary Shares subject to the Option each month thereafter, and will therefore be fully vested on __________ __, ____. This Option may be exercised, in whole or in part, with respect to any vested shares, on or before __________ __, ____.

II.

AGREEMENT

1. GRANT OF OPTION. CommTouch Software Ltd., an Israeli corporation
(the "COMPANY"), hereby grants to the Optionee (the "OPTIONEE") named in the Notice of Stock Option Grant set forth above (the "NOTICE OF GRANT") an option (the "OPTION") to purchase the total number of Ordinary Shares set forth in the Notice of Grant, at the exercise price per share set forth in the Notice of Grant (the "EXERCISE PRICE"), subject to the terms, definitions and provisions of the Plan, which is incorporated herein by reference. Capitalized terms used without definition in this Option Agreement shall have the meanings given such terms in the Plan.

2. EXERCISE OF OPTION.

(a) RIGHT TO EXERCISE. This Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and with the applicable provisions of the Plan and this Option Agreement.

(b) METHOD OF EXERCISE. This Option shall be exercisable by written notice (in the form attached hereto as Exhibit A), which shall state the election to exercise the Option, the number of Ordinary Shares with respect to which the Option is being exercised, and such other representations and agreements as to the Optionee's investment intent with respect to the Ordinary Shares as may be required by the Company pursuant to the provisions of the Plan. The written notice shall be signed by the Optionee and shall be delivered in person or by certified mail to the Company's Chief Financial Officer. The written notice shall be accompanied by payment of the Exercise Price. This Option shall be deemed to be exercised upon receipt by the Company of such written notice accompanied by the Exercise Price.

(c) COMPLIANCE WITH LAW. No Ordinary Shares will be issued pursuant to the exercise of any Option unless such issuance and such exercise shall comply with all relevant provisions of law and the requirements of any stock exchange upon which the Ordinary Shares may then be listed. Assuming such compliance, for income tax purposes the Ordinary Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such shares.

3. OPTIONEE'S REPRESENTATIONS. In the event the Ordinary Shares purchasable pursuant to the exercise of this Option have not been registered under the Securities Act of 1933, as amended, at the time this Option is exercised, Optionee shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B.

4. METHOD OF PAYMENT. Payment of the Exercise Price shall be by cash or check or by a combination thereof, at the election of the Optionee. In the event there is a public market for Ordinary Shares, Optionee shall also deliver a properly executed exercise notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option.

5. NON-TRANSFERABILITY OF OPTION; RIGHT OF REPURCHASE. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.

6. TERM OF OPTION. This Option may be exercised only in accordance with the terms set out in the Notice of Grant, and may be exercised prior to its expiration date only, in accordance with the Plan and the terms of this Option Agreement.

7. ENTIRE AGREEMENT; GOVERNING LAW. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company, the Subsidiary and the Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee's interest except by means of a writing signed by the Company and Optionee.

In case of conflict between the provisions in the Plan and this Option Agreement, the provisions in the Plan shall prevail. This Option Agreement is governed by California law except for that body of law pertaining to conflict of laws.

8. ACKNOWLEDGMENTS OF OPTIONEE.

(a) NO RIGHT OF EMPLOYMENT. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF ORDINARY SHARES PURSUANT TO THE OPTION IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL OF THE COMPANY OR THE SUBSIDIARY, AS THE CASE MAY BE (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING ORDINARY SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMMTOUCH SOFTWARE LTD. [19__] CSI STOCK OPTION PLAN THAT IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY OR THE SUBSIDIARY, NOR SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S OR THE SUBSIDIARY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.

(b) RECEIPT OF PLAN. Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Optionee further agrees to notify the Company upon any change in the residence address indicated below.

Date: __________, 19__

COMMTOUCH SOFTWARE LTD.

By: ___________________________________
Its: Chief Executive Officer

COMMTOUCH SOFTWARE LTD.
1996 CSI STOCK OPTION PLAN

STOCK OPTION AGREEMENT

Capitalized terms used without definition in this Stock Option Agreement (the "OPTION AGREEMENT") shall have the meanings given such terms in the CommTouch Software Ltd. 1996 CSI Stock Option Plan (the "PLAN").

I.

NOTICE OF STOCK OPTION GRANT

Name

OPTION. You have been granted an option to purchase ordinary shares (the "ORDINARY SHARES") of CommTouch Software Ltd., an Israeli corporation, subject to the terms and conditions of the Plan and this Option Agreement, as follows:

Total Exercise Price:                               $
                                                    --------------------

Type of Option:
                                                    --------------------

Expiration Date:                                                ,
                                                    ------------ -------

VESTING; TERMINATION. This Option will vest with respect to one fourth of the Ordinary Shares subject to the Option on the first anniversary of the Date of Grant, and with respect to an additional one thirty-sixth of the remaining Ordinary Shares subject to the Option each month thereafter, and will therefore be fully vested on __________ __, ____; provided, however, that if the Company (a) sells all or substantially all of its assets or (b) merges with another corporation and such merger results in the shareholders immediately prior to such transaction holding less than 50 percent of the voting power of the merged entity after the transaction (in either case, a "CHANGE OF CONTROL"), then 50 percent of the Optionee's unvested shares shall vest immediately prior to the effectiveness of the Change of Control and the remaining unvested shares shall vest on the earlier to occur of (i) any termination of the Optionee's employment other than voluntary termination which does not qualify as termination for "Good Reason," as defined in Exhibit A to this agreement or termination for "Cause," as defined in such Exhibit A or (ii) the one-year anniversary of the Change of Control. This Option may be exercised, in whole or in part, with respect to any vested shares, on or before __________ __, ____.

II.

AGREEMENT

1. GRANT OF OPTION. CommTouch Software Ltd., an Israeli corporation (the "COMPANY"), hereby grants to the Optionee (the "OPTIONEE") named in the Notice of Stock Option Grant set forth above (the "NOTICE OF GRANT") an option (the "OPTION") to purchase the total number of Ordinary Shares set forth in the Notice of Grant, at the exercise price per share set forth in the Notice of Grant (the "EXERCISE PRICE"), subject to the terms, definitions and provisions of the Plan, which is incorporated herein by reference. Capitalized terms used without definition in this Option Agreement shall have the meanings given such terms in the Plan.

2. EXERCISE OF OPTION.

(a) RIGHT TO EXERCISE. This Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and with the applicable provisions of the Plan and this Option Agreement.

(b) METHOD OF EXERCISE. This Option shall be exercisable by written notice (in the form attached hereto as Exhibit A), which shall state the election to exercise the Option, the number of Ordinary Shares with respect to which the Option is being exercised, and such other representations and agreements as to the Optionee's investment intent with respect to the Ordinary Shares as may be required by the Company pursuant to the provisions of the Plan. The written notice shall be signed by the Optionee and shall be delivered in person or by certified mail to the Company's Chief Financial Officer. The written notice shall be accompanied by payment of the Exercise Price. This Option shall be deemed to be exercised upon receipt by the Company of such written notice accompanied by the Exercise Price.

(c) COMPLIANCE WITH LAW. No Ordinary Shares will be issued pursuant to the exercise of any Option unless such issuance and such exercise shall comply with all relevant provisions of law and the requirements of any stock exchange upon which the Ordinary Shares may then be listed. Assuming such compliance, for income tax purposes the Ordinary Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such shares.

3. OPTIONEE'S REPRESENTATIONS. In the event the Ordinary Shares purchasable pursuant to the exercise of this Option have not been registered under the Securities Act of 1933, as amended, at the time this Option is exercised, Optionee shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B.

4. METHOD OF PAYMENT. Payment of the Exercise Price shall be by cash or check or by a combination thereof, at the election of the Optionee. In the event there is a public market for Ordinary Shares, Optionee shall also deliver a properly executed exercise notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option.

5. NON-TRANSFERABILITY OF OPTION; RIGHT OF REPURCHASE. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.

6. TERM OF OPTION. This Option may be exercised only in accordance with the terms set out in the Notice of Grant, and may be exercised prior to its expiration date only, in accordance with the Plan and the terms of this Option Agreement.

7. ENTIRE AGREEMENT; GOVERNING LAW. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company, the Subsidiary and the Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee's interest except by means of a writing signed by the Company and Optionee. In case of conflict between the provisions in the Plan and this Option Agreement, the provisions in the Plan shall prevail. This Option Agreement is governed by California law except for that body of law pertaining to conflict of laws.

8. ACKNOWLEDGMENTS OF OPTIONEE.

(a) NO RIGHT OF EMPLOYMENT. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF ORDINARY SHARES PURSUANT TO THE OPTION IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL OF THE COMPANY OR THE SUBSIDIARY, AS THE CASE MAY BE (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING ORDINARY SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMMTOUCH SOFTWARE LTD. [19__] CSI STOCK OPTION PLAN THAT IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY OR THE SUBSIDIARY, NOR SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S OR THE SUBSIDIARY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.

(b) RECEIPT OF PLAN. Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Optionee further agrees to notify the Company upon any change in the residence address indicated below.

Date: __________, 19__

COMMTOUCH SOFTWARE LTD.

By: ___________________________________
Its: Chief Executive Officer

COMMTOUCH SOFTWARE INC.

1996 STOCK OPTION PLAN

EXERCISE NOTICE

CommTouch Software Ltd.
c/o CommTouch Software Inc.
3945 Freedom Circle, Ste. 730
Santa Clara, CA 95054
Attention: Secretary

1. Exercise of Option. Effective as of today, ____________, the undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase _____ ordinary shares (the "Shares") of CommTouch Software Ltd. (the "Company") under and pursuant to the CommTouch Software Inc. 1996 Stock Option Plan (the "Plan") and the CommTouch Software Inc. Stock Option Agreement dated _____________ ( the "Stock Option Agreement") at a price of $___ per Share, or an aggregate price of $_________ (the "Exercise Price").

2. Representations of Optionee. Optionee acknowledges that Optionee has received, read and understood the Plan and the Stock Option Agreement and agrees to abide by and be bound by their terms and conditions.

3. Tax Consultation. Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionee's purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice.

4. Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.

5. Delivery of Payment. Optionee herewith delivers to the Company a
[check/promissory] in the amount of the Exercise Price for the Shares.

Submitted by:                                Accepted by:
OPTIONEE:                                    CommTouch Software Ltd.

                                             By:________________________________
___________________________________          Its:_______________________________

                       INVESTMENT REPRESENTATION STATEMENT

OPTIONEE        :

COMPANY         :     COMMTOUCH SOFTWARE LTD.

SECURITY        :     ORDINARY SHARES

AMOUNT          :

DATE :

In connection with the purchase of the above-listed Securities, the undersigned Optionee represents to the Company the following:

(a) Optionee is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Optionee is acquiring these Securities for investment and not with a view to, or for resale in connection with, any "distribution" thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act").

(b) Optionee acknowledges and understands that the Securities constitute "restricted securities" under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Optionee's representations as expressed herein. Optionee further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Optionee further acknowledges and understands that the Company is under no obligation to register the Securities. Optionee understands that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or exempt from registration.

(c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of "restricted securities" acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to the Optionee, the exercise will be exempt from registration under the Securities Act.

Unless an exemption from registration is otherwise available, the Securities may only be resold in certain limited circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than one year after the later of the date the Securities were sold by the Company or the date the Securities were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than two years, the satisfaction of certain of the conditions specified by Rule 144, including:
(1) the resale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Exchange Act); and, in the case of an affiliate, (2) the availability of certain public information about the Company, (3) the amount of Securities being sold during any three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely filing of a Form 144, if applicable.

Signature of Optionee:

Date: _________________

RESTRICTED SHARE PURCHASE AGREEMENT

This Restricted Share Purchase Agreement dated as of March 17, 1999 (the "Agreement") is entered into by and between CommTouch Software Ltd., a corporation formed under the laws of Israel (the "Company") whose executive offices are located at 10 Technology Avenue, Ein Vered, Israel, and _____________ ("Purchaser"), an employee of the Company, whose address is set forth below his signature at the end of this Agreement.

W I T N E S S E T H:

WHEREAS, Purchaser is an employee of the Company and the Company desires to provide Purchaser the opportunity to acquire share ownership in the Company; and

WHEREAS, the Company desires to issue and Purchaser desires to purchase Ordinary Shares of the Company as herein described, on the terms and conditions hereinafter set forth:

NOW, THEREFORE, it is agreed between the parties as follows:

1. (a) Purchaser hereby agrees to purchase from the Company and the Company agrees to sell and issue to Purchaser ______ Ordinary Shares of the Company, nominal value NIS 1.00 per share (the "Shares") for a purchase price of $______ per share, or an aggregate purchase price of $______________, payable by delivery at the Closing (as hereinafter defined) of Purchaser's Promissory Note in the form attached as Exhibit A and the Share Pledge and Security Agreement in the form attached as Exhibit B.

(b) The closing of the transactions contemplated hereby (the "Closing") shall occur at the offices of the Company, or at such other time and place as the parties may mutually agree upon in writing (the "Closing Date").

(c) At the Closing, Purchaser shall deliver the Promissory Note and the Share Pledge and Security Agreement to the Company and the Company shall issue and deliver to the Trustee (as hereinafter defined) a certificate or certificates for the Shares in the name of the Purchaser. In addition, the parties shall execute and deliver the items specified in Section 4(a) of this Agreement.

2. The Shares to be purchased by the Purchaser pursuant to this Agreement shall be subject to the following option (the "Purchase Option"):

(a) In the event the Purchaser ceases to be continuously employed by the Company, or a parent or subsidiary of the Company, for any reason, with or without cause, the Trustee may exercise the Purchase Option. Shares subject to the Purchase Option are hereinafter sometimes referred to as the "Option Shares." For the purpose of this Agreement, Purchaser's "continuous employment" shall cease when he ceases to be actively employed by the Company or a parent or subsidiary of the Company, as determined by and in the sole discretion

of the Board of Directors of the Company. A leave of absence, regardless of the reason therefor, shall be deemed to constitute the cessation of Purchaser's active employment unless such leave is authorized by the Company in writing upon approval of the Company's Board of Directors and Purchaser returns to work within the time specified in such authorization; provided, however, that if the Purchaser dies or becomes totally and permanently disabled during any such leave of absence, the Purchaser's continuous employment will be deemed to have terminated as of the date of his death or the date the Board of Directors determines him to be totally and permanently disabled.

(b) Purchaser understands that the Shares are being sold in order to induce Purchaser to become and/or remain employed by the Company and to work diligently for the continued success of the Company. Accordingly, the unvested portion of the Shares shall be subject to a right of repurchase by the Trustee. The Trustee shall have the right at any time within sixty (60) calendar days after the later of Purchaser's termination or the date any approved leave terminates (if Purchaser fails to return within the time specified) to purchase from the Purchaser at a price equal to the original purchase price of the Shares on the date of such termination or expiration of approved leave (such price hereinafter referred to as the "Option Price"), any Shares which have not become vested shares based on the following vesting schedule (as such vesting schedule may be modified pursuant to Section 2(c)):

The purchase price may be paid by the Trustee at its discretion in cash, check or wire transfer or by assumption of the unpaid balance of the Promissory Note, or by a combination of any of the foregoing.

(c) In the event of a Change of Control, as defined below, 50% of the then unvested Shares shall immediately vest and the remaining unvested Shares shall become fully vested on the earlier of (i) the date Purchaser's employment is terminated (A) by the Company (or any successor) without Cause, as defined below, or (B) by Purchaser for Good Reason (as defined below), or (ii) one year following the date of the Change of Control.

