TOP IMAGE SYSTEMS LTD (Form: 6-K, Received: 09/03/2013 06:09:12)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

For the month of September 2013

Commission File Number 001-14552

Top Image Systems Ltd.

(Translation of registrant’s name into English)

2 Ben Gurion Street, Ramat Gan, Israel 52573

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F x Form 40-F o

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

This Form 6-K including all attachments is being incorporated by reference into the Registration Statement on Form S-8 (file no. 333-125064) and the Registration Statements on Form F-3 (file no. 333-119885 and 333-175546).

This Report on Form 6-K of the Registrant consists of the following documents, which are attached hereto and incorporated by reference herein:

Exhibit 99.1	Proxy notice of the 2013 Annual General Meeting of Shareholders.
Exhibit 99.2	Proxy Card for Annual General Meeting of Shareholders.
Exhibit 99.3	TIS Compensation Policy
Exhibit 99.4	2003 Amended Options Plan (2013)

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Top Image Systems Ltd.

Date: September 3, 2013	By:	/s/ Ido Schechter
		Ido Schechter
		Chief Executive Officer

Exhibit No.	Description of Exhibit
99.1	Proxy notice of the 2013 Annual General Meeting of Shareholders.
99.2	Proxy Card
99.3	TIS Compensation Policy
99.4	2003 Amended Options Plan (2013)

TOP IMAGE SYSTEMS LTD.

1 B.S.R. Tower, 2 Ben Gurion St.

NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS

Notice is hereby given that the Annual Meeting of the Shareholders of Top Image Systems Ltd. (the " Company ") will be held at the Company’s offices at 1 B.S.R. Tower, 2 Ben Gurion St., Ramat Gan, Israel, on October 15, 2013 at 10 a.m. (local time) (the “ Meeting ”) for the following purposes (the “ Agenda ”):

(1)

To elect four directors (other than external directors) until the next annual general meeting of the Company.

(2)

To elect one external director for an additional term;

(3)

To approve the Company's Compensation Policy;

(4)

To approve the Amended and Restated ISOP (as defined below) and the reservation of an additional 1,100,000 Ordinary Shares of the Company for issue under the Amended and Restated ISOP.

(5)

To approve the terms of compensation of the Company’s Directors for 2013.

(6)

To approve a performance-based bonus for 2013 for Dr. Ido Schecter, the Company’s Chief Executive Officer, to be effective retroactively from January 1, 2013 and onwards and to approve the award of additional options to acquire shares to Dr. Schechter.

(7)

To approve a performance-based bonus for 2013 for Mr. Izhak Nakar, the Company’s Active Chairman, to be effective retroactively from January 1, 2013 and onwards and to approve the award of additional options to acquire shares to Mr. Nakar.

(8)

To extend the appointment of Kost, Forer, Gabbay & Kasierer, a member of Ernst & Young Global as the independent public accountants of the Company until the next annual general meeting of the Company, and to authorize the Board of Directors to determine the remuneration of such auditors in accordance with the volume and nature of their services, subject to the approval of the audit committee of the Company (the “ Audit Committee ”).

(9)

To review the Company’s consolidated Financial Statements for the year ended December 31, 2012.

Shareholders of record at the close of business on September 13, 2013 (the “ Record Date ”) will be entitled to receive notice of and to vote at the Meeting and any adjournments thereof.

Prior to the Record Date, the Company published a press release which is available on the website of the U.S. Security and Exchange Commission (the “Commission”) at http://www.sec.gov, on the Israel Securities Authority's website at http://www.magna.isa.gov.il, on the Tel Aviv Stock Exchange site http://www.tase.co.il (the “Distribution Sites”) and on the Company's website at www.TopImageSystems.com and made this notice and proxy statement available on the Distribution Sites, together with related proxy card and financial statements for the year ended on December 31, 2012. Shareholders of the Company (“ Shareholders ”) may also review a copy of all the documents mentioned herein at the Distribution Site and at Company's offices at the address stated above during regular working hours and subject to prior appointment (Tel: +972-3-7679100). Shareholders are entitled to receive a copy of the proxy statement, and all exhibits thereto, the proxy card, all position notices, the Compensation Policy, and the annual report at their request from the Company.

Each member of the Tel Aviv Stock Exchange (“ TASE ”) will email, without charge, a link to the Distribution Sites, to each Shareholder who is not listed in the Company’s shareholder register and whose shares are held through such TASE member, unless he or she notified the TASE member that he or she is not interested in receiving such link or wishes instead to receive the proxy statement, the proxy card and the position notices by regular mail in consideration of mailing costs.

Voting

Shareholders who do not expect to attend the Meeting in person are requested to print out, mark, date, sign the proxy card posted with the proxy statement and mail it as promptly as possible to the Company’s above-listed address. A Shareholder may also choose to mark, date, sign and mail the proxy card received by mail.

With regard to Resolutions ‎ (2) and ‎ (3), Shareholders must indicate on the proxy card whether or not they have a Personal Interest (as defined in the Companies Law) in the resolution. The votes of Shareholders who do not do so will not be counted.

Shareholders who hold their shares through members of TASE who wish to vote their shares, in person or by proxy, should obtain a certificate signed by that member of TASE which complies with the Israel Companies Regulations (Proof of Ownership for Voting in General Meetings), 2000, as proof of ownership of the shares, present such certificate at the Meeting or attach it to a duly executed proxy card. Such certification may be obtained at the TASE member's offices or may be sent to the Shareholder by mail (subject to payment of the cost of mailing), at the election of the Shareholder, provided that the Shareholder's request was with respect to a specific securities account. A Shareholder who holds its shares in “street name” (meaning in the name of a bank, broker or other record holder, other than through a member of TASE), must either direct the record holder of its shares on how to vote such shares or obtain a legal proxy from the record holder to vote the shares at the Meeting on behalf of the record holder as well as a statement from such record holder that it did not vote such shares.

Submission of Proxy Card

A duly executed proxy card must be received by the Company no later than October 12, 2013 at 10:00 a.m. (Israel time), i.e. 72 hours before the Meeting, in order to be counted in the vote to be held on the Meeting.

Submission of Position Notices

A Shareholder may address the other Shareholders in writing through the Company in an attempt to influence the manner in which the Shareholders will vote with regard to any proposal. Position notices must be submitted to the Company no later than the close of the business on September 23, 2013. Any position notice submitted to the Company at a later date will be ignored.

Voting through Agent; No Internet Voting

A Shareholder may appoint a voting agent to vote in his or her place by way of signing a writ of appointment in accordance with the Company's Articles of Association.

The Company does not allow voting through the Internet.

By Order of the Board of Directors,

TOP IMAGE SYSTEMS LTD.

Izhak Nakar

Active Chairman of the Board of Directors

Date: September 3, 2013

PROXY STATEMENT

TOP IMAGE SYSTEMS LTD.

1 B.S.R. Tower, 2 Ben Gurion St.

Ramat Gan

Israel

ANNUAL GENERAL MEETING OF SHAREHOLDERS

October 15, 2013

The Board of Directors (the " Board of Directors ") of Top Image Systems Ltd. (the " Company ") hereby solicits a proxy for use at the Company's Annual General Meeting of Shareholders (the " Meeting ") to be held at the Company’s offices at 1 B.S.R. Tower, 2 Ben Gurion St., Ramat Gan, Israel on October 15, 2013 at 10:00 a.m. (Israel time), or at any adjourned date thereof.

VOTING PROCEDURES

Shareholders who are unable to attend the Meeting in person should print out, mark, date and sign the proxy card (the “ Proxy Card ”) posted on the website of the U.S. Security and Exchange Commission (the “ Commission ”) at http://www.sec.gov , on the Israel Securities Authority's website at http://www.magna.isa.gov.il , on the Tel Aviv Stock Exchange site http://www.tase.co.il (the “ Distribution Sites ”) together with the notice of Annual General Meeting of Shareholders (the “ Notice ”) and this Proxy Statement and mail it as promptly as possible to the Company as specified in the Notice. A Shareholder who receives a Proxy Card by mail may, in lieu of printing the Proxy Card from the Distribution Site, complete, date and sign the Proxy Card and return it to the Company in a pre-addressed envelope which is included in the mailing. In all cases, with regard to Resolutions ‎ (3), ‎ (5), ‎ (6) and ‎ (7), Shareholders must indicate on the proxy card whether or not they are Controlling Shareholders or have a Personal in the resolution. The votes of Shareholders who do not do so will not be counted. A Shareholder who holds its shares through a member of the Tel Aviv Stock Exchange (“ TASE ”) who wishes to vote its shares, in person or by proxy, should obtain a certificate signed by a member of the TASE which complies with the Israel Companies Regulations (Proof of Ownership for Voting in General Meetings), 2000 as proof of ownership of the shares, present such certificate at the Meeting or attach it to a duly executed proxy card. A Shareholder who holds its shares in “street name” (meaning in the name of a bank, broker or other record holder, other than through a member of TASE), must either direct the record holder of its shares on how to vote such shares or obtain a legal proxy from the record holder to vote the shares at the Meeting on behalf of the record holder as well as a statement from such record holder that it did not vote such shares. The Proxy Card and such proxies will also serve as a voting deed (ktav hatzba’a) as that term is defined under the Israeli Companies Law of 1999 (the “ Companies Law ”).

Upon the receipt of a properly executed Proxy Card (including with regard to Resolutions ‎ (2) and ‎ (3), indication on the proxy card whether or not the Shareholder is a Controlling Shareholders or has a Personal Interest in the resolution), no later than October 12, 2013, at 10:00 a.m. (Israel time), i.e. 72 hours before the Meeting and, if shares are held through a member of TASE, the proper proof of ownership as described in the Notice, the persons named as proxies therein will vote the ordinary shares, par value New Israeli Shekel (“ NIS ”) 0.04 of the Company, (the “ Ordinary Shares ”) covered thereby in accordance with the instructions of the Shareholders executing the Proxy Card. In the absence of such instructions, the Ordinary Shares represented thereby will be voted in favor of each of the proposals discussed in this Proxy Statement and for each of the nominees for Directors below. Abstentions will be deemed as neither a vote “FOR” nor “AGAINST” a proposal, although they will be counted in determining whether a quorum is present.

The proxy solicited hereby may be revoked no later than 24 hours prior to the Meeting, by delivering a written revocation to Ms. Gili Shalita, CFO of the Company. Such proxy-revoking Shareholder may vote by attending the Meeting. Directors, Office Holders and employees of the Company may also solicit proxies by telephone, fax, email and personally. Brokers, custodians and fiduciaries may be requested to forward proxy soliciting material to the beneficial owners of Shares held in their names, and the Company may reimburse them for their reasonable out-of-pocket costs.

Except with regard to Position Notices described below, the Company will bear the cost of the preparation and publication of its proxy materials and the solicitation of proxies.

SHAREHOLDERS' POSITION NOTICES

The Companies Law provides that, with regard to those matters that may be voted upon by proxy, the Board of Directors or any Shareholder of the Company may address the Shareholders in writing through the Company in an attempt to influence the manner in which the Shareholders will vote (a "Position Notice" ). Any Shareholder who desires to submit a Position Notice must submit it to the Company no later than the close of business in Israel on September 23, 2013. The Company may respond to such Position Notices no later than October 3, 2013.

The Company will make all Position Notices which have been submitted in a timely manner available to the public through the Distribution Sites. Copies of such Position Notices may also be obtained for no charge at the Company's offices (at the address listed above). The Company will also send to each record holder a copy of each Position Notice timely submitted to it no later than 5 days after it is submitted. The Company will be entitled to reimbursement from a Shareholder who provides such Position Notice for the reasonable cost incurred in sending the Position Notice to the Shareholders. In case of a Position Notice sent by a Shareholder or Shareholders holding shares of the Company having a value of NIS 10,000 or more, (determined according to the closing price of the Ordinary Shares on the day immediately preceding the Record Date, as defined below), the Company will be entitled to reimbursement of up to NIS 200 (approximately $50).

INSPECTION OF PROXY CARDS

One or more Shareholders of the Company’s Ordinary Shares representing five percent or more of the total voting rights of the Company and also one or more holders of that percentage of the voting rights not held by a controlling Shareholder (as defined in Section 268 to the Companies Law) will be entitled to inspect Proxy Cards in accordance with the provisions of Regulation 10 of the Israeli Companies Regulation (Proxy Forms and Position Notices) - 2005.

As of August 26, 2013, the total number of Ordinary Shares representing 5% of the total number of voting rights of the Company is approximately 583,995 shares.

As of August 26, 2013, the total number of Ordinary Shares representing 5% of all voting rights of the Company not held by a controlling Shareholder as set forth above is also approximately 583,995 shares.

RECORD DATE QUORUM AND REQUIRED MAJORITY

Only holders of record of Ordinary Shares at the close of business on September 13, 2013 (the "Record Date" and such holders, “Shareholders” ) are entitled to notice of, and to vote at, the Meeting. On August 26, 2013, 11,679,898 Ordinary Shares were outstanding and entitled to vote. Each Ordinary Share is entitled to one vote on each matter to be voted at the Meeting. All of the Shareholders have the same voting rights.