"Change of Control" shall mean (i) the acquisition of 50% or more of the outstanding shares of the Company pursuant to a lawful tender offer validly made by a third party, (ii) a merger, consolidation or other reorganization of the Company (other than reincorporation of the Company), if after giving effect to such merger, consolidation, or other reorganization of the Company, the shareholders of the Company immediately prior to such merger, consolidation, or other reorganization do not represent a majority in interest of the holders of voting securities (on a fully diluted basis) with the ordinary power to elect directors of the surviving entity after such merger, consolidation or other reorganization, or (iii) the sale of all or substantially all of the assets of the Company to a third party who is not an affiliate of the Company.

"Cause" shall mean (i) failure or refusal to perform a directive of the Chief Executive Officer that is consistent with Purchaser's duties and responsibilities, provided the Company provides Purchaser with written notice specifying the nature of such failure or refusal and the actions needed by Purchaser to cure the same and such failure or refusal is not cured within 30 days of receipt of such notice, (ii) Purchaser shall have been determined to be guilty of misconduct or be in material violation of his fiduciary obligations to the Company (provided that the Company provides to Purchaser written notice specifying the nature of such breach and actions needed to be taken by Purchaser to cure the same and such breach is not cured by Purchaser within 10 days of receipt of such notice), (iii) Purchaser performs his duties in a grossly negligent manner, or (iv) Purchaser is convicted of a crime that has a material adverse impact on (A) Purchaser's ability to perform his duties, (B) the Company, or (C) the Company's business.

"Good Reason" shall be deemed to exist if (i)(A) there is a material adverse change in Purchaser's position causing such position to be of significantly less stature or of significantly less responsibility, (B) there is a reduction of more than 20% of Purchaser's base compensation, or (C) Purchaser refuses to relocate to a facility or location that is more than 50 miles from the Company's current location, and (ii) within the 30 days immediately following such material change, reduction, or refusal Purchaser elects to terminate his employment voluntarily.

(d) If Purchaser's employment is terminated (i) by the Company without Cause, or (ii) by Purchaser for Good Reason, prior to the effective date of the initial public offering of the Company's Ordinary Shares under the Securities Act of 1933, then 50% of the then unvested shares shall immediately vest.

(e) Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a parent or subsidiary of the Company, to terminate Purchaser's engagement, for any reason, with or without cause.

3. The Purchase Option shall be exercised by written notice delivered or mailed as provided in Section 12 of this Agreement and as provided for and defined in Section 16 of the Joint Escrow Instructions attached as Exhibit C to this Agreement.

4. (a) As security for his faithful performance of the terms of this Agreement and to insure the availability for delivery of Purchaser's Option Shares upon exercise of the Purchase Option, Purchaser agrees to deliver to the Trustee named in the Joint Escrow Instructions, attached hereto as Exhibit C, the certificate or certificates evidencing the Option Shares and two Share Transfer Deeds duly executed (with date and number of shares in blank) in the form attached hereto as Exhibit D. Such documents are to be held by the Trustee and delivered by the Trustee pursuant to the Joint Escrow Instructions, which instructions shall also be delivered to the Trustee at the Closing hereunder.

(b) Within thirty (30) calendar days after payment in full of the Promissory Note, and within thirty (30) days after each June 30 and December 31 following the payment in full of the Promissory Note, if Purchaser so requests, the Trustee will deliver to Purchaser certificates representing as many of the Shares as are no longer subject to the Purchase Option (less such shares as have been previously delivered). Ninety (90) calendar days after cessation of Purchaser's continuous employment by the Company, the Company will direct the Trustee to deliver to Purchaser a certificate or certificates representing the number of shares of Option Shares not repurchased by the Trustee pursuant to exercise of the Purchase Option (less such shares as have been previously delivered).

5. If, from time to time during the term of the Purchase Option:

(a) there is any stock dividend or liquidating dividend of cash and/or property, stock split or other change in the character or amount of any of the outstanding securities of the Company, or

(b) there is any consolidation, merger or sale of all or substantially all, of the assets of the Company, then, in such event, any and all new, substituted or additional securities or other property to which Purchaser is entitled by reason of his ownership of the Option Shares shall be immediately subject to such Purchase Option and be included in the term "Option Shares" for all purposes of the Purchase Option with the same force and effect as the shares of Option Shares from time to time subject to the Purchase Option. While the total Option Price shall remain the same after each such event, the Option Price per Option Share upon exercise of the Purchase Option shall be appropriately adjusted as determined by the Board of Directors of the Company.

6. If the Trustee makes available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Shares to be repurchased in accordance with the provisions of Section 2 of this Agreement, then from and after such time the person from whom such shares are to be repurchased shall no longer have any rights as a holder of such shares (other than the right to receive payment of such consideration in accordance with this Agreement). Such shares shall be deemed to have been repurchased in accordance with the applicable provisions of this Agreement, whether or not the certificate(s) therefor have been delivered as required by this Agreement.

7. All certificates representing the Shares purchased under this Agreement shall, where applicable, have endorsed thereon legends in substantially the following form:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE

SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN OPTIONS TO PURCHASE SUCH SHARES SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND THE REGISTERED HOLDER. SUCH AGREEMENT GRANTS CERTAIN REPURCHASE RIGHTS UPON TERMINATION OF SERVICE WITH THE ISSUER. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE ISSUER AND WILL BE FURNISHED UPON WRITTEN REQUEST TO THE SECRETARY OF THE ISSUER BY THE HOLDER OF RECORD OF THE SHARES REPRESENTED BY THIS CERTIFICATE.

and any legend required to be placed thereon by the California Commissioner of Corporations and any applicable state securities law or Israeli securities law.

8. (a) This Agreement is made with Purchaser in reliance upon Purchaser's representation to the Company, which by his acceptance hereof he confirms, that the Shares which he will receive will be acquired for investment for an indefinite period for his own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and that he has no present intention of selling, granting participation in, or otherwise distributing the same, but subject, nevertheless, to any requirement of law that the disposition of his property shall at all times be within his control. By executing this Agreement, Purchaser further represents (i) that he does not have any contract, understanding or agreement with any person to sell, transfer or grant participations, to such person or to any third person, with respect to any of the Shares, (ii) that his current residence address is as set forth on the signature page hereto, and (iii) that all communications between the parties concerning the purchase and sale of the Shares have taken place within the State of California.

(b) Purchaser understands that the Shares will not be registered under the Securities Act on the ground that the sale provided for in this Agreement is exempt pursuant to Section 4(2) of the Securities Act, and that the Company's reliance on such exemption is predicated on his representations set forth herein.

(c) Purchaser agrees that in no event will he make a disposition of any of the Shares unless and until (a) he shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the circumstances surrounding the

proposed disposition, and (b) he shall have furnished the Company with an opinion of counsel satisfactory to the Company to the effect that (i) such disposition will not require registration of such Shares under the Securities Act, or (ii) that appropriate action necessary for compliance with the Securities Act has been taken, or (c) the Company shall have waived, expressly and in writing, its rights under clauses (a) and (b) of this Section 8.

(d) In connection with the investment representations made herein, Purchaser represents that he has heretofore discussed or had the opportunity to discuss the Company's plans, operations and financial condition with the Company's officers and has heretofore received all such information as he deems necessary and appropriate to enable him to evaluate the financial risks inherent in his investment. The Purchaser further represents that he has received satisfactory and complete information concerning the business and financial condition of the Company in response to all inquiries in respect thereof, and by reason of the Purchaser's business or financial experience or the business or financial experience of the Purchaser's professional advisors who are unaffiliated with and who are not compensated by the Company or any affiliate or selling agent of the Company, directly or indirectly, the Purchaser has the capacity to protect his own interest in connection with the transactions contemplated by this Agreement.

(e) Purchaser understands that if the Company does not register with the Securities and Exchange Commission pursuant to Section 12 of the Securities Exchange Act of 1934 (the "Exchange Act") or if a registration statement covering the Shares (or a filing pursuant to the exemption from registration under Regulation A of the Securities Act) under the Securities Act is not in effect when he desires to sell the Shares, he may be required to hold the Shares for an indeterminate period. Purchaser also acknowledges that he understands that any sale of the Shares which might be made by him in reliance upon Rule 144 under the Securities Act may be made only in limited amounts in accordance with the terms and conditions of that Rule 144.

9. The Company covenants and agrees that (a) at all times after it first becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act it will use its best efforts to comply with the current public information requirements of Rule 144(c)(1) under the Securities Act and that if prior to becoming subject to such reporting requirements an over-the-counter market develops for the Shares, it will make publicly available the information required by Rule 144(c)(2), (b) it will furnish Purchaser upon request with all information required for the preparation and filing of Form 144, and (c) it will on a timely basis use its best efforts to file all reports required to be filed and make all disclosures, including disclosures of material adverse information, required to permit Purchaser to make the required representations in Form 144.

10. Except as otherwise provided herein, Purchaser shall, during the term of this Agreement, be entitled to exercise all rights and privileges of a shareholder of the Company with respect to the Shares.

11. The parties agree to execute such further documents or agreements and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.

12. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon the earliest of personal delivery, actual receipt or the third full business day following deposit in the United States mail with postage and fees prepaid, addressed to the other party to this Agreement at such other party's address shown below his or her signature or at such other address as such party may designate by ten (10) calendar days' advance written notice to the other party to this Agreement.

13. This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer herein set forth, be binding upon Purchaser, his heirs, executors, administrators, successors and assigns. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of a like or different nature.

14. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

15. No modification of this Agreement shall be valid unless made in writing and signed by the parties to this Agreement.

16. This Agreement constitutes the entire agreement between the Company and the Purchaser regarding the purchase of the Shares. Any and all prior agreements and negotiations concerning the subject matter of this Agreement are merged herein. Should any part, term or provision of this Agreement be declared invalid, void or unenforceable, all remaining parts, terms and provisions of this Agreement shall remain in full force and effect and shall in no way be invalidated, impaired or affected thereby. Nothing in this Agreement, express or implied, is intended to confer on any person other than the parties to this Agreement or their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

COMMTOUCH SOFTWARE LTD.:                     PURCHASER:

By ________________________________          ___________________________________
Its _______________________________

Address:

EXHIBIT C

JOINT ESCROW INSTRUCTIONS

__________________, 1999

Dear Sir:

As Trustee for both CommTouch Software Ltd., a corporation formed under the laws of Israel (the "Company") and _____________ ("Purchaser"), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Restricted Share Purchase Agreement (the "Agreement") of even date herewith between the Company and Purchaser, to which a form of these Joint Escrow Instructions is attached as Exhibit C, in accordance with the following instructions:

1. In the event you shall elect to exercise the Purchase Option set forth in the Agreement, you shall give to Purchaser a written notice as provided in the Agreement. Purchaser hereby irrevocably authorizes and directs you to close the transaction contemplated by such notice, including prompt delivery of stock certificates.

2. At such closing, you are directed (a) to date the Share Transfer Deed or Deeds necessary for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver same, together with the certificate or certificates evidencing the shares to be transferred, to the Company against the simultaneous delivery by you to Purchaser of the purchase price (by certified or bank cashier's check or assumption of the Promissory Note) for the number of shares being purchased pursuant to the exercise of the Purchase Option.

3. Purchaser irrevocably authorizes the Company to deposit with you any certificates evidencing shares to be held by you hereunder and any additions and substitutions to said shares as defined in the Agreement. Purchaser does hereby irrevocably constitute and appoint you as his or her attorney-in-fact and agent for the term of this escrow to execute with respect to such securities all documents and documents or agreements necessary or appropriate to make such securities negotiable and to complete any transaction herein contemplated. Subject to the provisions of this Section 3, Purchaser shall be entitled to exercise all rights and privileges of a shareholder of the Company while the certificates representing the shares are held by you.

4. In accordance with the terms of Section 4 of the Agreement, you shall, upon request from time to time after the Promissory Note has been paid in full, deliver to

Purchaser a certificate or certificates representing so many shares as are no longer subject to the Purchase Option.

5. This escrow shall terminate upon the release of all shares held under the terms and provisions hereof.

6. If at the time of termination of this escrow you should have in your possession any documents, securities or other property belonging to Purchaser, you shall deliver all of same to Purchaser and shall be discharged from all further obligations hereunder.

7. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.

8. You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Trustee or as attorney-in-fact of Purchaser while acting in good faith and in the exercise of your own good judgment, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.

9. You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law, and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree of any court, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.

10. You shall not be liable in any respect on account of the identity, authority or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder.

11. You shall not be liable for the outlawing of any rights under any statute of limitations with respect to these Joint Escrow Instructions or any documents deposited with you.

12. You shall be entitled to employ such legal counsel and other experts as you may deem necessary to properly advise you in connection with your obligations hereunder and you may rely upon the advice of such counsel.

13. Your responsibilities as Trustee hereunder shall terminate if you resign by written notice to each party. In the event of any such termination, the Company shall appoint another person as successor Trustee.

14. If you reasonably require other or further documents or agreements in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such documents or agreements.

15. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such dispute shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment or a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.

16. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties entitled at the following addresses, or at such other addresses as a party may designate by ten
(10) calendar days' advance written notice to each of the other parties hereto.

COMPANY:                     CommTouch Software Ltd.
                             10 Technology Avenue
                             Ein Vered, Israel

PURCHASER:                   Notices to Purchaser shall be sent to the address
                             set forth below Purchaser's signature on these
                             Joint Escrow Instructions.

TRUSTEE:                     ________________________
                             ________________________

               17. By signing these Joint Escrow Instructions, you become a

party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement.

18. This Agreement shall be governed by and construed in accordance with the laws of the State of California and the laws of Israel.

19. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

Very truly yours,

COMMTOUCH SOFTWARE LTD.

By ________________________________
Its ____________________________

PURCHASER

Address:

TRUSTEE

EXHIBIT D

SHARE TRANSFER DEED

The undersigned, __________________ (the "Transferor"), in consideration of the sum of NIS _____ paid to the Transferor by ________________ (the "Transferee"), does hereby transfer to the Transferee ____ Ordinary Shares, nominal value NIS 1 per share, in COMMTOUCH SOFTWARE LTD., an Israeli company (the "Company"), to be held unto the said Transferee, his executors, administrators, heirs and assigns, upon all of the terms and conditions subject to which the Transferor held such shares, and the said Transferee does hereby agree to take such shares subject to the above terms and conditions.

AS WITNESS our hand the ___ day of __________________.

___________________                 TRANSFEREE

____________________         By:  __________________

Witness to signature:        Witness to signature:

____________________         ______________________

CONSENT OF SPOUSE
OF PURCHASER OF ORDINARY SHARES OF
COMMTOUCH SOFTWARE LTD.

The undersigned, as spouse to the Purchaser of shares of COMMTOUCH SOFTWARE LTD., hereby acknowledges that she has read and reviewed the terms of the Restricted Share Purchase Agreement between COMMTOUCH SOFTWARE LTD. and the Purchaser and hereby agrees to be bound by the terms and conditions thereof, as if the undersigned had executed said Agreement as an original party thereto.

Dated: _______________, 1999

Name (please print): ___________________

Internal Revenue Service Center                     Election Under Section 83(b)
Fresno, CA  93888                                   of the Internal Revenue Code
                                                    of 1986

Gentlemen:

I hereby elect under section 83(b) of the Internal Revenue Code of 1986 to include in gross income any excess of fair market value over purchase price with respect to the transfer of the property described below:

1. Name:

2. Address:

3. Social Security Number: ____________________

4. Tax Year of Election: Calendar year of 1999.

5. Description of Property: __________ Ordinary Shares of CommTouch Software Ltd., a corporation formed under the laws of Israel.