The attendance at the Meeting of two or more Shareholders, personally, by their representatives or by proxy, who hold 33 1/3% of the voting power of the Company will constitute a quorum for the Meeting. If no quorum is present within a half hour after the time appointed for the holding of the Meeting, the Meeting will stand adjourned to the same day in the following week, at the same time and place, with no need for any notice to the Shareholders. If there is no quorum present at a postponed meeting, the meeting may be postponed to another date.

Resolutions ý (1), ý (4), ý (5), ý (6), ý (7), ý (8) and ý (9) set forth in this Proxy Statement require a simple majority of the total number of votes cast at the meeting. Resolutions ‎ (2) and ‎ (3) require one of the following: a) the majority of the votes at the General Meeting will include a majority of the votes of Shareholders who are not Controlling Shareholders or who do not have a Personal Interest in the approval of the Compensation Policy and who are participating in the vote; abstaining Shareholders will not be regarded as having voted, nor will the vote of a Shareholder who did not indicate whether he or she has a Personal Interest be counted or b) the total votes of the opposing Shareholders among the Shareholders mentioned in sub-paragraph a) will not be greater than 2% of all the voting rights in the Company (a “ Special Majority ”). The Company does not believe that it has any Controlling Shareholders. In all cases, votes may be cast in person or by proxy.

PRINCIPAL SHAREHOLDERS

The following table shows, as of August 26, 2013, certain information as to each person known to the Company to be the beneficial owner of more than 5% of the Ordinary Shares then outstanding and all Directors and officers as a group.

Name	Number of Shares Beneficially Owned			Percentage of Shares (3)
Izhak Nakar		1,826,909	(1)		15.4	%
Ido Schechter		696,377			5.8	%
All executive officers and directors as a group		3,177,250	(2)		25.6	%

(1)	Including 1,562,735 Ordinary Shares of Nir 4 You Technologies Ltd., an Israeli company beneficially owned by Mr. Nakar.

(2)	Includes 1,826,909 Ordinary Shares beneficially owned by Izhak Nakar and 696,377 Ordinary Shares beneficially owned by Ido Schechter.

(3)

The percentage of shares is calculated by dividing the number of shares that an individual owns and the number of shares an individual has the right to acquire within 60 days, with the sum of the number of the outstanding shares of the Company and the number of shares that such individual has the right to acquire within 60 days.

REPORTING REQUIREMENTS

The Company is subject to the information reporting requirements of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), applicable to foreign private issuers. The Company fulfills these requirements by filing reports with the Commission. The Company’s filings with the Commission may be inspected without charge at the Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the Commission at 1-800-SEC-0330. The Company’s filings are also available to the public on the Commission’s website at http://www.sec.gov .

As a foreign private issuer, the Company is exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements. The circulation of the Notice and this Proxy Statement should not be taken as an admission that the Company is subject to the proxy rules under the Exchange Act.

PROPOSALS ON THE AGENDA OF THE MEETING

1.	PROPOSAL TO ELECT DIRECTORS (OTHER THAN EXTERNAL DIRECTOR)

The Board of Directors presently consists of the following persons: Izhak Nakar, Ido Schechter, Elie Housman, Lyron Bentovim, Asael (Asi) Karfiol and Osnat Segev-Harel. Each of Asael Karfiol and Osnat Segev-Harel is an External Director within the meaning of the Companies Law. Each of Asael Karfiol, Osnat Segev-Harel, Elie Housman and Lyron Bentovim is an “independent director” within the meaning of NASDAQ Rule 5605(a)(2). The appointment of Asael Karfiol will expire on November 24, 2013 and the appointment of Osnat Segev-Harel will expire in December, 2014.

The Board of Directors has recommended the persons named below for election as Directors to serve until the next annual general meeting of the Shareholders.

The following table provides certain relevant information concerning the nominees, including their principal occupations during the past five years and backgrounds:

Nominee	Age	Principal Occupation and Background
Izhak Nakar	61	Izhak Nakar founded Top Image Systems in 1991 and served as Chief Executive Officer & Chairman of the Board of the Company until 2001. Between 2001 and 2009 Mr. Nakar served as a Director in the Company. Since 2009, Mr. Nakar serves as the Active Chairman of the Board. Mr. Nakar has co-founded several technology companies including the Company and TopGuard (acquired by Elron Software NASDAQ:ELRN), e-Mobilis and has founded Anir Vision and NIR 4 YOU TECHNOLOGY. Mr. Nakar served in the Israeli Air Force from 1970 to 1987, where he led various large-scale, highly technical development projects, including leading a development team that worked in cooperation with the U.S. Air Force. He received his B.Sc. in Computer Science from Bar Ilan University in 1982, and an MBA from Bar Ilan University in 1984. Mr. Nakar is a recipient of the “Israel Defense Award,” bestowed annually by the President of Israel, for the development of high-tech systems in the field of intelligence for the Israeli Defense Forces. He also received the “Man of the Year Award” in Business and Management (‘95-’96) in recognition of his business accomplishments and contributions to the growth and development of Israeli high-tech companies. In addition, in 2004, Mr. Nakar was elected as a member of the Board of Israel-Japan chamber of Commerce.
Elie Housman	76	Elie Housman has been a Director of the Company since May 2000 and a member of the Company’s audit committee (the “ Audit Committee ”) since 2002. Mr. Housman was a principal at and consultant to Charterhouse Group International (“ Charterhouse ”) from 1989 until June 2001. At Charterhouse, Mr. Housman was involved in the acquisition of a number of companies with total sales of several hundred million dollars. Prior to Charterhouse, he was co-owner of AP Parts, a $250 million automotive parts manufacturer. Mr. Housman was also the Chairman of Novo Plc. of London, a leading company in the broadcast storage and services industry. At present, Mr. Housman is a director of three public companies, ICTS International, N.V., a prominent aviation security company. Mr. Elie Housman will serve as a Director possessing financial and accounting expertise as determined by the Company following Section 92(a)(12) of the Companies Law.

Dr. Ido Schechter	53	Dr. Ido Schechter has been the CEO of the Company since January 2002. From January 2001 until he became CEO, Dr. Schechter was Vice President of the Company’s ASP2, an initiative of the Company to offer data collection services via the Internet, using the eFLOW platform solution. Prior to that, Dr. Schechter was the Company’s Vice President of Sales From August 1996. From January 1995 until August 1996, Dr. Schechter served as General Manager of Super Image, a former affiliate of the Company, which operated a form processing service bureau. From August 1993 to December 1994, Dr. Schechter oversaw the start-up of automatic form processing services at Israel Credit Cards, Ltd. From 1991 to 1993, Dr. Schechter was a research scientist at the Horticultural Research Institute of Ontario, Canada. Dr. Schechter is the recipient of eight Honors and Scholarships, has published or presented more than twenty-five articles and is a Captain in the Israeli Air Force. Dr. Schechter received his Ph.D. and M.Sc. in Plant Physiology from the University of Guelph in Ontario, Canada and his B.Sc. from the Hebrew University in Israel. Dr. Schechter has served on the Board of Directors since December 2005.
Lyron Bentovim	44	Lyron Bentovim has been serving as a director of the Company from November, 2008. From August 2009 until July 2012, Mr. Bentovim served as the Chief Operating Officer and the Chief Financial Officer of Sunrise Telecom Inc, a US company engaged in developing test and measurement solutions for telecom networks. Prior to joining Sunrise Telecom Inc. since January 2002, Mr. Bentovim has been a Portfolio Manager for Skiritai Capital LLC, an investment advisor based in San Francisco which holds approximately 4.6% of the issued and outstanding capital stock of the Company. He has over 20 years of industry experience, including his experience as a member of the Board of directors at RTW Inc., Ault Inc, Manhattan Bridge Capital Inc., Three-Five Systems Inc., Sunrise Telecom Incorporated, and Argonaut Technologies Inc. Prior to his position in Skiritai Capital LLC, Mr. Bentovim served as the President, COO, and co-founder of WebBrix Inc. Additionally; Mr. Bentovim spent time as a Senior Engagement Manager with strategy consultancies USWeb/CKS, the Mitchell Madison Group LLC and McKinsey & Company Inc. As a Senior Engagement Manager, Mr. Bentovim advised many Fortune 1000 companies in the Financial Services, Insurance, Retail, and Manufacturing sectors. During his consulting career, Mr. Bentovim assisted companies in exploring and developing solutions in the areas of strategic planning and operational improvements. Mr. Bentovim is experienced in evaluating Global 500 organizations and implementing strategies designed to streamline processes, reduce inefficiencies and achieve significant overhead reductions. Mr. Bentovim has an MBA from Yale School of Management and a Law degree from the Hebrew University in Jerusalem.

The information is based on data provided to us by the relevant director.

During 2013 to date, the Board of Directors met 5 times and acted 1 time by unanimous written consent. Each of the Directors attended (in person or by proxy) no fewer than 75% of those meetings.

Remuneration of Officers and Directors

For the year ended December 31, 2012, Dr. Schechter was paid $486,000. That amount included his base salary of $262,000, a bonus of $144,000 for the Company's performance during 2012 and $80,000 paid or reserved for automobile allowance, pension, retirement, severance, vacation or similar benefits.

For the year ended December 31, 201 2 , the compensation paid, and the value of benefits in kind granted, to Mr. Izhak Nakar, the Active Chairman, was $338,000, and a bonus of $144,000 for the Company's performance during 2012.

The compensation paid to all other persons, as a group, who were, at December 31, 2012, Directors or members of our administrative, supervisory or management bodies during that time was $94,000.

In the absence of instructions to the contrary, the persons named in the enclosed proxy will vote the Ordinary Shares represented thereby “FOR” the election of each of the nominees listed below.

If any of such nominees is unable to serve, the person named in the Proxy Card will vote the shares for the election of such other nominees as Board of Directors may propose. The nominees have advised that they agreed to serve as Directors if elected.

For each individual nominee to the Board of Directors, the vote will be separate.

RESOLVED , to elect Izhak Nakar, Elie Housman, Ido Schechter and Lyron Bentovim as Directors to serve until the next annual general meeting of the Company.

The Board of Directors recommends that the Shareholders vote “FOR” the election of each of Izhak Nakar, Elie Housman, Ido Schechter and Lyron Bentovim as Directors to serve until the next annual general meeting of the Shareholders.

2.	PROPOSAL TO ELECT ONE EXTERNAL DIRECTOR FOR AN ADDITIONAL TERM

Israeli law requires that the Company have two external directors in office at all times. An external director is appointed for a period of three years that may be extended for two additional three year period. A person may not be appointed as an External Director if:

Such person or his or her relative, partner, employer or any person to which they are directly or indirectly subordinate, or any entity under that person’s control, has or had, on or within the two years preceding the date of such appointment as an external director, any affiliation with the Company, with a Controlling Shareholder at the date of such appointment or their relative, or with an entity controlling, controlled by or under common control with the Company or, in a company that has no Controlling Shareholder, an affiliation to a person who at the date of such appointment acts as the company’s chairman of the Board, CEO, a principal shareholder or the most senior officer in the financial field. The term "affiliation" includes an employment relationship, a regular business or professional relationship, control, and service as an office holder other than service as a director appointed as an external director in a company offering shares to the public for the first time.

Such person's position or business activities create or may create a conflict of interests or interfere with such person's ability to serve in the capacity of an external director.

Such person acts as a director of another company in which one of the external directors acts as a director in the Company.

Such person is an employee of the securities authority or of the Tel Aviv Stock Exchange.

Such person or their relative, partner, employer or any person to which he or she is directly or indirectly subordinate, or any entity under that person’s control, has a professional or business relationship with a person to whom affiliation is prohibited, even if such relationship is not maintained regularly, aside for negligible relationships.

Under the Companies Law and regulations promulgated under it, a person is qualified to serve as an external director only if he or she possesses accounting and financial expertise or professional competence. At least one of the external directors must have accounting and financial expertise.

At the annual general meeting held on November 25, 2010, the election of Mr. Asi Karfiol for his second term as an External Director of the Company was approved by the Shareholders. Mr. Karfiol’s appointment is to expire on November 24, 2013. Therefore, the Board of Directors of the Company recommends that Mr. Karfiol be appointed as an External Director for his third three-year term. Mr. Karfiol has declared and warranted to the Company that all the conditions provided by the Companies Law for his appointment have been fully satisfied. It is noted that the Board of Directors has determined that Mr. Karfiol has accounting and financial expertise, required for purposes of the Companies Law and in order to qualify as a financially sophisticated Audit Committee member required under Nasdaq rules.

Below is certain relevant information concerning the recommended External Director, including her principal occupation during the past five years:

Nominee	Age	Principal Occupation and Background
Asi Karfiol	47	Asi Karfiol, I.D. no 058089939, is an Israeli citizen who resides at Raanana, Israel. Asi Karfiol was elected to serve as our external director for the second term –in November 2010. Mr. Karfiol has been active in the field of venture capital and investment banking for more than 15 years in which he incorporates his financial education and expertise together with his technological and marketing education and expertise. Mr. Karfiol is a partner and an Executive Director in Mooreland Partners, a global technology focused investment banking firm based in Greenwich Connecticut, with offices in New York, Silicon Valley and London. Prior to that, Mr. Karfiol served as General Partner at Hyperion Israel Venture Partners for seven years. From 1995 through 2001, Mr. Karfiol served as Vice President at Ascend Venture Capital, an Israeli venture capital fund and at ITI – Integrated Technologies of Israel, an American-Israeli investment company. Prior to that, Mr. Karfiol served as Marketing Manager for the Keter Plastic Group and as General Manager of a strategic international marketing consulting firm for leading Israeli corporations. Mr. Karfiol holds a B.Sc. (summa cum laude) in Electrical Engineering and an MBA (magna cum laude) from Tel Aviv University. Certification Program at Bar Ilan University. Mr. Karfiol possesses professional competence as required by the Companies Law and regulations deriving thereof.