6. Date of Property Transfer:

7. Nature of Property Restrictions: Property is subject to a declining right to repurchase the stock at the undersigned's original purchase price if the undersigned ceases to be employed with CommTouch Software Ltd., which right will lapse over a 48-month period.

8. Fair Market Value at the Time of Transfer: $______ per share for an aggregate of $__________. The Fair Market Value at the time of transfer was determined without regard to any lapse restrictions as defined in section 1.83-3(i) of the Income Tax Regulations.

9. Amount Paid for Property: $_____ per share for an aggregate of $_________.

10. A copy of this election has been furnished to CommTouch Software Ltd., the person for whom the services are performed.

____________________, 1999 ____________________________

SHARE PLEDGE AND SECURITY AGREEMENT

THIS SHARE PLEDGE AND SECURITY AGREEMENT (the "Agreement"), dated as of _______________, is made by and between ________________ ledgor") and CommTouch Software Ltd., a corporation formed under the laws of Israel ("Secured Party").

R E C I T A L S

A. Pledgor is the owner of _____ shares of common stock of Secured Party (the "Pledged Shares").

B. As security for the "Obligations" described in Section 2 below, Pledgor has agreed to make the pledge contemplated by this Agreement.

IT IS AGREED:

1. PLEDGE. Pledgor hereby pledges and delivers to _________________ ("Trustee") on behalf of Secured Party, and grants to Secured Party a security interest in, all of the following (the "Pledged Collateral"):

(a) The Pledged Shares and the certificates representing the Pledged Shares, and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares; and

(b) All additional shares of stock or other securities of Secured Party from time to time acquired by Pledgor in connection with any stock split, stock dividend or other distribution or exchange in respect of any shares of stock pledged hereunder, and the certificates representing such additional shares or other securities, and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares.

The inclusion of proceeds in this Agreement does not authorize Pledgor to sell, dispose of or otherwise use the Pledged Collateral in any manner not specifically authorized hereby.

2. SECURITY FOR OBLIGATIONS. This Agreement secures the payment and performance of (i) all indebtedness evidenced by, and all liabilities and obligations of Pledgor to Secured Party under, that certain Promissory Note executed by Pledgor dated March 17, 1999, in favor of Secured Party (the "Note"), and all modifications, renewals, extensions and rearrangements thereof and substitutions and replacements therefor, and (ii) all indebtedness, liabilities and obligations of Pledgor now or hereafter existing under this Agreement (all of the foregoing collectively the "Obligations").

3. DELIVERY OF PLEDGED COLLATERAL. All certificates representing the Pledged Collateral, accompanied by instruments of transfer or assignment duly executed in blank by Pledgor, have been delivered to the Trustee and shall be held on behalf of Secured Party pursuant hereto, all in form and substance satisfactory to Secured Party. Upon the occurrence and during the continuation of an event which, with the giving of notice or the lapse of time, or both, would become an Event of Default (as defined in Section 7 hereof), Secured Party shall have the right,

in its discretion and without notice to Pledgor, to direct the Trustee to transfer to or to register in its name or the name of a nominee any or all of the Pledged Collateral, subject only to the revocable rights specified in
Section 5(a) hereof. In addition, Secured Party shall have the right at any time to exchange certificates representing the Pledged Collateral in the Trustee's possession for certificates of smaller or larger denominations.

4. REPRESENTATIONS AND WARRANTIES. Pledgor represents and warrants as follows:

(a) Pledgor is a resident of the State of California and has full power and authority to enter into and perform all of his obligations under this Agreement.

(b) The execution, delivery and performance by Pledgor of this Agreement does not violate any provision of any statute, law, rule, regulation, judgment, order or decree binding upon Pledgor and will not conflict with, or constitute a breach or default under, any indenture, loan agreement, contract or other agreement or instrument to which Pledgor is a party or by which Pledgor or any of his property is bound.

(c) No authorization, consent or approval or other action by, and no notice to or other filing with, any governmental authority or regulatory body is required either (i) for the execution and delivery by Pledgor of this Agreement, the pledge by Pledgor of the Pledged Collateral pursuant hereto or the performance by Pledgor of any of his obligations hereunder, or (ii) for the exercise by Secured Party of the voting or other rights provided for in this Agreement or the remedies in respect of the Pledged Collateral pursuant hereto (except as may be required in connection with such disposition by laws affecting the offering and sale of securities generally).

(d) Pledgor is, and in the case of any Pledged Collateral other than the Pledged Shares will be, the legal and beneficial owner of the Pledged Collateral free and clear of any lien, security interest, option, charge or encumbrance, except for the security interest created by this Agreement.

(e) The pledge of the Pledged Shares creates a valid and perfected first priority security interest in the Pledged Collateral, securing payment of the Obligations.

5. VOTING RIGHTS; DIVIDENDS; ETC.

(a) So long as no Event of Default or event which, with the giving of notice or the lapse of time, or both, would become an Event of Default shall have occurred and be continuing:

(i) Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement or any document, agreement or instrument entered into in connection with the Note.

(ii) Pledgor shall be entitled to receive and retain any and all cash dividends paid in respect of the Pledged Collateral; provided, however, that all other dividends and stock, property or otherwise, including dividends representing stock or

liquidating dividends, or a distribution or return of capital upon or in respect of the Pledged Collateral, or any part thereof, or resulting from a split-up revision or reclassification of the Pledged Shares or any part thereof, or received in exchange for the Pledged Shares or any part thereof as a result of a merger, consolidation or otherwise, shall be paid, delivered and transferred directly to Secured Party immediately upon receipt thereof by Pledgor, or, if received by Secured Party, shall be retained by Secured Party as part of the Pledged Shares.

(b) Upon the occurrence and during the continuation of an event which, with the giving of notice or the lapse of time, or both, would become an Event of Default:

(i) All rights of Pledgor to exercise the voting and other consensual rights which he would otherwise be entitled to exercise pursuant to Section 5(a)(i) shall cease, and all such rights shall thereupon become vested in Secured Party who shall thereupon have the sole right to exercise such voting and other consensual rights.

(ii) Secured Party shall be entitled to receive and retain any and all cash dividends paid in respect of the Pledged Collateral until the Obligations shall have been paid and performed in full.

(iii) All dividends and other distributions which are received by Pledgor contrary to the provisions of this Agreement shall be received in trust for the benefit of Secured Party, shall be segregated from other funds of Pledgor and shall be forthwith paid over to Secured Party as payment in respect of the Obligations (with any necessary endorsements).

6. TRANSFERS AND OTHER LIENS; ADDITIONAL SHARES.

(a) Pledgor agrees that he will not (i) sell or otherwise dispose of, or grant any option with respect to, any of the Pledged Collateral, or (ii) create or permit to exist any lien, security interest or other charge or encumbrance upon or with respect to any of the Pledged Collateral, except for the security interest created by this Agreement.

(b) Pledgor agrees that he will pledge hereunder, immediately upon his acquisition (directly or indirectly) thereof, any and all additional shares of stock or other securities he may acquire in connection with any stock split, stock dividend or other distribution or exchange in respect of any shares of stock or other securities pledged hereunder.

7. EVENTS OF DEFAULT. Pledgor shall be in default under this Agreement upon the happening of any of the following events (each an "Event of Default"):

(a) Pledgor fails to pay or perform when due any of the Obligations;

(b) Any representation or warranty made by Pledgor in connection with this Agreement proves to be false in any material respect when made;

(c) Pledgor makes an assignment for the benefit of creditors, admits in writing his inability to pay his debts as they mature, applies to any court for the appointment of a trustee

or receiver of any substantial part of his properties, or commences any voluntary proceedings under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution, liquidation or other similar law of any jurisdiction; or

(d) Any such application or any such proceedings described in (c) above are filed or commenced against Pledgor and Pledgor indicates his approval, consent of acquiescence thereto, or an order is entered adjudicating Pledgor bankrupt or insolvent and such order remains in effect for thirty (30) days.

8. RIGHTS AND REMEDIES UPON DEFAULT. If any Event of Default shall have occurred:

(a) Secured Party shall have, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code (the "Code") in effect in the State of California at that time, and Secured Party may also, without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more private sales, at any of Secured Party's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as Secured Party may deem commercially reasonable. Secured Party is authorized at any such sale, if Secured Party deems it advisable, to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing for their own account and not with a view to the distribution or sale of any such Pledged Collateral. Each purchaser at any such sale shall hold the Pledged Collateral acquired at such sale absolutely free from any claim or right of any kind, including any equity or right of redemption of Pledgor, and Pledgor hereby expressly waives all rights of redemption, stay or appraisement which he has or may have under any rule, law or statute now or hereafter existing. Pledgor agrees that, to the extent notice of sale shall be required by law, at least five (5) days' notice to Pledgor of the time after which any private sale is to be made shall constitute reasonable notification. Secured Party shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. Secured Party may adjourn any private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Secured Party may, instead of exercising the powers of sale provided for herein and under the Code, proceed by a suit or suits, at law or in equity, to foreclose the pledge of this Agreement and sell the Pledged Collateral, or any portion thereof, under a judgment or decree of any court or courts of competent jurisdiction.

(b) Any cash held by Secured Party as Pledged Collateral and all cash proceeds received by Secured Party in respect of any sale of, collection from or other realization upon all or any part of the Pledged Collateral may, in the discretion of Secured Party, be held by Secured Party as collateral for, and/or then or at any time thereafter applied in whole or in part by Secured Party against, the Obligations in such order as Secured Party shall elect. Any surplus of such cash or cash proceeds held by Secured Party and remaining after payment in full of the Obligations shall be paid over to Pledgor or to whomsoever may be lawfully entitled to receive such surplus.

(c) All rights and remedies of Secured Party expressed herein are in addition to all other rights and remedies possessed by Secured Party in any other agreement or instrument entered into in connection with or relating to the Obligation or by law.

(d) Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable to the seller than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall, to the extent permitted by law, be deemed to have been made in a commercially reasonable manner.

(e) Pledgor further agrees that a breach of any of the covenants contained in this Section will cause irreparable injury to Secured Party, and that Secured Party has no adequate remedy at law in respect of any such breach and, as a consequence, agrees that each and every covenant contained in this
Section shall be specifically enforceable against Pledgor, and Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred.

9. CONTINUING PLEDGE. This Agreement shall create a continuing security interest in the Pledged Collateral and shall (i) remain in full force and effect until payment in full of the Obligations, (ii) be binding upon Pledgor and his successors and assigns, and (iii) inure to the benefit of Secured Party and its successors, transferees and assigns. Without limiting the generality of the foregoing clause (iii), Secured Party may assign or otherwise transfer any of its rights under this Agreement to any other person, and such person shall thereupon become vested with all the benefits in respect thereof granted to Secured Party herein or otherwise. Upon payment in full of the Obligations, Pledgor shall be entitled to the return, at Pledgor's expense, of such of the Pledged Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof.

10. FURTHER ASSURANCES. Pledgor agrees that he will, at his own expense, promptly execute, acknowledge and deliver all such documents and instruments, and take all such actions, as the Secured Party may from time to time request in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Secured Party to exercise and enforce its rights and remedies hereunder and otherwise to effectuate the purposes of this Agreement and carry out the terms hereof.

11. WAIVERS; REMEDIES CUMULATIVE. No failure on the part of Secured Party to exercise, and no delay in exercising, any right or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right or remedy hereunder by Secured Party preclude any other or further exercise thereof or the exercise of any other right or remedy. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

12. NOTICES. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be delivered by hand or mailed by first class mail, registered or certified, return receipt requested, postage prepaid, and properly addressed, to the party at the addresses set forth below.

(a) If to Pledgor:

(b) If to Secured Party at:

CommTouch Software Ltd.

10 Technology Avenue
Ein Vered, Israel

All such notices, requests, demands and other communications shall be effective only upon receipt. Any party may change its address for notice given in accordance with this Section 12.

13. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts made and to be performed in the State of California, except to the extent that the validity or perfection of the security interest hereunder, or remedies hereunder, in respect of any particular Pledged Collateral are governed by the laws of a jurisdiction other than the State of California. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. This Agreement shall be given a fair and reasonable construction in accordance with the intention of the parties and without regard to, or aid of, Section 1654 of the California Civil Code.

14. MISCELLANEOUS. Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated, except by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. The captions in this Agreement have been inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.

IN WITNESS WHEREOF, the parties have executed this Stock Pledge and Security Agreement as of the date first above written.

PLEDGOR:                                     SECURED PARTY:

___________________________________          CommTouch Software Ltd.

                                             By:________________________________

                                             Its:_______________________________

Exhibit A

PROMISSORY NOTE

$__________ ________, 19__

FOR VALUE RECEIVED, the undersigned, _______________ ("Debtor"), promises to pay to CommTouch Software Ltd., a corporation formed under the laws of Israel ("Holder"), the principal amount of $_________, together with accrued interest thereon calculated from time to time at the rate of [the applicable federal rate as determined under Section 1274 of the Internal Revenue Code] per annum, compounded annually. Accrued interest shall be paid on December 31 of each year beginning with the year in which this Note is executed. Principal and any unpaid interest shall be due and payable on the fourth anniversary of the date of this Note.

Notwithstanding anything to the contrary set forth in this note,
(i) in the event of the termination of Debtor's employment with Holder for any reason, Holder, at its option, may declare a portion of the principal balance of this Note, plus accrued interest on such portion of the principal balance, to be immediately due and payable in full, such portion of the principal to be equal to the number of Holder's vested Ordinary Shares which have been paid for by this Note, multiplied by the price per share paid by Debtor for such shares; or
(ii) in the event that Debtor sells any of Holder's Ordinary Shares, which have been paid for by this Note, Holder, at its option, may declare the principal and accrued interest then outstanding to be immediately due and payable to the extent of the cash and fair market value of any property received by Debtor in such sale.

Debtor may at any time prepay all or any portion of the amounts owing hereunder.

If any of the following events (each an "Event of Default") shall occur and be continuing, then Holder may, at its option and without notice to Debtor or any other person, declare the outstanding principal balance of this note, together with any accrued interest and/or other sums that Debtor may owe to Holder under or in connection with this note, immediately due and payable and, if Holder exercises such option, Holder shall so advise Debtor in writing and Debtor shall pay all such sums owed:

(i) Debtor fails to pay when due any principal, interest or other amounts owing hereunder;

(ii) Any representation or warranty made by Debtor in any agreement, document or instrument delivered in connection with this note or the indebtedness evidenced hereby proves to be false in any material respect when made;

(iii) Debtor violates any other covenant, agreement or condition contained in any agreement, document or instrument executed in connection with or given as security for this note, and such violation shall continue for a period of 15 days after notice of such violation is given by Holder to Debtor;

(iv) Debtor makes an assignment for the benefit of creditors;

(v) Debtor admits in writing his inability to pay his debts as they mature, applies to any tribunal for the appointment of a trustee or receiver of any substantial part of his assets, or

commences any proceedings with respect to himself under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, liquidation or other similar law of any jurisdiction; or

(vi) Any such application or any such proceedings described in
(v) above are filed or commenced against Debtor, and Debtor indicates his approval, consent or acquiescence, or an order is entered adjudicating Debtor bankrupt or insolvent, or approving the application or petition in any such proceedings, and such order remains in effect for 30 days.

Debtor hereby waives grace (except as expressly provided herein), demand, presentment for payment, notice of demand, notice of nonpayment or dishonor, protest and notice of protest and shall pay all costs of collection when incurred, including without limitation, reasonable attorneys' fees, costs and other expenses. Neither any failure to exercise, nor any delay in exercising, any right under this note on the part of Holder shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this note preclude any other or further exercise thereof or the exercise of any other right. No waiver or amendment of this note shall be effective unless made in a writing, specifying such waiver or amendment signed by the party hereto against which such waiver or amendment is being enforced.