RESOLVED , to elect Mr. Karfiol as an External Director to serve for an additional period of three years until November 24, 2016.

The Board of Directors recommends that the Shareholders vote "FOR" the election of Mr. Asi Karfiol as an External Director to serve until November 24, 2016.

Approval of this resolution requires a Special Majority.

3.	PROPOSAL TO APPROVE THE COMPANY'S COMPENSATION POLICY.

In accordance with recent amendments to the Companies Law, a public company, such as the Company, is required to adopt a compensation policy setting forth the principles that govern the terms of office and employment (including cash and equity-based compensation, exemption from liability, indemnification, D&O insurance and other benefits and payments related to the service and employment) of the “office holders” of a company, as defined in the Companies Law. These amendments to the Companies Law also define the criteria to be considered or included in the compensation policy. Subject to certain exceptions, the compensation policy must be approved by the company’s shareholders.

On August 29, 2013, the Company's Board of Directors, based on the recommendation of its Compensation Committee of the same day, resolved to approve the compensation policy in the form available on the Company’s website at www.TopImageSystems.com and on the Distribution Sites (the " Compensation Policy ").

The Compensation Committee and the Board of Directors believe that the most effective executive compensation program is one that is designed to reward achievement and that aligns executives’ interests with those of the Company and its shareholders by rewarding performance, with the ultimate objective of improving shareholder value and building a sustainable company. The Compensation Committee and the Board of Directors also seek to ensure that the Company will maintain its ability to attract and retain superior employees in key positions and that the compensation provided to key employees will remain competitive relative to the compensation paid to similarly situated executives of a selected group of our peer companies and the broader marketplace from which the Company recruits and competes for talent. The Compensation Committee and the Board of Directors believes that the Compensation Policy properly balances the requirements of the Companies Law and the philosophy and objectives described above.

All of the directors have a personal interest in the approval of the Compensation Policy because it will govern their compensation. The Companies Law also requires that the Compensation Policy be approved by the General Meeting of Shareholders, with a Special Majority. In the event the Shareholders do not approve the proposed Compensation Policy, the Company is entitled to adopt it anyway, provided that the Compensation Committee and afterwards the Board of Directors determined, based on detailed grounds and after further discussion of the Compensation Policy, that the approval of the Compensation Policy despite the opposition of the General Meeting, is for the benefit of the Company.

The Compensation Committee and the Board of Directors have determined that the present compensation of the Company's Office Holders - as well as those aspects of their compensation that are being submitted to the approval of the Shareholders at this meeting – is consistent with the Compensation Policy.

RESOLVED , to approve the Company's Compensation Policy.

The Board of Directors recommends that the Shareholders vote "FOR" approving the Company's Compensation Policy.

Approval of this resolution requires a Special Majority.

4.	PROPOSAL TO APPROVE THE AMENDMENT AND RESTATEMENT OF THE COMPANY'S ISRAELI SHARE OPTION PLAN AND THE RESERVATION OF ADDITIONAL SHARES FOR AWARD UNDER IT.

On August 29, 2013, the Company's Board of Directors, based on the recommendation of the Company's Compensation Committee of the same day, resolved to amend and restate the Company's 2003 Israeli Share Option Plan. The form of the amended and restated ISOP is available on the Company’s website at www.TopImageSystems.com and on the Distribution Sites (the " Amended and Restated ISOP "). At the same time, the Board (based on the recommendation of the Compensation Committee), decided to reserve an additional 1,100,000 Ordinary Shares of the Company for issue under the Amended and Restated ISOP.

In large measure, the Amended and Restated ISOP maintains the conditions of the ISOP. However, it incorporates changes, inter alia, with regard to conformance with provisions of relevant tax law, with regard to the treatment of options in the context of a merger or acquisition of the Company and with regard to the default vesting terms of options awarded under it.

All of the directors have a personal interest in the approval of the Amended and Restated ISOP because it will govern any options that may be issued to them.

RESOLVED , to approve the Amended and Restated ISOP and the reservation of an additional 1,100,000 Ordinary Shares of the Company for issue under it .

The Board of Directors recommends that the Shareholders vote "FOR" approving the Amended and Restated ISOP and reserving the shares.

5.	PROPOSAL TO APPROVE THE TERMS OF COMPENSATION OF THE DIRECTORS FOR 2013.

Pursuant to Israeli law, the terms of compensation of members of the Board of directors of a publicly traded company require approval of the Compensation Committee, the Board of directors and the Shareholders of such company and must be in accordance with the Compensation Policy. The compensation for external directors is set at the date of their appointment and cannot be modified during their term of service except when reappointed or when a new external director is appointed and only for the purpose of equalizing the terms of the existing external director in favor of such existing external director. If a company sets its external director’s annual compensation or participation compensation (in a certain range as set forth in the Companies Regulations Principles Relating Compensation and Expenses to an External Director) - 2000, it is exempt from approving such compensation by its Shareholders. The annual compensation and participation compensation offered by the Company to its External Directors is within that range. Therefore, the Company has not brought this matter to the approval of the General Meeting. However, options to purchase shares given to External Directors must be approved by the General Meeting. By law, the conditions of employment for members of the Compensation Committee who are not external directors must be equivalent to those of the external directors.

The Shareholders are asked to decide with regard to the following terms of compensation for the Directors:

In addition to their annual compensations and participation compensations, each of Mr. Asael Karfiol and Ms. Osnat Segev-Harel (both are external directors) will be awarded options (in addition to options already awarded them and provided that the Shareholders approve Resolution ‎ 4 above,) in accordance with the Amended and Restated ISOP, to acquire 25,000 Ordinary Shares of the Company. Absent a transaction that would result in the sale of all or substantially all of the assets or share capital of the Company (a “ Change of Control ”), half of the options will vest on December 31, 2013 and the remainder on December 31, 2014. In the event of a Change in Control, any unvested portion of the options will vest immediately. The exercise price per share of the options will be equal to the closing price of the Company’s shares on the date of the General Meeting.

Since each of Messrs. Elie Housman and Lyron Bentovim is a member of the Compensation Committee, their annual compensations and participation compensations will be equivalent to that of the external directors, including the award of options (in addition to options already awarded them and provided that the Shareholders approve Resolution ‎ 4 above,) in accordance with the Amended and Restated ISOP, to acquire 25,000 Ordinary Shares of the Company. Absent a Change of Control, half of the options will vest on December 31, 2013 and the remainder on December 31, 2014. In the event of a Change in Control, any unvested portion of the options will vest immediately. The exercise price per share of the options will be equal to the closing price of the Company’s shares on the date of the General Meeting. The annual compensation and participation compensations of each of the external directors are based on the "fixed sums" as defined in the relevant regulations, which are currently NIS 36,935 (approximately $10,120)per year and NIS 2,470 (approximately $677) per meeting in the director participates, subject to change in accordance with the law and regulations.

Mr. Izhak Nakar and Dr. Ido Schechter have waived, for 2014, any separate compensation in return for serving as Directors in excess of their compensation as the Active Chairman and the Chief Executive Officer of the Company (respectively) in accordance with Proposal ‎ 7 and Proposal ‎ 6.

The Compensation Committee approved the above compensation of the Directors on August 29, 2013. The Board of Directors approved the above compensation on the same day. Both the Compensation Committee and the Board of Directors determined that, the compensation of the Directors is consistent with Section 267B(a) of the Companies Law and relates to the matters listed in Parts A and B of the First Addendum A of the Companies Law.

All of the directors have a personal interest in the approval of the compensation of the Directors.

RESOLVED, to approve the terms of compensation of the Directors for 2013 as described in Proposal No. ‎ 5 .

The Board of Directors recommends that the Shareholders vote "FOR" approving the terms of compensation of the Directors for 2013.

6.	PROPOSAL TO APPROVE THE AWARD OF OPTIONS AND PERFORMANCE BONUS FOR 2013 FOR DR. IDO SCHECHTER, THE CHIEF EXECUTIVE OFFICER.

Dr. Ido Schechter currently serves as both a Director and as the Chief Executive Officer of the Company. Pursuant to Israeli law, the terms of compensation of a director of a publicly traded company, including with respect to such director’s services in other positions or capacities) require approval of the Compensation Committee, the Board of directors and the shareholders of such company and must be in accordance with the Compensation Policy.

The Shareholders are asked to decide with regard to the following additional terms of compensation for Dr. Schechter

In addition to his other terms of employment, provided that the Shareholders approve Resolution ‎ 4 above, Dr. Schechter will be awarded options (in addition to options previously awarded him) in accordance with the Amended and Restated ISOP, to acquire 30,000 Ordinary Shares of the Company. Absent a Change of Control, half of the options will vest on December 31, 2013 and the remainder on December 31, 2014. In the event of a Change in Control, any unvested portion of the options will vest immediately. The exercise price per share of the options will be equal to the closing price of the Company’s shares on the date of the General Meeting.

As further incentive, Dr. Schechter will be entitled to receive the following performance bonus for 2013:

Dr. Schechter will be entitled to receive 4% of the Company’s EBITDA for the year ended December 31, 2013, provided , however that Company will achieve at least 90% of the Revenue Target and EBIDTA Target.

The Company’s “ Revenue Target ” was set by the Board of Directors at $37,500,000, and the “ EBITDA Target ” was set by the Board of Directors at $4,225,000.

It is noted that Dr. Schechter's other terms of employment were approved at the last General Meeting of Shareholders and do not require renewed approval at this time. Dr. Schechter has waived and will not be entitled to receive the annual and per meeting payments payable to the other Directors.

The Compensation Committee approved the award of options and performance bonus for Dr. Schechter on August 29, 2013. The Board of Directors, approved the award of options and performance bonus to Dr. Schechter on the same day. Both the Compensation Committee and the Board of Directors determined that, the terms of compensation of Dr. Schechter are consistent with Section 267B(a) of the Companies Law and relate to the matters listed in Parts A and B of the First Addendum A of the Companies Law.

Dr. Schecter has a personal interest in the approval of the award of options and performance bonus.

RESOLVED, to approve the award of options and performance bonus for Dr. Schechter, as described in Proposal No. ‎ 6.

The Board of Directors recommends that the Shareholders vote “FOR” the approval of the terms of compensation to Dr. Schechter as described in Proposal No. ý6 above.

7.	PROPOSAL TO APPROVE THE AWARD OF OPTIONS AND PERFORMANCE BONUS FOR 2013 FOR MR. IZHAK NAKAR, THE ACTIVE CHAIRMAN.

Izhak Nakar currently serves as a Director and as the Active Chairman. Pursuant to Israeli law, the terms of compensation of a director of a publicly traded company, including with respect to such director’s services in other positions or capacities) require approval of the Compensation Committee, the Board of directors and the shareholders of such company and must be in accordance with the Compensation Policy.

The Shareholders are asked to decide with regard to the following additional terms of compensation for Mr. Nakar.

In addition to his other terms of employment, provided that the Shareholders approve Resolution ‎ 4 above, Mr. Nakar will be awarded options (in addition to options previously awarded him) in accordance with the Amended and Restated ISOP, to acquire 30,000 Ordinary Shares of the Company. Absent a Change of Control, half of the options will vest on December 31, 2013 and the remainder on December 31, 2014. In the event of a Change in Control, any unvested portion of the options will vest immediately. The exercise price per share of the options will be equal to the closing price of the Company’s shares on the date of the General Meeting.

As further incentive, Mr. Nakar will be entitled to receive the following bonus for 2013:

Mr. Nakar will be entitled to receive 4% of the Company’s EBITDA for the year ended December 31, 2013, provided , however that Company will achieve at least 90% of the Revenue Target and EBITDA Target.

The Company’s “ Revenue Target ” was set by the Board of Directors at $37,500,000, and the “ EBITDA Target ” was set by the Board of Directors at $4,225,000.

It is noted that Mr. Nakar's other terms of employment were approved at the last General Meeting of Shareholders and do not require renewed approval at this time. Mr. Nakar has waived and will not be entitled to receive the annual and per meeting payments payable to the other Directors.

The Compensation Committee approved the award of options and performance bonus for Mr. Nakar on August 29, 2013. The Board of Directors, approved the award of options and performance bonus to Mr. Nakar on the same day. Both the Compensation Committee and the Board of Directors determined that, the terms of compensation of Mr. Nakar are consistent with Section 267B(a) of the Companies Law and relate to the matters listed in Parts A and B of the First Addendum A of the Companies Law.

Mr. Nakar has a personal interest in the approval of the award of options and performance bonus.

RESOLVED, to approve the award of options and performance bonus for Mr. Nakar, as described in Proposal No. ‎ 7 .

The Board of Directors recommends that the Shareholders vote “FOR” the approval of the terms of compensation to Dr. Schechter as described in Proposal No. ý7 above.