All payments shall be in lawful money of the United States of America. Holder shall be entitled to set off any amounts owed by Holder to Debtor against any payments due and payable from Debtor to Holder. The rights and duties of the parties hereunder shall be interpreted and construed pursuant to and in accordance with the laws of the State of California.

This note is secured by a Share Pledge and Security Agreement of even date herewith by and between Debtor and Holder.

EXHIBIT 10.2

SHARE OPTION AGREEMENT

This SHARE OPTION AGREEMENT (the "Agreement") is between COMMTOUCH SOFTWARE LTD., an Israeli company (the "Company"), and the Grantee whose name appears on the attached Schedule (the "Grantee").

In order to provide an incentive to the Grantee to exert his or her utmost efforts on behalf of the Company, the Grantee has been awarded one or more Options on the terms and conditions set forth in this Agreement and in the attached Schedule, which forms an integral part of this Agreement. For purposes of United States taxation, if applicable, it is intended that the Options constitute "Non-Qualified Share Options" that are not "Incentive Stock Options" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended.

SECTION 1 OPTIONS

The Grantee is hereby granted Options to purchase the number of Ordinary Shares, nominal value NIS 1 per share, of the Company (the "Shares") specified in the Schedule. The Options are exercisable at the exercise price per Share as determined by the company from time to time.

SECTION 2 EXERCISE OF RIGHTS

2.1 Times when Shares can be Purchased

Subject to the terms and conditions of this Agreement, the Options will become exercisable at such times, and shall remain exercisable for such periods, as are specified in the Schedule. Without derogating from the provisions of Section 3 of this Agreement, if any Option has not been exercised and the Shares covered thereby not paid for by the expiration date specified in the Schedule, such Option and the right to acquire such Shares shall terminate, and all interests and rights of the Grantee in and to the same shall ipso facto expire. Notwithstanding any provision of this Agreement or the Schedule to the contrary, upon any change of control of the Company one-half of all unvested Options then held by the Grantee shall immediately vest and become exercisable, with the remaining unvested Options to be subject to the regular vesting provisions of the Schedule. For purposes of this Section 2.1, a "change of control" shall mean the sale or other disposition of a majority of the outstanding Shares or a sale or other disposition of a majority of the Company's assets, within any 18-month period.

2.2 Notice

If the Grantee of an Option wishes to exercise any of the Grantee's rights, the Grantee must give notice of exercise to the Company at the Company's principal office. The Grantee must give the notice in writing, in form satisfactory to the Company, in respect of a whole number of Shares. The Grantee must include with the notice full payment for any Shares being purchased and any taxes and other mandatory payments due under Section 2.3 hereof.

2.3 Payment

2.3.1 Payment of the option price for any Shares being purchased under an Option, as specified in the Schedule, must be made in cash or by bank check, or in such other manner as the Company determines.

2.3.2 The Grantee cannot buy any Shares under an Option unless, at the time the Grantee gives notice of exercise to the Company, the Grantee includes with such notice payment in cash or by bank check of all withholding taxes due, and any other mandatory payments, if any, on account of his or her buying Shares under the Option or gives other assurance satisfactory to the Company of the payment of those withholding taxes.

2.4 Certificates for Shares

2.4.1 The Company shall deliver certificates for Shares bought under an Option as soon as practicable after receiving payment for the Shares and for any taxes under Section 2.3 hereof, and all documents required under this Agreement. The certificates will be made out in the name of the Grantee.

2.4.2 If any law, regulation or interpretation requires the Company to take any action regarding the Shares before the Company issues certificates for the Shares being purchased, the Company may delay delivering the certificates for the Shares for the period necessary to take that action.

SECTION 3 TERMINATION OF EMPLOYMENT

3.1 In General

Subject to the provisions of Section 3.2 hereof, if a Grantee should, for any reason, cease to be employed by the Company on a full-time basis, all of his or her rights, if any, in respect of all Options previously granted to him or her under this Agreement that are not exercisable then or within two weeks after such cessation of employment shall ipso facto terminate; all of his or her rights in respect of such Options that are exercisable then or within two weeks after such cessation of employment on a full-time basis, but which are not exercised within two weeks after such cessation of employment on a full-time basis, shall terminate upon the expiration of such two-week period. In the event of resignation or discharge of a Grantee from the employ of the Company or a subsidiary thereof, his or her employment shall, for the purposes of this
Section 3.1, be deemed to have ceased upon the delivery to the employer of notice of resignation, or upon the delivery to the employee of notice of discharge, as the case may be, irrespective of the effective date of such resignation or discharge. In the event the employment of a Grantee is terminated by the Company for cause, such Grantee shall not be entitled to exercise the Options subsequent to the time of delivery of the notice of discharge.

3.2 Death, Disability, Retirement Anything herein to the contrary notwithstanding:

(a) If a Grantee should die, the estate or other successors to whom the rights of a Grantee in respect of Options or Shares purchasable pursuant to the exercise thereof are transferred (by operation of law or by will) shall be entitled to exercise such Options (or portions thereof) that were exercisable on dates after the death of such Grantee and purchase Shares pursuant to the exercise thereof (or pursuant to the exercise of Options previously exercised by the Grantee) to the same extent and on the same terms as the deceased Grantee could have done but for his or her death; except that, so long as the rights in such Options or to purchase such Shares did not expire prior to the date of death of the Grantee, (i) the estate or such successor may exercise any such Options that were otherwise exercisable on a date after the date of death of such Grantee and purchase such Shares, at any time within 3 months from the date of death of the Grantee, and (ii) the rights in any such Options or Shares purchasable pursuant to the exercise thereof shall ipso facto terminate to the extent they are not exercised and such Shares are not paid for by the estate or successors within 3 months from the date of death of such Grantee.

(b) If a Grantee is unable to continue to be employed by the Company by reason of his or her becoming incapacitated while in the employ of the Company as a result of an accident or illness or other cause, which incapacitation is approved by the Company, such Grantee shall, subject to approval of the Company (which shall not unreasonably be withheld), continue to enjoy rights under this Agreement on such terms and conditions as the Company in its discretion may determine.

(c) If a Grantee should retire upon reaching mandatory retirement age, he or she shall, subject to the approval of the Company, continue to enjoy such rights, if any, under this Agreement and on such terms and conditions as the Company in its discretion may determine.

SECTION 4 RIGHT OF PURCHASE

Should the holders of more than 50% of the outstanding shares of the Company (the "Selling Shareholders") determine to sell their shares to an unaffiliated third party, and should they wish to sell the Shares which the Grantee then holds or to which the Grantee may be entitled upon the exercise of Options, then the Selling Shareholders shall have the right, for this purpose, to purchase (i) any Shares then held by the Grantee pursuant to the previous exercise of Options, and (ii) any unexpired but unexercised (whether or not yet exercisable) Options then held by the Grantee. Such right may be exercised only concurrently with or immediately prior to the sale by the Selling Shareholders of their shares in the Company. The purchase price for each Share or Option shall be equivalent to the purchase price per share to be received by the Selling Shareholders, less any component of such price per share attributable to a control premium. The determination of the purchase price per Share or Option to be paid to the Grantee shall be made by the Company's independent certified public accountant, whose determination shall be final and binding. In order to secure the Grantee's obligation under this section, the Grantee shall deposit share transfer deeds, signed in blank, with the Company. The Grantee acknowledges that the provisions of this section are designed to create rights in favor of the Selling Shareholders and agrees to their enforcement hereof. The provisions of this section shall cease to have effect upon the consummation of the Company's initial public offering.

SECTION 5 ADJUSTMENTS

5.1 Upon the occurrence of any of the following described events, a Grantee's rights to purchase Shares under this Agreement shall be adjusted as hereinafter provided:

5.2 Upon the Company's initial public offering, the exercise of the options will be subject to any regulations and restrictions issued by any securities regulatory or stock exchange authority.

5.3 In the event the shares of the Company shall be subdivided or combined into a greater or smaller number of shares or if, upon a merger, consolidation, reorganization, recapitalization or the like, the shares of the Company shall be exchanged for other securities of the Company or of another corporation, each Grantee shall be entitled, subject to the conditions herein stated, to purchase such number of Shares or amount of other securities of the Company or such other corporation as were exchangeable for the number of Shares of the Company that such Grantee would have been entitled to purchase on such date except for such action, and appropriate adjustments shall be made in the purchase price per share to reflect such subdivision, combination or exchange; provided, however, that any fractional shares so resulting shall be cancelled.

5.4 In the event that the Company shall issue any of its shares or other securities as bonus shares (or stock dividends) upon or with respect to any shares, each Grantee upon subsequently exercising an Option shall be entitled to receive (for the purchase price payable upon such exercise), the Shares as to which he or she is exercising his or her right and, in addition thereto (at no additional cost), such number of shares as is equal to the amount of Shares which he or she would have received had he or she been the holder of the

Shares as to which he or she is exercising his or her said right at all times between the date of the granting of such right and the date of its exercise; provided, however, that any fractional shares so resulting shall be cancelled.

5.5 The Company shall determine the specific adjustments to be made under this Section 5, and its determination shall be conclusive.

SECTION 6 VOTING, ASSIGNABILITY AND SALE OF SHARES

6.1 The Grantee shall have no voting rights as a shareholder of the Company until the consummation of the initial public offering of Shares (the "IPO"). Until the IPO, the Grantee's Shares shall be voted by a proxy pursuant to the direction of the Board of Directors of the Company. Simultaneously with each exercise of an Option, the Grantee shall execute an irrevocable proxy in a form acceptable to the Board of Directors of the Company, to the person or persons then designated by the Board of Directors, to vote the Shares acquired upon the exercise of the Option, with such proxy to remain in effect (or be renewed) until the Company consummates its IPO. In addition, until the consummation of the Company's IPO, and unless and until released by the Board of Directors for particular action, the Grantee's right as a shareholder to consent to or approve action by the Company (whether such right is expressly granted by the Articles of Association or is otherwise implied by virtue of the nature of the action to be taken) shall be exercised pursuant to the direction of the Board of Directors by a power of attorney issued by the Grantee as set forth herein. Simultaneously with each exercise of an Option, the Grantee shall execute an irrevocable power of attorney in a form acceptable to the Board of Directors of the Company, to the person or persons then designated by the Board of Directors, to act on behalf of the Grantee as a shareholder, with such power of attorney to remain in effect (or be renewed) until the Company consummates its IPO. The Grantee may not transfer or sell Shares issued upon the exercise of an Option to any third party unless such third party furnishes the Company with an irrevocable proxy and an irrevocable power of attorney as described in this section, prior to such sale or transfer.

6.2 No Options, and no Shares purchasable under this Agreement that were not fully paid for, shall be assignable or transferable by the Grantee; and during the lifetime of the Grantee each and all of his or her rights to purchase shares under this Agreement shall be exercisable only by him or her. For avoidance of doubt, the foregoing shall not be deemed to restrict the transfer of a Grantee's rights in respect of Options or Shares purchasable pursuant to the exercise thereof upon the death of such Grantee to his or her estate or other successors by operation of law or will, whose rights therein shall be governed by Section 3.2 hereof.

6.3 Until such time as the Company consummates its IPO, the Grantee shall not be allowed to sell or transfer any Shares purchased pursuant to the exercise of Options granted under this Agreement, except in accordance with the Company's Articles of Association and the following provisions:

6.3.1 The sale or transfer shall be subject to a right of first refusal, in favor of such person or persons as the Company may indicate. The Grantee shall be advised whether or not the right of first refusal is being exercised within 30 days of his or her

notification to the Company of the intention to sell or transfer and the terms of the proposed sale or transfer.

6.3.2 In the event the right of first refusal is not exercised, the Grantee may sell or transfer the Shares within 7 days. If the Grantee does not sell or transfer the Shares within 7 days, all of the provisions of this section shall again apply to any subsequent sale or transfer.

6.3.3 In any case, the sale or transfer shall not directly or indirectly be to a competitor of the Company, shall be allowed only if the Grantee is not then in breach of any of his or her obligations to the Company, shall be with respect to all of the Shares then held by the Grantee, and shall be subject to the approval of the Company's Board of Directors (which shall not unreasonably be withheld).

SECTION 7 REPRESENTATIONS, WARRANTIES AND COVENANTS

The Grantee hereby represents, warrants and covenants that until such time as the Company consummates its initial public offering, upon the Company's request the Grantee will consent to any resolution requested or approved by the Company, will sign any document and will take any other action which may be necessary or desirable to the consummation of an offering, whether public or private. The Grantee hereby authorizes the Company to sign any document on his or her behalf in order to implement the foregoing, and the Grantee will not assert any claim against the Company or anyone else in this regard.

SECTION 8 MISCELLANEOUS

8.1 Entire Agreement

This Agreement contains all of the understandings between the Company and the Grantee concerning all Options granted under this Agreement, and include all earlier negotiations and understandings. The Company and the Grantee have made no promises, agreements, conditions or understandings, either orally or in writing, that are not included in this Agreement.

8.2 Interpretation

The interpretation and construction by the Company of any provision of this Agreement or of any Option thereunder shall be final and conclusive.

8.3 Employment

By granting Options under this Agreement, the Company does not give the Grantee any right to continue to be employed by the Company or to be entitled to any remuneration or benefits not set forth in this Agreement. None of the provisions of this Agreement will interfere with or limit the right of the Company to end the Grantee's employment at any time. Furthermore, it is agreed by the parties that no income or any other benefit flowing from this Agreement will be taken in account in respect of the Grantee's social rights or any other rights deriving from his or her being an employee.

8.4 Captions

The captions and section numbers appearing in this Agreement are inserted only as a matter of convenience. They do not define, limit, construe or describe the scope or intent of the provisions of this Agreement.

8.5 Counterparts

This Agreement may be executed in counterparts, each of which when signed by the Company and the Grantee will be deemed an original and all of which together will be deemed the same agreement.

8.6 Notice

Any notice or communication having to do with this Agreement must be given by personal delivery or by registered mail, return receipt requested, addressed - if to the Company, to the principal office of the Company and, if to the Grantee, to the Grantee's last known address on the personnel records of the Company.

8.7 Succession and Transfer

Each and all of the provisions of this Agreement are binding upon and shall inure to the benefit of the Company and the Grantee (and, to the extent specifically provided in this Agreement, the Grantee's heirs). The Grantee may not sell, give, transfer, encumber or assign, or use as collateral, any of the holder's rights under this Agreement.

8.8 Governing Law

This Agreement shall be governed by and construed exclusively in accordance with the law of the State of Israel applicable to agreements to be performed in the State of Israel.

8.9 Tax Consequences

Any tax consequences arising from the grant or exercise of any Option, from the payment for Shares covered thereby or from any other event or act (of the Company or the Grantee) hereunder, shall be borne solely by the Grantee. Furthermore, the Grantee shall agree to indemnify the Company and hold it 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 Grantee.

IN WITNESS WHEREOF the Company and the Grantee have caused this Agreement to be signed and delivered as of the date set forth below.

COMMTOUCH SOFTWARE LTD.

By: __________________________

Effective Date: _________________

COMMTOUCH SOFTWARE LTD.