8.	PROPOSAL TO EXTEND THE APPOINTMENT OF THE INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY UNTIL THE NEXT ANNUAL GENERAL MEETING OF THE COMPANY.

At the last annual meeting of Shareholders, following the recommendation of the Board of Directors, the Shareholders appointed the accounting firm of Kost, Forer, Gabbay & Kasierer, a member of Ernst & Young Global as independent certified public accountants of the Company until the next annual general meeting of the Company. It is proposed to extend the appointment of Kost, Forer, Gabbay & Kasierer until the next annual general meeting of the Company.

The Shareholders of the Company are requested to decide on the following resolution :

RESOLVED, to extend the appointment of Kost, Forer, Gabbay & Kasierer as the independent public accountants of the Company until the next annual general meeting of the Company and to authorize the Board of Directors to determine the remuneration of such auditors in accordance with the volume and nature of their services, subject to the approval of the Audit Committee.

The Board of Directors recommends that the Shareholders vote “FOR” the approval of the extension of the appointment of the independent public accountant of the Company in accordance with the above resolution.

9.	REVIEW OF THE COMPANY’S CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012

A copy of the Company’s audited consolidated financial statements for the year ended December 31, 2012 is available on the Company’s website at www.TopImageSystems.com and on the Distribution Sites.

At the Meeting, the Directors will present the annual report, the audited consolidated financial statements for the year ended December 31, 2012, and the auditor’s report in respect thereof and will answer appropriate questions with regard to them.

Management is not aware of any other matters to be presented at the Meeting. If, however, any other matters should properly come before the Meeting or any adjournment thereof, the proxy confers discretionary authority with respect to acting thereon, and the persons named in the enclosed proxy will vote on such matters in accordance with their best judgment.

Shareholders are urged to complete and return their proxies promptly in order, among other things, to ensure action by a quorum and to avoid the expense of additional solicitation. If the accompanying proxy is properly executed and returned in time, and a choice is specified, the shares represented thereby will be voted as indicated thereon. If no specification is made, the proxy will be voted in favor of each of the proposals described in this Proxy Statement.

By Order of the Board of Directors

TOP IMAGE SYSTEMS LTD.

Izhak Nakar

Active Chairman of the Board of Directors

Tel Aviv, Israel

Date: September 3, 2013

TOP IMAGE SYSTEMS LIMITED

For the Annual General Meeting of Shareholders to be held

The undersigned shareholder of Top Image Systems Limited (the "Company" ) hereby appoints Mr. Itzhak Nakar – and, if he will be unable to attend the meeting, Dr. Ido Schechter - with full power of substitution, as the true and lawful attorney, agent and proxy of the undersigned, to vote, as indicated on the reverse side, all of the Ordinary Shares of the Company which the undersigned is entitled to vote at the Annual Meeting of Shareholders of the Company to be held at the corporate offices of Top Image Systems at 1 B.S.R. Tower, 2 Ben Gurion St., Ramat Gan, Israel on October 15, 2013 at 10:00 a.m. (local time), and all adjournments and postponements thereof.

(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)

x Please mark your votes as in this example

1.	PROPOSAL NO. 1: Election of directors who are not external directors	FOR	AGAINST	ABSTAIN			FOR	AGAINST	ABSTAIN
	Izhak Nakar	o	o	o	4.	PROPOSAL NO. 4: To approve the amendment and restatement of the Company's Israeli Share Option Plan and the reservation of shares for award under it	o	o	o
	Elie Housman	o	o	o	5.	PROPOSAL NO. 5: To approve the terms of compensation for the Company's directors for 2013.	o	o	o
	Ido Schechter	o	o	o
	Lyron Bentovim	o	o	o	6.	PROPOSAL NO. 6: To approve THE award of options and performance bonus for 2013 for Dr. Ido Schechter, the Company's Chief Executive Officer.	o	o	o

2.	PROPOSAL NO. 2: Election of one external director for additional term, to serve until November 24, 2016.				7.	PROPOSAL NO. 7: To approve the award of options and performance bonus for 2013 for Mr. Izhak Nakar, the Company's Active Chairman.	o	o	o
	Asi Karfiol	o	o	o
	In connection with this proposal, please state whether or not you have a Personal Interest (as defined in the Companies Law) in the proposal. If you fail to indicate whether or not you have a Personal Interest, your shares will not be voted and your vote will not be counted for the resolution.	o yes o no			8.	PROPOSAL NO. 8. To extend the appointment of Kost, Forer, Gabbay & Kasierer, a member of Ernst & Young Global as the independent public accountants of the Company until the next annual general meeting of the Company, and to authorize the Board of Directors to determine the remuneration of such auditors in accordance with the volume and nature of their services, subject to the approval of the audit committee of the Company.	o	o	o
3.	PROPOSAL NO. 3: To approve the Company's Compensation Policy	o	o	o

	In connection with this proposal, please state whether or not you have a Personal Interest in the proposal. If you fail to indicate whether or not you have a Personal Interest, your shares will not be voted and your vote will not be counted for the resolution.	o yes o no

This proxy when properly executed will be voted in the manner directed herein. If no direction is made, this Proxy will be voted FOR all of the above proposals. The undersigned hereby acknowledges receipt of the Notice of the Annual General Meeting of Shareholders and the Proxy Statement accompanying such Notice. This proxy revokes any proxy or proxies heretofore given to vote upon or act with respect to the undersigned's shares. The undersigned hereby ratifies and confirms all that the proxies, their substitutes, or any of them, may lawfully do by virtue hereof.

			______________, 2013
NAME OF SHAREHOLDER IN BLOCK LETTERS		(SIGNATURE OF SHAREHOLDER)	DATE

Note:

If the signer is an officer of a corporation, an executor, an administrator, a trustee or similar representative, the full title or capacity should be stated. Joint owners should each sign.

Compensation Policy for Executive Officers and Directors

1. Background	2
2. Compensation Objectives	2
3. Compensation policy	3
3.1. Officers’ Compensation Package Components	3
3.2. Base Salary	4
3.3. Benefits and Perquisites	5
3.4. Cash Bonus	6
3.5. Equity based Compensation	8
3.6. Retirement and termination of service arrangements	9
3.7. Inter-Company Compensation Ratio	10
3.8. Non-Employees Directors’ Compensation	10
3.9. Insurance, Exculpation and Indemnification	11
4. Management and Control	12

B.S.R Tower 1 // 2 Ben Gurion Street Ramat Gan 52573, Israel // Tel + 972 3 767 9100 // www.topimagesystems.com

Amendment No. 20 to the Israeli Companies Law was enacted on December 12 th , 2012. This amendment mandates the adoption of a compensation policy for Executive Officers and Directors in publicly-traded companies, and defines a special procedure for authorizing employment terms for office holders.