SHARE OPTION AGREEMENT SCHEDULE

Identification:

1. Name of Grantee: ___________________________________

3. Date of Option Agreement: __________________________

Terms of Option Awards:

1. Number of Ordinary Shares: _________________________

2. Option Exercise Price per Ordinary Share: __________

4. Expiration Date: ____________________

EXHIBIT 10.3

3(i) OPTION AGREEMENT

(the "OPTION AGREEMENT")

Made as of the ______________ day of ______, 1999

By and between

COMMTOUCH SOFTWARE LTD.

an Israeli Company located at
10 Technology Avenue
Ein Vered, Israel
(the "COMPANY")

of the first part

AND

ID______________________
(the "OPTIONEE")

of the second part

WHEREAS          In _____, 1999, the Company adopted its 1999 Section 3(i) Share
                 Option Plan (the "OPTION PLAN"), a copy of which is attached
                 hereto as EXHIBIT A, forming an integral part hereof; and

WHEREAS          The Company has determined that the Optionee be granted Options
                 under the Option Plan to buy Shares of the Company, and the
                 Optionee has agreed to such grant, all on the terms and subject
                 to the conditions set forth in the Option Plan and in this
                 Option Agreement.

NOW, THEREFORE, it is agreed as follows:

1.1        The preamble to this Option Agreement constitutes an
           integral part hereof.

1.2        Unless otherwise defined herein, capitalized terms used
           herein shall have the meaning ascribed to them in the
           Option Plan.

2.1        The Company hereby grants the Optionee the number of
           Options set forth in Section 2 of EXHIBIT B attached
           hereto to purchase Shares at the price per Share set forth
           in Section 3 of EXHIBIT B attached hereto (the "OPTION
           PRICE"), on the terms and subject to the conditions
           hereinafter provided.

           The Option Price will be paid in NIS in accordance with
           the representative rate of exchange of the U.S. dollar,
           last published by the Bank of Israel and known at the time
           of giving the notice of exercise (as set forth in Section
           5.1 below).

2.2        The Optionee is aware that the Company intends to issue
           additional shares in the future to various entities and
           individuals, as the Company in its sole discretion shall
           determine.

3.1        The term of this Option Agreement shall commence on the
           date hereof (the "DATE OF GRANT") and terminate on the
           Expiration Date (as defined in Section 6 below), or at the
           time at which all of the Options have expired or been
           terminated pursuant to the terms of the Option Plan or
           pursuant to this Option Agreement.

3.2        The Options may be exercised by the Optionee in whole at
           any time or in part from time to time, as determined by
           the Board, and to the extent that the Options become
           vested in accordance with Section 4 of Exhibit B, prior to
           the Expiration Date, and provided that, subject to the
           provisions of Section 3.4 below, the Optionee is an
           employee of the Company or a Subsidiary of the Company or
           a company or a Parent or a subsidiary company of such
           company issuing or assuming the Options in a transaction
           described in Section 7.1 of the Agreement (the foregoing
           collectively, the "GROUP" ), or continuing to provide
           services to the Group, at all times during the period
           beginning with the granting of the Option and ending upon
           the date of exercise.

           The term "PARENT" shall mean for the purposes of the
           Option Agreement and the Option Plan: any company (other
           than the Company) in an unbroken chain of companies ending
           with the Company if, at the time of granting an Option,
           each of the companies (other than the Company), owns stock
           possessing fifty percent (50%) or more of total combined
           voting power of all classes of stock in one of the other
           companies in such chain.

3.3        Subject to the provisions of Section 3.4 below, in the
           event of termination of the Optionee's employment with the
           Company the Group, or, if applicable, the termination of
           the provision of services by the Optionee to the Group,
           all Options granted to the Optionee will immediately
           expire. A notice of termination of employment or services
           by either the Group or the Optionee shall be deemed to
           constitute termination of employment or services.

           3.4        Notwithstanding anything to the contrary previously
                      stated, an Option may be exercised after the date of
                      termination of the Optionee's service or employment with
                      Group, during an additional period of time beyond the date
                      of such termination, but only with respect to the number
                      of Options already vested at the time of such termination
                      according to the Vesting Dates, if:

                      3.4.1      termination is without Cause, in which event
                                 any Options still in force and unexpired may be
                                 exercised within a period of 90 (ninety) days
                                 from the date of such termination.

                      3.4.2      termination is the result of death or
                                 disability of the Optionee, in which event any
                                 Options still in force and unexpired may be
                                 exercised within a period of 90 (ninety) days
                                 from the date of termination.

                      3.4.3      prior to the date of such termination, the
                                 Committee shall authorize an extension of the
                                 terms of all or part of the Options beyond the
                                 date of such termination for a period not to
                                 exceed the period during which the Options by
                                 their terms would otherwise have been
                                 exercisable.

                                 The term "CAUSE" shall mean any action,
                                 omission or state of affairs related to the
                                 Optionee which the Committee or the Boards
                                 decides, in its sole discretion, is against the
                                 interests of the Company.

           3.5        The Options may be exercised only to purchase whole
                      Shares, and in no case may a fraction of a Share be
                      purchased. If any fractional Shares would be deliverable
                      upon exercise, such fraction shall be rounded up if
                      one-half or more, or otherwise rounded down, to the
                      nearest whole number.

4.         VESTING

Subject to the requirements as to the number of Shares for which an Option is exercisable as set forth in Section 2.1 above, and unless EXHIBIT B hereto provides otherwise, one-fourth (1/4) of the Options shall vest (i.e., Options shall become exercisable) at the end of the first year of the Optionee's continuous service or employment with the Group and one-thirty-sixth (1/36) of the remaining Options shall vest at the end of each month of such continuous service or employment over the next thirty-six months

5.1        The Options shall be exercised by the Optionee by giving
           written notice to the Company, in such form and method as
           may be determined by the Company and the Trustee (the
           "EXERCISE NOTICE"), which exercise shall be effective upon
           receipt of the Exercise Notice by the Company at its
           principal office. The Exercise Notice shall specify the
           number of Shares with respect to which the Options are
           being exercised.

5.2        The Shares shall immediately be issued to the Trustee and
           be held by the Trustee in accordance with the provisions
           of Section 5 of the Option Plan. The Trustee shall not
           transfer any Options to the Optionee prior to the exercise
           of the Options into Shares, and thereafter, the Trustee
           will transfer the Shares to the Optionee upon demand. If
           any law or regulation requires the Company to take any
           action with respect to the Shares so demanded before the
           issuance thereof, then the date of their issuance shall be
           extended for the period necessary to take such action. The
           Optionee hereby authorizes the Trustee to sign an
           agreement with the Company whereby Shares will not be
           transferred without deduction of taxes at source. The
           Optionee hereby undertakes to exempt the Trustee from any
           liability in respect of any action or decision duly taken
           and bona fide executed in relation with the Option Plan,
           or any Option or Share granted to the Optionee thereunder.

           6.1        Except as otherwise stated in this Option Agreement, the
                      Options, to the extent not previously exercised, shall
                      terminate forthwith upon the earlier of: (i) the date set
                      forth in Section 4 of EXHIBIT B hereto; and (ii) the
                      expiration of any extended period in any of the events set
                      forth in Section 3.4 above (and such earlier date shall be
                      hereinafter referred to as the "EXPIRATION DATE").

           6.2        Without derogating from the above, the Committee may, with
                      the prior written consent of the Optionee, from time to
                      time cancel all or any portion of the Options then subject
                      to exercise, and the Company's obligation in respect of
                      such Options 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 pertaining to such
                      canceled Options, at the date of such cancellation, 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 determined by the Committee in its sole
                      discretion.

7.         ADJUSTMENTS

           7.1        In the event of a merger of the Company with or into
                      another corporation, or the sale of substantially all of
                      the assets of the Company while unexercised Options remain
                      outstanding under the Option Plan the successor
                      corporation or a Parent or subsidiary of such successor
                      corporation or the purchasing corporation may assume the
                      unexercised Options outstanding under the Option Plan or
                      may substitute 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 successor or

           purchasing corporation or cash or property which were
           distributed to the shareholders of the Company in respect
           of such shares. In the event of substitution of shares or
           securities appropriate adjustments shall be made to the
           purchase price per share to reflect such action, all as
           will be determined by the Committee whose determination
           shall be final. In the event that the successor or
           purchasing corporation does not agree to assume or
           substitute as described in this section 7.1, the Options
           shall terminate as of the date of the closing the above
           merger or sale, as applicable.

7.2        In the event of the proposed liquidation or dissolution of
           the Company, the Company shall notify the Optionee at
           least fifteen (15) days prior to such proposed action. To
           the extent not previously exercised, the Options shall
           terminate immediately prior to the consummation of such
           proposed action.

7.3        If the outstanding shares of the Company shall at any time
           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 the Option
           therefore granted, and the Option Price, 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, all as will be
           determined by the Board who's determination shall be
           final.

7.4        Anything herein to the contrary notwithstanding, if prior
           to the consummation of an initial public offering of the
           securities of the Company all or substantially all of the
           shares of the Company are to be sold, or upon a merger or
           reorganization or the like, the shares of the Company, or
           any class thereof, are to be exchanged for securities of
           another Company, then in such event, the Optionee shall be
           obliged to sell or exchange (in accordance with the value
           of his Shares in accordance with the deal) as the case may
           be, the Shares such Optionee purchased hereunder, in
           accordance with the instructions then issued by the Board,
           whose determination shall be final.

8. RIGHTS PRIOR TO EXERCISE OF OPTION; LIMITATIONS AFTER PURCHASE OF SHARES

8.1        Subject to the provisions of Sections 8.2 and 8.4 below,
           the Optionee shall not 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 in case
           of Options and Shares held by the Trustee, subject always
           to the provisions of Section 5 of the Option Plan,
           registration of the Optionee as holder of such Shares in
           the Company's register of members.

8.2        With respect to all Shares )contrary to unexercised
           Options) issued upon the exercise of Options purchased by
           the Optionee and held by the Trustee, the Optionee shall
           be entitled to receive dividends in accordance with the
           quantity of such Shares, and subject to any applicable
           taxation on distribution of dividends. During the period
           in which Shares issued to the Trustee on behalf of the
           Optionee are held by the Trustee, the cash dividends paid
           with respect thereto shall be paid directly to the
           Optionee.

8.3        No Option purchasable hereunder, whether fully paid or
           not, shall be assignable, transferable or given as
           collateral or any right with respect to them given to any
           third party whatsoever, and during the lifetime of the
           Optionee each and all of the Optionee's rights to purchase
           Shares hereunder shall be exercisable only by the
           Optionee.

           As long as the Shares are held by the Trustee in favor of
           the Optionee, all rights the Optionee possesses over the
           Shares are personal, can not be transferred, assigned,
           pledged or mortgaged, other than by will or laws of
           descent and distribution.

           Any such action made directly or indirectly, whether for
           immediate or future validity, shall be void.

8.4        Until the consummation of an IPO, Shares shall be voted by
           a proxy pursuant to the directions of the Board, such
           proxy to be to the person or persons designated by the

Board. A copy of the proxy is attached hereto as EXHIBIT C.

8.5        The Optionee acknowledges that once the Company's shares
           will be traded in any public market, his right to sell his
           Shares may be subject to some limitations, as required by
           the Company's underwriters. In such event, the Optionee
           will unconditionally agree to any such limitations.

8.6        The Optionee shall not dispose of any Shares in
           transactions which violate, in the opinion of the Company,
           any applicable rules and regulations.

8.7        The Optionee agrees that the Company shall have the
           authority to endorse upon the certificate or certificates
           representing the Shares such legends referring to the
           foregoing restrictions, and any other applicable
           restrictions, as it may deem appropriate (which do not
           violate the Optionee's rights according to this Option
           Agreement).

9. GOVERNMENT REGULATIONS

The Option Plan, and the granting and exercise of the Options thereunder, and the Company's obligation to sell and deliver Shares or cash under the Option Plan, are 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.

10. CONTINUANCE OF EMPLOYMENT

Nothing in this Option Agreement shall be construed to impose any obligation on the Company or a subsidiary, consultant or contractor thereof to continue the Optionee's employment with it, to confer upon the Optionee any right to continue in the employ of the

Company or a subsidiary thereof, or to restrict the right of the Company or a subsidiary thereof to terminate such employment at any time.

11. GOVERNING LAW & JURISDICTION

This Option Agreement 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. The competent courts of Tel-Aviv, Israel shall have sole jurisdiction in any matters pertaining to this Option Agreement.

12. TAX CONSEQUENCES

Any tax consequences arising from the grant or exercise of any Option, from the payment for Shares covered thereby 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 shall withhold taxes according to the requirements under applicable laws, rules, and regulations, including the withholding of taxes at source. Furthermore, the Optionee shall agree to indemnify the Company and the Trustee 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 Committee and/or the Trustee shall not be required to release any Share certificate to an Optionee until all required payments have been fully made.

13. FAILURE TO ENFORCE NOT A WAIVER

The failure of any party to enforce at any time any provisions of this Option Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

14. PROVISIONS OF THE OPTION PLAN

The Options provided for herein are granted pursuant to the Option Plan, and said Options and this Option Agreement are in all respects governed by the Option Plan and subject to all of the terms and provisions whether such terms and provisions are incorporated in this Option Agreement solely by reference or are expressly cited herein. Any interpretation of this Option Agreement will be made in accordance with the Option Plan but in the event of any contradiction between the provisions of this Option Agreement and the Option Plan, the provisions of this Option Agreement will prevail.

15. BINDING EFFECT

This Option Agreement shall be binding upon the heirs, executors, administrators, and successors of the parties hereof.

16. NOTICES

Any notice required or permitted under this Option Agreement shall be deemed to have been duly given if delivered, faxed or mailed, if delivered by certified or registered mail or return receipt requested, either to the Optionee at his or her address set forth above or such other address as he or she may designate in writing to the Company, or to the Company at the address set forth above or such other address as the Company may designate in writing to the Optionee, within one week.

17. ENTIRE AGREEMENT

This Option Agreement and the Option Plan exclusively concludes all of the terms of the Optionee's option plan and, subject to the provisions of Section 19 of the Option Plan, annuls and supersedes any other agreement, arrangement or understanding whether oral or in writing, relating to the grant of options in the Company to the Optionee. Any change of any kind to this Option Agreement will be valid only if made in writing and signed by both the Optionee and the Company's authorized representative and approved by the Board.

IN WITNESS WHEREOF, the Company has executed this Option Agreement in duplicate on the day and year first above written.

COMMTOUCH SOFTWARE LTD.

By:______________________

The undersigned hereby accepts, and agrees to, all terms and provisions of the foregoing Option Agreement.

EXHIBIT A TO THE OPTION AGREEMENT

COMMTOUCH SOFTWARE LTD.

THE 1999
SECTION 3(I) SHARE OPTION PLAN

COMMTOUCH SOFTWARE LTD.

THE 1999
SECTION 3(i) SHARE OPTION PLAN

1. NAME

This share option plan, as amended from time to time, shall be known as the CommTouch Software Ltd. 1999 Section 3(i) Share Option Plan
(the "OPTION PLAN").

2. PURPOSE OF THE OPTION PLAN

The Option Plan is intended as an incentive to retain in the employ of CommTouch Software Ltd. (the "COMPANY") or a Subsidiary of the Company which now exists or hereafter is organized or acquired by the Company, persons of training, experience, and ability, to attract new directors, employees, consultants and contractors, whose services are considered 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 "OPTIONS"), pursuant to this Option Plan approved by the Board of Directors of the Company (the "BOARD").

The term "PARENT" shall mean for the purposes of the Option Agreement and the Option Plan: any company (other than the Company) in an unbroken chain of companies ending with the Company if, at the time of granting an Option, each of the companies (other than the Company), owns stock possessing fifty percent (50%) or more of total combined voting power of all classes of stock in one of the other companies in such chain.

The term "SUBSIDIARY" shall mean for the purposes of the Plan: any company (other than the Company) in an unbroken chain of companies beginning with the Company if, at the time of granting an option, each of the companies other than the last company in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other companies in such chains.

3. ADMINISTRATION OF THE OPTION PLAN

The Board or a share option committee appointed and maintained by the Board for such purpose (the "COMMITTEE") shall have the power to administer the Option Plan. Notwithstanding the above, the Board shall automatically have a residual authority if no Committee shall be constituted or if such Committee shall cease to operate for any reason whatsoever.

The Committee shall consist of such number of members (not less than two (2) in number) as may be fixed by the Board. The Committee shall select one of its members as its chairman (the "CHAIRMAN") and shall hold its meetings at such times and places as the Chairman shall determine. The Committee shall keep records of its meetings and shall make such rules and regulations for the conduct of its business as it shall deem advisable.

Any member of such Committee shall be eligible to receive Options under the Option Plan while serving on the Committee, unless otherwise specified herein.

The Committee shall have full power and authority to:

3.1        Designate participants.

3.2        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.

3.3        Accelerate the right of an Optionee to exercise, in whole
           or in part, any previously granted Option.

3.4        Interpret the provisions and supervise the administration
           of the Option Plan;

3.5        Determine the Fair Market Value (as defined below) of the
           Shares (as defined below).

3.6        Determine any other matter which is necessary or desirable
           for, or incidental to administration of the Option Plan.

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 having a purchase price equal to, lower than or higher than the purchase price provided in the Option so surrendered and canceled, and containing such other terms and conditions as the Committee may prescribe in accordance with the provisions of the Option Plan.

All decisions and selections made by the Board or the Committee pursuant to the provisions of this Option Plan shall be made by a majority of its members except that no member of the Board or the Committee shall vote on, or be counted for quorum purposes, with respect to any proposed action of the Board or the 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.

The interpretation and construction by the Committee of any provision of the Option Plan or of any Option thereunder shall be final and conclusive unless otherwise determined by the Board.

Subject to the Company's decision, 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 any 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 Option 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 a director or otherwise under the Company's Articles of Association, any agreement, any vote of shareholders or disinterested directors, insurance policy or otherwise.

"FAIR MARKET VALUE" shall mean in the Plan, as of any date, the value of a Share determined as follows:

(i) If the Shares are listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market system, or The Nasdaq SmallCap Market of the Nasdaq Stock Market , the Fair Market Value shall be the closing sales price for such Shares (or the closing bid, if no sales were reported), as quoted on such exchange or system for the last market trading day prior to time of determination, as reported in the Wall Street Journal, or such other source as the Administrator deems reliable.

(ii) If the Shares are regularly quoted by a recognized securities dealer but selling prices are not reported , the Fair Market Value shall be the mean between the high bid and low asked prices for the Shares on the last market trading day prior to the day of determination, or;

(iii) In the absence of an established market for the Shares, the Fair Market Value thereof shall be determined in good faith by the committee.

4. DESIGNATION OF PARTICIPANTS

The persons eligible for participation in this Option Plan as recipients of Options may include any employees, directors and consultants of the Company, or a Subsidiary of the Company or a company or a Parent or a subsidiary company of such company issuing or assuming the Options in a transaction described in Section 9.1 of this Option Plan (the foregoing collectively, the "GROUP"). The grant of an Option hereunder shall neither entitle the recipient thereof to participate nor disqualify him from participating in any other grant of Options pursuant to this Option Plan or any other option or stock plan of the Company or any of its affiliates.

Anything in the Option Plan to the contrary notwithstanding, all grants of Options to directors and office holders ("NOSEI MISRA" - as such term is defined in the Companies

Ordinance (New Version), 1983 (the "COMPANIES ORDINANCE")) shall be authorized and implemented only in accordance with the provisions of the Companies Ordinance, as in effect from time to time.

5. TRUSTEE

The Options which shall be granted to employees consultants and contractors of the Group or any Shares (as defined below) issued upon exercise of such Options and/or other shares received subsequently following any realization of rights, shall be issued to a Trustee nominated by the Committee (the "TRUSTEE") and held for the benefit of the Optionees from the date of grant.

Anything to the contrary notwithstanding, the Trustee shall not release any Options and/or any Shares issued upon exercise of Options, prior to the full payment of the Optionee's tax liabilities arising from Options which were granted to him and/or any Shares issued upon exercise of such Options.

Upon receipt of the Option, the Optionee will sign an undertaking to exempt the Trustee from any liability in respect of any action or decision duly taken and bona fide executed in relation with the Option Plan, or any Option or Share granted to him thereunder.

6.1        The Company has reserved 250,000 authorized but unissued
           Ordinary Shares nominal value NIS 1.00 per share, of the
           Company (the "SHARES"), for purposes of the Option Plan
           (subject to adjustment as set forth in paragraph 9 below),
           the 1996 CommTouch Software, Inc. Stock Option Plan and
           Israeli Option Agreements previously issued to Israeli
           employees. Any of such Shares which may remain unissued
           and which are not subject to outstanding Options at the
           termination of the Option Plan shall cease to be reserved
           for the purpose of the Option Plan, but until termination
           of the Option Plan the Company shall at all times reserve
           sufficient number of Shares to meet the requirements of
           the Option Plan. Should any Option for any reason expire
           or be canceled prior to its exercise or relinquishment in
           full, the Shares subject to such Option may again be
           subjected to an Option under the Option Plan.

6.2        An optionee who purchased Shares hereunder upon exercise
           of Options shall have no voting rights as a shareholder
           (in any and all matters whatsoever) until the consummation
           of an initial public offering of the Company's securities
           (an "IPO"). Until an IPO, such Shares shall be voted by a
           proxy pursuant to the directions of the Board, such proxy
           to be to the person or persons designated by the Board.
           All Shares issued upon exercise of the Options shall
           entitle the holder thereof to receive dividends and other
           distributions thereon.

7. VESTING

Unless Exhibit B to the Option Agreement provides otherwise, one-fourth (1/4) of the Options shall vest (i.e., Options shall become exercisable) at the end of the first year of an Optionee's continuous services or employment with the group, and one-thirty-sixth (1/36) of the remaining Options shall vest per month of such continuous employment over the next thirty-six months (the "VESTING DATES").

           8.1        The purchase price of each Share subject to an Option or
                      any portion thereof shall be determined by the Committee
                      in its sole and absolute discretion in accordance with
                      applicable law, subject to any guidelines as may be
                      determined by the Board from time to time.

           8.2        The Option price shall be payable upon the exercise of the
                      Option in a form satisfactory to the Committee, including
                      without limitation, by cash or check. The Committee shall
                      have the authority to postpone the date of payment on such
                      terms as it may determine.

9.         ADJUSTMENTS

Upon the occurrence of any of the following described events, the Optionee's rights to purchase Shares under the Option Plan shall be adjusted as hereafter provided:

9.1        In the event of a merger of the Company with or into
           another corporation, or the sale of substantially all of
           the assets of the Company while unexercised Options remain
           outstanding under the Option Plan the successor
           corporation or a Parent or subsidiary of such successor
           corporation or the purchasing corporation may assume the
           unexercised Options outstanding under the Option Plan or
           may substitute 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 successor or purchasing corporation or cash or
           property which were distributed to the shareholders of the
           Company in respect of such shares. In the event of
           substitution of shares or securities appropriate
           adjustments shall be made to the purchase price per share
           to reflect such action, all as will be determined by the
           Committee whose determination shall be final. In the event
           that the successor or purchasing corporation does not
           agree to assume or substitute as described in this Section
           9.1, the Options shall terminate as of the date of the
           closing of the above merger or sale, as applicable.

9.2        In the event of the proposed liquidation or dissolution of
           the Company, the Company shall notify the Optionee at
           least fifteen (15) days prior to such proposed action. To
           the extent not previously exercised, the Options shall
           terminate immediately prior to the consummation of such
           proposed action.

9.3        If the outstanding shares of the Company shall at any time
           be changed or exchanged by declaration of a stock
           dividend, stock split, combination or exchange of shares,
           recapitalization, 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 Option
           Plan or subject to any Options therefore 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 shares. Upon the occurrence of any of the
           foregoing, the class and aggregate number of Shares
           issuable pursuant to this Option Plan (as set forth in
           Section 6 hereof), in respect of which Options have not
           yet been exercised, shall be appropriately adjusted, all
           as may be determined by the Board who's determination
           shall be final.

9.4        Anything herein to the contrary notwithstanding, if prior
           to the completion of an IPO, all or substantially all of
           the shares of the Company are to be sold, or upon a merger
           or reorganization or the like, the shares of the Company,
           or any class thereof, are to be exchanged for securities
           of another Company, then in such event, each Optionee
           shall be obliged to sell or exchange, as the case may be,
           the shares such Optionee purchased under the Option Plan,
           in accordance with the instructions then issued by the
           Board whose determination shall be final.

10. TERM AND EXERCISE OF OPTIONS

10.1 The Options shall be exercised by the Optionee by giving written notice to the Company, in such form and method as may be determined by the Company and the Trustee, which exercise shall be effective upon receipt of such notice by the Company at its principal office. The notice shall specify the number of Shares with respect to which Options are being exercised.

10.2 Each Option granted under this Option Plan shall be exercisable following the exercise dates and for the number of Shares as shall be provided in EXHIBIT B to the Option Agreement. However no Option shall be exercisable after the Expiration Date, as defined for each Optionee in his Option Agreement.

10.3 Options granted under the Option Plan shall not be transferable by Optionees other than by will or laws of descent and distribution, and during an Optionee's lifetime shall be exercisable only by that Optionee.

10.4 The Options may be exercised by the Optionee in whole at any time or in part from time to time, to the extent that the Options become vested, prior to the Expiration Date, and provided that, subject to the provisions of Section 10.6 below, the Optionee is an employee a consultants or a contractor of the Group at all times during the period beginning with the granting of the Option and ending upon the date of exercise.

10.5 Subject to the provisions of Section 10.6 below, in the event of termination of the Optionee's employment or services with the Group , c all Options granted to the Optionee will immediately expire. A notice of termination of employment or services shall be deemed to constitute termination of employment or services with Group.

10.6 Notwithstanding anything to the contrary previously stated, an Option may be exercised after the date of termination of the Optionee's services or employment with the Group during an additional period of time beyond the date of such termination, but only with respect to the number of Options already vested according to the Vesting Dates, if:

10.6.1     termination is without Cause, in which event
           any Options still in force and unexpired may be
           exercised within a period of 90 (ninety) days
           from the date of such termination.

10.6.2     termination is the result of death or
           disability of the Optionee, in which event any
           Options still in force and unexpired may be
           exercised within a period of 90 (ninety) days
           from the date of termination.

10.6.3     prior to the date of such termination, the
           Committee shall authorize an extension of the
           terms of all or part of the Options beyond the
           date of such termination for a period not to
           exceed the period during which the Options by
           their terms would otherwise have been
           exercisable.

           The term "CAUSE" shall mean any action,
           omission or state of affairs related to the
           Optionee which the Committee or the Boards
           decides, in its sole discretion, is against the
           interests of the Company.

10.7 To avoid doubt, the holders of Options shall not 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, nor shall they be deemed to be a class of shareholders or creditors of the Company for purpose of the operation of section 233 of the Companies Ordinance or any successor to such section, until registration of the Optionee as holder of such Shares in the Company's register of members.

10.8 Any form of Option Agreement authorized by this Option Plan may contain such other provisions as the Committee may, from time to time, deem advisable. Without limiting the foregoing, 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 Committee in its sole discretion.

11. DIVIDENDS

With respect to all Shares (but not unexercised Options) issued upon the exercise of Options purchased by the Optionee and held by the Trustee, the Optionee shall be entitled to receive dividends in accordance with the quantity of such Shares, and subject to any applicable taxation on distribution of dividends. During the period in which Shares issued to the Trustee on behalf of a Optionee are held by the Trustee, the cash dividends paid with respect thereto shall be paid directly to the Optionee.

12. ASSIGNABILITY AND SALE OF OPTIONS

No Option, purchasable hereunder, whether fully paid or not, shall be assignable, transferable or given as collateral or any right with respect to them given to any third party whatsoever, and during the lifetime of the Optionee each and all of such Optionee's rights to purchase Shares hereunder shall be exercisable only by the Optionee.

As long as the Shares are held by the Trustee in favor of the Optionee, then all rights the Optionee possesses over the Shares are personal, can not be transferred, assigned, pledged or mortgaged, other than by will or laws of descent and distribution.

13. TERM OF THE OPTION PLAN

The Option Plan shall be effective as of the day it was adopted by the Board and shall terminate at the end of 60 months from such day of adoption.

14. AMENDMENTS OR TERMINATION

The Board may, at any time and from time to time, subject to the written consent of the Trustee, amend, alter or discontinue the Option Plan, except that no amendment or alteration shall be made which would impair the rights of the holder of any Option therefore granted, without his consent.

15. GOVERNMENT REGULATIONS

The Option 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.

16. CONTINUANCE OF EMPLOYMENT OR HIRED SERVICES

Neither the Option Plan nor the Option Agreement with the Optionee shall impose any obligation on the Group, to continue any Optionee in its employ or the hiring by the Group of the Optionee's services, and nothing in this Option Plan or in any Option granted pursuant thereto shall confer upon any Optionee any right to continue in the employ or service of the Group or restrict the right of the Group to terminate such service or employment at any time.

17. GOVERNING LAW & JURISDICTION

This Option 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. The competent courts of Tel-Aviv, Israel shall have sole jurisdiction in any matters pertaining to this Option Plan.

18. TAX CONSEQUENCES

Any tax consequences arising from the grant or exercise of any Option, from the payment for Shares covered thereby 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 shall withhold taxes according to the requirements under the applicable laws, rules, and regulations, including withholding taxes at source. Furthermore, the Optionee shall agree to indemnify the Company and the Trustee 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 Committee and/or the Trustee shall not be required to release any Share certificate to an Optionee until all required payments have been fully made.

19. NON-EXCLUSIVITY OF THE OPTION PLAN

The adoption of the Option Plan by the Board shall not be construed as amending, modifying or rescinding any previously approved incentive arrangements 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 Option Plan or under the Share Option Agreements previously issued to Israeli employees, and such arrangements may be either applicable generally or only in specific cases.

20. MULTIPLE AGREEMENTS

The terms of each Option may differ from other Options granted under this Option 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 this Option Plan, either in addition to, or in substitution for, one or more Options previously granted to that Optionee.

EXHIBIT B TO THE OPTION AGREEMENT

TERMS OF THE OPTION

1. NAME OF THE OPTIONEE: _______________________________________

2. NUMBER OF OPTIONS GRANTED: _______________________________________

3. PRICE PER SHARE: _______________________________________

4. EXPIRATION DATE: _______________________________________

5. DATE OF GRANT: _______________________________________

EXHIBIT C TO THE OPTION AGREEMENT

PROXY

Mr.____________ and Mr. ______________, or any of them, with power of substitution in each, are hereby authorized to represent the undersigned at any and all general meetings of CommTouch Software Ltd. )the "Company") (including general meetings convened for the purpose of adopting extraordinary resolutions) and to vote thereat on any and all matters the same number of Ordinary Shares of the Company as the undersigned would be entitled to vote if then personally present.

EXHIBIT 10.4

COMMTOUCH SOFTWARE LTD.

1999 NONEMPLOYEE DIRECTORS STOCK OPTION PLAN

1. PURPOSE.

The purpose of this Plan is to offer Nonemployee Directors of CommTouch Software Ltd. an opportunity to acquire a proprietary interest in the success of the Company, or to increase such interest, by purchasing Ordinary Shares of the Company. This Plan provides for the grant of Options to purchase Shares. Options granted hereunder shall be "Nonstatutory Options," and shall not include "incentive stock options" intended to qualify for treatment under Sections 421 and 422 of the Internal Revenue Code of 1986, as amended.

2. DEFINITIONS.

As used herein, the following definitions shall apply:

(a) "ADMINISTRATOR" shall mean the entity, either the Board or the committee of the Board, responsible for administering this Plan, as provided in
Section 3.

(b) "AFFILIATE" means a parent or subsidiary corporation as defined in Sections 424(e) and (f) of the Code.

(c) "ANNUAL OPTION" shall have the meaning set forth in Section 6(b).

(d) "BOARD" shall mean the Board of Directors of the Company, as constituted from time to time.

(e) "CHANGE IN CONTROL" shall mean the occurrence of any one of the following:

(i) any "person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company, an Affiliate, or a Company employee benefit plan, including any trustee of such plan acting as trustee) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities;

(ii) the election of any director of the Company who was not a candidate proposed by a majority of the Board in office prior to the time of such election; or

(iii) the dissolution or liquidation (partial or total) of the Company or a sale of assets involving 50% or more of the assets of the Company, or any merger or reorganization of the Company, whether or not another entity is the survivor, or other transaction

pursuant to which the holders, as a group, of all of the shares of the Company outstanding prior to the transaction hold, as a group, less than 50% of the shares of the Company outstanding after the transaction.

(f) "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time, and any successor statute.

(g) "COMPANY" shall mean CommTouch Software Ltd., an Israeli corporation.

(h) "DISABILITY" means permanent and total disability as determined by the Administrator in accordance with the standards set forth in Section 22(e)(3) of the Code.

(i) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute.

(j) "EXPIRATION DATE" shall mean the last day of the term of an Option established under Section 6(e).

(k) "FAIR MARKET VALUE" means as of any given date (a) the closing price of the Ordinary Shares as reported by the Nasdaq National Market; (b) if the Ordinary Shares are no longer quoted on the Nasdaq National Market but are listed on an established stock exchange or quoted on any other established interdealer quotation system, the closing price for the Ordinary Shares on such exchange or system, as reported in the Wall Street Journal; or (c) if the Ordinary Shares are not traded on an exchange or quoted on the Nasdaq National Market or a successor quotation system, the fair market value of an Ordinary Share as determined by the Board in good faith. Such determination shall be conclusive and binding on all persons.

(l) "INITIAL OPTION" shall have the meaning set forth in Section 6(a).

(m) "NONEMPLOYEE DIRECTOR" shall mean any person who is a member of the Board but is not an employee of the Company or any Affiliate of the Company and has not been an employee of the Company or any Affiliate of the Company at any time during the preceding 12 months. Service as a director does not in itself constitute employment for purposes of this definition.

(n) "OPTION" shall mean a stock option granted pursuant to this Plan. Each Option shall be a nonstatutory option not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

(o) "OPTION AGREEMENT" shall mean the written agreement described in
Section 6 evidencing the grant of an Option to a Nonemployee Director and containing the terms, conditions and restrictions pertaining to such Option.

(p) "OPTIONEE" shall mean a Nonemployee Director who holds an Option.

(q) "ORDINARY SHARES" shall mean the Ordinary Shares of the Company.

(r) "PLAN" shall mean this CommTouch Software Ltd. 1999 Nonemployee Directors Stock Option Plan, as it may be amended from time to time.

(s) "SECTION" unless the context clearly indicates otherwise, shall refer to a Section of this Plan.

(t) "SHARES" shall mean the Ordinary Shares subject to an Option granted under this Plan.

(u) "TAX DATE" means the date defined in Section 7(c).

(v) "TERMINATION" means, for purposes of the Plan, with respect to an Optionee, that the Optionee has ceased to be, for any reason, a director of the Company.

3. ADMINISTRATION.

(a) ADMINISTRATOR. The Plan shall be administered by the Board or, upon delegation by the Board, by a committee consisting of not fewer than two non-employee directors (as such term is defined in Rule 16b-3(b)(3)(i) of the Exchange Act) (in either case, the "Administrator"). The Administrator shall have no authority, discretion or power to select the Nonemployee Directors who will receive Options hereunder or to set the number of shares to be covered by each Option granted hereunder, the exercise price of such Option, the timing of the grant of such Option or the period within which such Option may be exercised; provided, however, that the Administrator shall have the discretion to change the exercise price of an outstanding option granted under the Plan or to issue new options under the Plan with a lower exercise price in exchange for outstanding options granted under the Plan in connection with a general repricing by the Company of outstanding options. In connection with the administration of the Plan, the Administrator shall have the powers possessed by the Board. The Administrator may act only by a majority of its members. The Administrator may delegate administrative duties to such employees of the Company as it deems proper, so long as such delegation is not otherwise prohibited by Rule 16b-3 under the Exchange Act. The Board at any time may terminate the authority delegated to any committee of the Board pursuant to this
Section 3(a) and revest in the Board the administration of the Plan.

(b) ADMINISTRATOR DETERMINATIONS BINDING. Subject to the limitations set forth in Section 3(a), the Administrator may adopt, alter and repeal administrative rules, guidelines and practices governing the Plan as it from time to time shall deem advisable, may interpret the terms and provisions of the Plan, any Option and any Option Agreement and may otherwise supervise the administration of the Plan. All decisions made by the Administrator under the Plan shall be binding on all persons, including the Company and Optionees. No member of the Administrator shall be liable for any action that he or she has in good faith taken or failed to take with respect to this Plan or any Option.

4. ELIGIBILITY.

Only Nonemployee Directors may receive Options under this Plan.

5. SHARES SUBJECT TO PLAN.

(a) AGGREGATE NUMBER. Subject to Section 9, the total number of Ordinary Shares reserved and available for issuance pursuant to Options under this Plan shall be 180,000 shares. Such shares may consist, in whole or in part, of authorized and unissued shares or shares reacquired in private transactions or open market purchases, but all shares issued under the Plan regardless of source shall be counted against the 180,000 share limitation. If any Option terminates or expires without being exercised in full, the shares issuable under such Option shall again be available for issuance in connection with other Options. If Ordinary Shares issued pursuant to an Option are repurchased by the Company, such Ordinary Shares shall not again be available for issuance in connection with Options. To the extent the number of Ordinary Shares issued pursuant to an Option is reduced to satisfy withholding tax obligations, the number of shares withheld to satisfy the withholding tax obligations shall not be available for later grant under the Plan.

(b) NO RIGHTS AS A SHAREHOLDER. An Optionee shall have no rights as a shareholder with respect to any Shares covered by his or her Option until an electronic transfer (as evidenced by the appropriate entry on the books of the Company or its duly authorized transfer agent) of such Shares is effected. Subject to Section 9, no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property), distributions, or other rights for which the record date is prior to the date the certificate is issued.

6. GRANT OF OPTIONS.

(a) MANDATORY INITIAL OPTION GRANTS. Subject to the terms and conditions of this Plan, if any person who is not, and has not been in the preceding 12 months, an officer or employee of the Company and who has not previously been a member of the Board is elected or appointed a member of the Board, then on the effective date of such appointment or election the Company shall grant to such new Nonemployee Director an Option to purchase 10,000 shares at an exercise price equal to the Fair Market Value of such Shares on the date of such option grant. Any Option granted pursuant to this Section 6(a) shall be referred to as an "Initial Option."

(b) MANDATORY ANNUAL OPTION GRANTS. Subject to the terms and conditions of this Plan, on May 17 the date of the first meeting of the Board immediately following the annual meeting of shareholders of the Company (even if held on the same day as the meeting of shareholders) commencing in 1999, the Company shall grant to each Nonemployee Director then in office (other than a Nonemployee Director who received a grant under Section 6(a) on or after the record date for such annual meeting) an Option to purchase 10,000 shares at an exercise price equal to the Fair Market Value of such shares on the date of such option grant; provided, however, the grant date for grants made in connection with the annual shareholders meeting in

1999 shall be May 17, 1999; provided, however, that all grants under this Plan shall be null and void if the shareholders of the Company do not approve the Plan on or before April 18, 2000. Any Option granted pursuant to this Section 6(b) shall be referred to as an "Annual Option."

(c) VESTING OF INITIAL OPTION AND ANNUAL OPTION. Each Option granted under Section 6(a) or 6(b) shall become exercisable with respect to one fourth of the number of Shares covered by such Option three months after the date of grant and with respect to one third of the remaining shares subject to the Option every three months thereafter, so that the Option shall be fully exercisable on the first anniversary of the date such Option was granted.

(d) TERM. Subject to the other provisions of this Plan, each Option granted pursuant to this Plan shall have a term of ten years.

(e) LIMITATION ON OTHER GRANTS. The Administrator shall have no discretion to grant Options under this Plan other than as set forth in Sections 6(a) and 6(b).

(f) OPTION AGREEMENT. As soon as practicable after the grant of an Option, the Optionee and the Company shall enter into a written Option Agreement which specifies the date of grant, the number of Shares, the option price, and the other terms and conditions applicable to the Option.

(g) TRANSFERABILITY. No Option shall be transferable otherwise than by will or the laws of descent and distribution, and an Option shall be exercisable during the Optionee's lifetime only by the Optionee.

(h) LIMITS ON EXERCISE. Subject to the other provisions of this Plan, an Option shall be exercisable in such amounts as are specified in the Option Agreement.

(i) EXERCISE PROCEDURES. To the extent the right to purchase Shares has accrued, Options may be exercised, in whole or in part, from time to time, by written notice from the Optionee to the Company stating the number of Shares being purchased, accompanied by payment of the exercise price for the Shares, and other applicable amounts, as provided in Section 7.

(j) TERMINATION. In the event of Termination, Options held at the date of Termination, to the extent then exercisable, may be exercised in whole or in part at any time within three months after the date of Termination, (but in no event after the Expiration Date), but not thereafter. Notwithstanding the foregoing, if Termination is due to death or Disability, Options held at the date of Termination, to the extent then exercisable, may be exercised in whole or in part at any time within two years from the date of Termination (but in no event after the Expiration Date) by the Optionee or by the Optionee's guardian or legal representative in the case of Disability or in the case of death, by the person to whom the Option is transferred by will or the laws of descent and distribution.

7. PAYMENT AND TAXES UPON EXERCISE OF OPTIONS.

(a) PURCHASE PRICE. The purchase price of Shares issued under this Plan shall be paid in full at the time an Option is exercised.

(b) DELIVERY OF PURCHASE PRICE. Optionees may make all or any portion of any payment due to the Company upon exercise of an Option or with respect to federal, state, local or foreign tax payable in connection with the exercise of an Option, by delivery of cash or check. Exercise of an Option may be made pursuant to a "cashless exercise/sale" procedure pursuant to which funds to pay for exercise of the Option are delivered to the Company by a broker upon receipt of stock from the Company, or pursuant to which Optionees obtain margin loans from brokers to fund the exercise of the Option.

(c) TAX WITHHOLDING. The Optionee shall pay to the Company in cash, promptly upon exercise of an Option or, if later, the date that the amount of such obligations becomes determinable (in either case, the "Tax Date"), all applicable federal, state, local and foreign withholding taxes that the Administrator, in its discretion, determines will result upon exercise of an Option or from a transfer or other disposition of the Ordinary Shares acquired upon exercise of an Option or otherwise related to an Option or the Ordinary Shares acquired in connection with an Option.

A person who has exercised an Option may make an election to have the Ordinary Shares to be obtained upon exercise of the Option withheld by the Company on behalf of the Optionee, to pay the amount of tax that the Administrator, in its discretion, determines to be required to be withheld by the Company.

Any Ordinary Shares tendered to or withheld by the Company will be valued at Fair Market Value on such date. The value of the Ordinary Shares tendered or withheld may not exceed the required federal, state, local and foreign withholding tax obligations as computed by the Company.

8. USE OF PROCEEDS.

Proceeds from the exercise of Options pursuant to this Plan shall be used for general corporate purposes.

9. ADJUSTMENT OF SHARES.

In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, stock split or other change in corporate structure affecting the Ordinary Shares, appropriate adjustments shall be made by the Administrator in the aggregate number and kind of shares of stock reserved for issuance under the Plan and in the number, kind and exercise price of shares subject to outstanding Options; provided, however, that the number of shares subject to any Option shall always be a whole number.

10. EFFECT OF CHANGE IN CONTROL.

In the event of a "Change in Control," any Options outstanding as of the date such Change in Control is determined to have occurred and not then exercisable and vested shall become fully exercisable and vested.

11. NO RIGHT TO DIRECTORSHIP.

Neither this Plan nor any Option granted hereunder shall confer upon any Optionee any right with respect to continuation of the Optionee's membership on the Board or shall interfere in any way with provisions in the Company's Memorandum of Association and Articles of Association relating to the election, appointment, terms of office, and removal of members of the Board.

12. LEGAL REQUIREMENTS.

The Company shall not be obligated to offer or sell any Shares upon exercise of any Option unless the Shares are at that time effectively registered or exempt from registration under the federal securities laws and the offer and sale of the Shares are otherwise in compliance with all applicable securities laws and the regulations of any stock exchange on which the Company's securities may then be listed. The Company shall have no obligation to register the securities covered by this Plan under the federal securities laws or take any other steps as may be necessary to enable the securities covered by this Plan to be offered and sold under federal or other securities laws. Upon exercising all or any portion of an Option, an Optionee may be required to furnish representations or undertakings deemed appropriate by the Company to enable the offer and sale of the Shares or subsequent transfers of any interest in the Shares to comply with applicable securities laws. Certificates or records of electronic transfers evidencing Shares acquired upon exercise of Options shall bear any legend required by, or useful for purposes of compliance with, applicable securities laws, this Plan or the Option Agreements.

13. DURATION AND AMENDMENTS.

(a) DURATION. This Plan shall become effective upon the closing of the Company's initial public offering, provided that it has been adopted by the Board and approved by the shareholders of the Company, either by written consent or by approval of shareholders voting at a validly called shareholders' meeting. The Plan shall terminate automatically on the tenth anniversary of its effective date.

(b) AMENDMENT AND TERMINATION. The Board may amend, alter or discontinue the Plan or any Option, but no amendment, alteration or discontinuance shall be made which would impair the rights of an Optionee under an outstanding Option without the Optionee's consent. No amendment shall require shareholder approval except (i) an increase in the total number of shares reserved for issuance under the Plan, (ii) to the extent required by applicable laws, rules or regulations or (iii) to the extent that the Board otherwise concludes that shareholder approval is advisable.

(c) EFFECT OF AMENDMENT OR TERMINATION. No Shares shall be issued or sold under this Plan after the termination hereof, except upon exercise of an Option granted before termination. Termination or amendment of this Plan shall not affect any Shares previously issued and sold or any Option previously granted under this Plan.

14. RULE 16B-3.

With respect to persons subject to Section 16 of the Exchange Act, transactions under this Plan are intended to comply with the applicable conditions of Rule 16b-3 under the Exchange Act. To the extent any provision of this Plan or action by the Administrator fails to so comply, it shall be adjusted to comply with Rule 16b-3, to the extent permitted by law and deemed advisable by the Administrator. It shall be the responsibility of persons subject to Section 16 of the Exchange Act, not of the Company or the Administrator, to comply with the requirements of Section 16 of the Exchange Act; and neither the Company nor the Administrator shall be liable if this Plan or any transaction under this Plan fails to comply with the applicable conditions of Rule 16b-3, or if any such person incurs any liability under
Section 16 of the Exchange Act.

Approved by the Board of Directors on ___________ __, 1999.

Approved by the Shareholders of the Company on ___________ __, 1999, to be effective on the date of the closing of the Company's initial public offering of its ordinary shares.

COMMTOUCH SOFTWARE LTD.

1999 NONEMPLOYEE DIRECTORS STOCK OPTION PLAN

STOCK OPTION AGREEMENT

Capitalized terms used without definition in this Stock Option Agreement (the "OPTION AGREEMENT") shall have the meanings given such terms in the CommTouch Software Ltd. 1999 Nonemployee Directors Stock Option Plan (the "PLAN").

I.

Date of Grant:                              __________________

Exercise Price per Share:                   $_______

Total Number of Ordinary Shares Granted:      10,000

Total Exercise Price:                       $_______

Type of Option:                             NSO

Expiration Date:                            __________________

VESTING; TERMINATION. This Option will vest with respect to 2,500 ordinary shares three months after the date of grant and will vest with respect to 2,500 ordinary shares every three months thereafter, provided that the Optionee continues to serve as a Director of the Company. This Option may be exercised, in whole or in part, with respect to any vested shares, on or before
[_______________].

II.

AGREEMENT

1. GRANT OF OPTION. CommTouch Software Ltd., an Israeli company (the "COMPANY"), hereby grants to the Optionee (the "OPTIONEE") named in the Notice of Stock Option Grant set forth above (the "NOTICE OF GRANT") an option (the "OPTION") to purchase the total number of Ordinary Shares set forth in the Notice of Grant, at the exercise price per share set forth in the Notice of Grant (the "EXERCISE PRICE"), subject to the terms, definitions and provisions of the Plan, which is incorporated herein by reference. Capitalized terms used without definition in this Option Agreement shall have the meanings given such terms in the Plan.

2. EXERCISE OF OPTION.

(a) RIGHT TO EXERCISE. This Option shall be exercisable during its term in accordance with the Vesting schedule set out in the Notice of Grant and with the applicable provisions of the Plan and this Option Agreement.

(b) METHOD OF EXERCISE. This Option shall be exercisable by written notice (in the form attached hereto as Exhibit A), which shall state the election to exercise the Option, the number of Ordinary Shares with respect to which the Option is being exercised, and such other representations and agreements as to the Optionee's investment intent with respect to the Ordinary Shares as may be required by the Company pursuant to the provisions of the Plan. The written notice shall be signed by the Optionee and shall be delivered in person or by certified mail to the Secretary of the Company. The written notice shall be accompanied by payment of the Exercise Price. This Option shall be deemed to be exercised upon receipt by the Company of such written notice accompanied by the Exercise Price.

(c) COMPLIANCE WITH LAW. No Ordinary Shares will be issued pursuant to the exercise of any Option unless such issuance and such exercise shall comply with all relevant provisions of law and the requirements of any stock exchange upon which the Ordinary Shares may then be listed. Assuming such compliance, for income tax purposes the Ordinary Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such shares.

3. METHOD OF PAYMENT. Payment of the Exercise Price shall be by cash or check or by a combination thereof, at the election of the Optionee. Optionee shall also deliver a properly executed exercise notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option. Exercise of an Option may be made pursuant to a "cashless exercise/sale" procedure pursuant to which funds to pay for exercise of the Option are delivered to the Company by a broker upon receipt of stock from the Company, or pursuant to which Optionee obtains a margin loan from a broker to fund the exercise of the Option.

4. NON-TRANSFERABILITY OF OPTION; RIGHT OF REPURCHASE. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.

5. TERM OF OPTION. This Option may be exercised only in accordance with the terms set out in the Notice of Grant, and may be exercised prior to its expiration date only, in accordance with the Plan and the terms of this Option Agreement.

6. ENTIRE AGREEMENT; GOVERNING LAW. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee's interest except by means of a writing signed by the Company and Optionee. In case of conflict between the provisions in the Plan and this Option Agreement, the provisions in the Plan shall prevail. This Option Agreement is governed by California law except for that body of law pertaining to conflict of laws.

7. ACKNOWLEDGMENTS OF OPTIONEE.

(a) NO RIGHT TO CONTINUATION OF BOARD MEMBERSHIP. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF ORDINARY SHARES PURSUANT TO THE OPTION IS EARNED ONLY BY CONTINUING BOARD MEMBERSHIP AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING APPOINTED TO THE BOARD OF DIRECTORS, BEING GRANTED THIS OPTION OR ACQUIRING ORDINARY SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMMTOUCH SOFTWARE LTD. 1999 NONEMPLOYEE DIRECTORS STOCK OPTION PLAN THAT IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF BOARD MEMBERSHIP BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S BOARD MEMBERSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.

(b) RECEIPT OF PLAN. Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Optionee further agrees to notify the Company upon any change in the residence address indicated above.

Date:                                     COMMTOUCH SOFTWARE LTD.
     -----------------


                                          --------------------------------------
                                          Gideon Mantel
                                          Chief Executive Officer

                                          --------------------------------------


                                          [Name of Optionee]

                                                                             Page
                                                                             ----
Section 1.     Establishment of the Plan...................................   1

Section 2.     Definitions.................................................   1

Section 3.     Shares Authorized...........................................   2

Section 4.     Administration..............................................   3

Section 5.     Eligibility and Participation...............................   3

Section 6.     Offering and Purchase Periods...............................   4

Section 7.     Purchase Price..............................................   4

Section 8.     Employee Contributions......................................   4

Section 9.     Plan Accounts; Purchase of Shares...........................   5

Section 10.    Withdrawal From the Plan....................................   5

Section 11.    Taxes.......................................................   6

Section 12.    Effect of Termination of Employment or Death................   6

Section 13.    Rights Not Transferable.....................................   6

Section 14.    Recapitalization, Etc.......................................   7

Section 15.    Limitation on Stock Ownership...............................   7

Section 16.    No Rights as an Employee....................................   7

Section 17.    Rights as a Shareholder.....................................   7

Section 18.    Use of Funds................................................   8

Section 19.    Amendment or Termination of the Plan........................   8

Section 20.    Governing Law...............................................   8

NAME: (Please print)
                    ------------------------------------------------------------
                            (First)            (Middle)              (Last)

-------------------------           --------------------------------------------
Relationship
                                    --------------------------------------------
                                    (Address)

NAME: (Please print)
                    ------------------------------------------------------------
                            (First)            (Middle)              (Last)

-------------------------           --------------------------------------------
Relationship
                                    --------------------------------------------
                                    (Address)

Employee's Social Security Number:
                                    --------------------------------------------

Employee's Address:
                                    --------------------------------------------

                                    --------------------------------------------


                                    --------------------------------------------

Dated:
       ---------------------        --------------------------------------------
                                    Signature of Employee

                                    --------------------------------------------
                                    Spouse's Signature (If beneficiary other
                                    than spouse)

Name and Address of Participant:            Signature:

------------------------------              -----------------------------------

------------------------------              -----------------------------------
                                            Date:


------------------------------

a California corporation                a California   corporation

By: /s/ SADA CHIDAMBARAM                By: /s/ GIDEON MANTEL
    ------------------------------          -------------------------------

Name: Sada Chidambaram                  Name: Gideon Mantel
      ----------------------------            -----------------------------

Title: President                        Title: Chief Executive Officer
       ---------------------------             ----------------------------

Date: December 4, 1998                  Date: 12/1/98
      ----------------------------            -----------------------------


By:                                     By:
    ------------------------------          -------------------------------

Name:                                   Name:
      ----------------------------            -----------------------------

Title:                                  Title:
       ---------------------------             ----------------------------

Date:                                   Date:
      ----------------------------            -----------------------------

Address:                                Address:
        --------------------------              ---------------------------


----------------------------------      -----------------------------------

      Period          Price/SF     Rent/Month
      ------          --------     ----------
01/01/99 - 06/30/99     $3.20      $10,480.00
07/01/99 - 06/30/00     $3.25      $10,643.75
07/01/00 - 06/30/01     $3.30      $10,807.50
07/01/01 - 06/30/02     $3.35      $10,971.25

By: /s/ BIRK S. MCCANDLESS
    -------------------------------
    Birk S. McCandless, as Trustee
    under the Birk S. McCandless
    and Mary McCandless Inter
    Vivos Trust Agreement dated
    February 17, 1982,
    a General Partner

SUBLANDLORD:                           SUBTENANT:

ASCII OF AMERICA, INC.                 COMMTOUCH, INC.
a California corporation               a California corporation


By: /s/ Sada Chidambaram               By:  /s/ Gideon Mantel
   ---------------------------              --------------------------
Name: Sada Chidambaram                 Name: Gideon Mantel
     -------------------------              --------------------------
Title: President                       Title: President
      ------------------------               -------------------------
Date: December 10, 1998                Date:
     -------------------------              --------------------------

By:                                    By:
   ---------------------------              --------------------------
Name:                                  Name:
     -------------------------              --------------------------
Title: Secretary                       Title: Secretary
      ------------------------               -------------------------
Date:                                  Date:
     -------------------------              --------------------------

1.   DATE OF LEASE:                      1/13/96

2.   LANDLORD:                           McCandless Towers, Phase I
                                         3945 Freedom Circle, Suite 640
                                         Santa Clara, California 95054

3.   TENANT:                             ASCII of America, Inc.,
                                         a California corporation

4.   PREMISES:                           3945 Freedom Circle, Suites 730 and 740
                                         Santa Clara, California 95054

5.   SQUARE FEET:                        4,830 sq. ft.

6.   PERMITTED USE:                      General office

7.   TERM:                               Five (5) years

     (a) SCHEDULED COMMENCEMENT DATE:    July 1, 1997

     (b) SCHEDULED EXPIRATION DATE:      June 30, 2002

8.   RENT:

     (a) BASIC RENT:                     $ 9,080.40 per month (Lease months 1-12) $2.75
                                         $ 9,321.90 per month (Lease months 13-24) $2.80
                                         $ 9,563.40 per month (Lease months 25-36) $2.85
                                         $ 9,804.90 per month (Lease months 37-48) $2.90
                                         $10,046.40 per month (Lease months 49-60) $2.95

     (b) TENANT'S ESTIMATED SHARE OF
         COMMON AREA CHARGES:            $ 4,202.10 per month

9.   SECURITY DEPOSIT:                   $14,248.50

10.  PARKING SPACES PROVIDED:            Seventeen (17)

11.  OTHER IMPORTANT PROVISIONS:         Tenant Improvement Allowance
                                         Early Access

ITEM                                                       PAGE
----                                                       ----
1.   USE
2.   TERM
3.   POSSESSION
4.   MONTHLY RENT
5.   ADJUSTMENT OF BASIC RENT AND DIRECT EXPENSES
6.   RESTRICTION ON USE
7.   COMPLIANCE WITH LAWS
8.   ALTERATIONS
9.   REPAIR AND MAINTENANCE
10.  LIENS
11.  INSURANCE
12.  UTILITIES AND SERVICE
13.  TAXES AND OTHER CHARGES
14.  ENTRY BY LANDLORD
15.  COMMON AREA; PARKING
16.  DAMAGE BY FIRE; CASUALTY
17.  INDEMNIFICATION
18.  ASSIGNMENT AND SUBLETTING
19.  DEFAULT
20.  LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
21.  EMINENT DOMAIN
22.  NOTICE AND COVENANT TO SURRENDER
23.  TENANT'S QUITCLAIM
24.  HOLDING OVER
25.  SUBORDINATION
26.  CERTIFICATE OF ESTOPPEL
27.  SALE BY LANDLORD
28.  ATTORNMENT TO LENDER OR THIRD PARTY
29.  DEFAULT BY LANDLORD
30.  CONSTRUCTION CHANGES
31.  MEASUREMENT OF PREMISES
32.  ATTORNEY FEES
33.  SURRENDER
34.  WAIVER
35.  EASEMENTS; AIRSPACE RIGHTS
36.  RULES AND REGULATIONS
37.  NOTICES
38.  NAME
39.  GOVERNING LAW; SEVERABILITY
40.  DEFINITIONS
41.  TIME
42.  INTEREST ON PAST DUE OBLIGATIONS; LATE CHARGE
43.  ENTIRE AGREEMENT
44.  CORPORATE AUTHORITY
45.  RECORDING
46.  REAL ESTATE BROKERS
47.  EXHIBITS AND ATTACHMENTS
48.  ENVIRONMENTAL MATTERS
49.  SIGNAGE
50.  SUBMISSION OF LEASE
51.  PREMISES TAKEN "AS IS"
52.  ADDITIONAL RENT
53.  LANDLORD'S OPTION TO RELOCATE PREMISES
54.  TENANT IMPROVEMENT ALLOWANCE
55.  EARLY ACCESS

Lease months 1-12        $ 9,080.40 per month

Lease months 13-24       $ 9,321.90 per month

Lease months 25-36       $ 9,563.40 per month

Lease months 37-48       $ 9,804.90 per month

Lease months 49-60       $10,046.40 per month

Landlord:                                 Tenant:
---------                                 -------

McCANDLESS TOWERS, PHASE I                ASCII OF AMERICA, INC.,
a California limited partnership          a California corporation

By: McCandless Group, a
    California general partnership,
    General Partner

    By: /s/ SIGNATURE                     By: /s/ SIGNATURE
       ------------------------------        ---------------------------
       Birk S. McCandless, as Trustee
       under the Birk S. McCandless       Name: Printed Name
       and Mary McCandless Inter Vivos         -------------------------
       Trust Agreement dated February
       17, 1982, a General Partner        Title: President
                                                ------------------------

       Date:                              Date: 1-13-97
            -------------------------          -------------------------

                                          By: /s/  S HYNDMAN
                                             ---------------------------

                                          Name: S HYNDMAN
                                               -------------------------

                                          Title: Secretary
                                                ------------------------

                                          Date: 1-13-97
                                               -------------------------

COMMTOUCH, INC., A CALIFORNIA CORPORATION       DE ANZA BUILDING


By: /s/  SIGNATURE                              By: /s/  SIGNATURE
    -------------------------------------           ----------------------------

Date:  2/22/96                                  Date:  March 13, 1996
      -----------------------------------             --------------------------

1)   RENT SCHEDULE:

     Months 01-06        $1.30 per sq. ft. full service
     Months 07-12        $1.35 per sq. ft. full service
     Months 13-24        $1.40 per sq. ft. full service
     Months 25-36        $1.45 per sq. ft. full service

TENANT:   Commtouch, Inc.,            LANDLORD: De Anza Building
          a California Corporation              a California Limited Partnership

By: [SIG]                             By: [SIG]
   -------------------------             ------------------------------

                                      March 13, 1996

          /s/ SIGNATURE
-----------------------------------------------      -------------------
Tenant, Gideon Mantel, CEO, Commtouch Inc.           date


          /s/ SIGNATURE                                   2-15-99
-----------------------------------------------      -------------------
Landlord, Yun So Chang                               date

/s/ HARRISON WILLIAMS                              12/10/96
--------------------------------------            ----------
Harrison Williams, General Partner                   Date
DeAnza Building, a Limited Partnership


/s/ GIDEON MANTEL                                   12-9-96
--------------------------------------            -----------
Gideon Mantel, C. O. O.                              Date

CommTouch, Inc.

COMPANY                      STATE OF INCORPORATION
-------                      ----------------------
CommTouch Software Inc.            California

and to which the date is             )


                                                KOST FORER & GABBAY
                                      A member of Ernst & Young international