The purpose of the Compensation Policy is to describe TIS's overall compensation strategy for executive officers and directors and to provide guidelines for setting compensation of its executive officers and directors.

The Compensation Policy is a multi-year policy which shall be in effect for a period of three years from the date of its approval. The Compensation Committee and the Board of Directors shall review the Compensation Policy from time to time, as required by the Companies Law. The Compensation Policy shall be reapproved as required by the Companies Law, every three years.

For purposes of this Policy, "officers" shall mean "office holders" as such term is defined in the Companies Law, excluding, unless otherwise expressly indicated herein, TIS' directors.

This Compensation Policy shall apply to compensation agreements and arrangements which will be approved after the date on which this Compensation Policy is approved by the shareholders of TIS.

It is hereby clarified that nothing in this Compensation Policy shall be deemed to grant any of TIS’s Officers or employees or any third party any right or privilege in connection with their employment by the Company.

2.	Co mpensa tion Objectives

Strong and effective leadership is fundamental to TIS’s continued growth and success in the future. This requires the ability to attract, retain, reward and motivate highly-skilled officers in competitive labor markets.

The Compensation Policy is intended to align between the need to incentivize officers to succeed in achieving their goals and the need to assure that the compensation structure meets TIS’s interests and its overall financial and strategic objectives.

B.S.R Tower 1 // 2 Ben Gurion Street Ramat Gan 52573, Israel // Tel + 972 3 767 9100 // www.topimagesystems.com

In support of this goal, TIS's officer's compensation practices are designed to meet the following objectives:

Improve business results (Gross Profit / Operating Profit / EBITDA) and strategy implementation, and support work-plan’s goals, through a long term perspective.

Create an appropriate incentive taking into account; inter alia, the risk management policy of the Company.

Balance rewards for both short-term and long-term results to ensure sustained business performance over time.

Create a clear line-of-sight between officers’ compensation and both Company and individual performance.

Align Officers’ interests with those of the Company and its shareholders and incentivize achievement of long term goals.

Create fair and reasonable incentives, considering the Company's size, characteristics and type of activity.

Create the right balance between fixed and variable pay components.

3.	Compensa tio n Policy

3.1.

Officers’ Compensation Package Components

Officers’ compensation packages will generally be comprised of the following elements:

Base Salary – a fixed monetary compensation paid monthly.

Benefits and Perquisites – programs designed to supplement cash compensation, based on local market practice for comparable positions.

Cash Bonus (Short Term Incentive) – variable monetary bonus paid annually, designed to reward officers based on both the Company’s and individually defined results.

Equity based Compensation (Long Term Incentive) – variable equity based compensation designed to retain officers, align officers’ and shareholders’ interests and incentivize achievement of long term goals.

Termination Payments - retirement and termination of service arrangements.

B.S.R Tower 1 // 2 Ben Gurion Street Ramat Gan 52573, Israel // Tel + 972 3 767 9100 // www.topimagesystems.com

The “mix” of the elements that will be provided to each officer will be structured in order to support the Company’s philosophy of compensating officers for Company and individual performance and aligning their interests with shareholder interests, while recognizing that the mix may vary from period to period and from officer to officer.

Notwithstanding the foregoing, variable compensation components may not exceed 60% of an officer’s total compensation package with respect to any given calendar year.

Base salary is a fixed compensation element which provides compensation to an officer for performance of his or her standard duties and responsibilities and reflects the officer's role, skills, qualifications, experience and market value (the “ Base Salary ”).

The Base Salary for newly hire officers will be set based on the following considerations:

Role and business responsibilities.

Professional experience, education, expertise and qualifications.

Previous compensation paid to the officer.

The Company’s financial state.

Internal equity: (a) Base salary and the total compensation package of comparable TIS’ officers; (b) The relationship between the officer’s compensation package and the salaries of the Company’s other employees and specifically the median and average salaries and the effect of such relationship on work relations in the Company.

External equity - Market value (based on a comparative salary survey 1 ).

When deciding on increasing an officer’s Base Salary, the following considerations, in addition to the abovementioned, shall be applied: Changes to the officer’s scope of responsibilities and business challenges, the need to retain the officer, Inflation since the last Base Salary update and updated market rate (based on a comparative salary survey).

Adjustments to base salary may be periodically reviewed, considered and approved by the Compensation Committee and the Board.

1 The survey is based on sample of technology companies in hi-tech and life sciences with annual revenues in the range of 50-250 million ILS. Most of the companies are publicly-traded companies (listed in Tel Aviv, NASDAQ or dual companies) while the others are private companies of the same size as well as local subsidiaries of multinational companies of the same size.

B.S.R Tower 1 // 2 Ben Gurion Street Ramat Gan 52573, Israel // Tel + 972 3 767 9100 // www.topimagesystems.com

The following table indicates the maximum of monthly salaries for each position:

Position	Maximum Base Salary (Nis)
CEO		95,000
CFO		50,000
VPs / CTO (Non Israeli based)*		70,000
VPs / CTO (Israeli based)		40,000

* The salary was converted into NIS according to the exchange rate known at the time of writing the compensation policy.

3.3.

Benefits and perquisites

The following benefits and perquisites may be granted to the Officers in order, among other things, to comply with legal requirements:

Pension and savings – subject to applicable law, officers can choose between any combinations of executive insurance and a pension fund.

Disability insurance – the Company will purchase disability insurance for officers; premium will not exceed 2.5% of the monthly salary.

Providence fund – officers are entitled to a providence fund provision at the expense of the Company at a rate of 7.5% of the monthly salary.

Convalescence pay - officers are entitled to convalescence pay according to applicable law.

Vacation – officers are entitled to annual vacation days pursuant to their employment agreement, up to a cap of 25 days per annum.

Sick Days – officers will be entitled to paid sick days in accordance with law. However, the Company may cover sick days from the first day.

TIS may offer additional benefits and perquisites to the Officers, which will be comparable to customary market practices, such as, but not limited to: company car benefits; company cellular phone; reimbursement of business travel including a daily stipend when traveling and other business related expenses; complementary health insurance; meals; etc.; provided however, that such additional benefits and perquisites shall be determined in accordance with TIS's policies and procedures

B.S.R Tower 1 // 2 Ben Gurion Street Ramat Gan 52573, Israel // Tel + 972 3 767 9100 // www.topimagesystems.com

Non-Israeli Officers may receive similar, comparable or customary benefits and perquisites as applicable in the jurisdiction in which they are employed.

TIS’ short term incentive scheme will be based on a variable monetary bonus paid annually, designed to reward officers based on the Company and his/her individually defined results (the “ Bonus ”).

Before the beginning of each calendar year, following recommendation of the CEO (and with respect to the CEO and the Chairman, following recommendation of the chairman of the Compensation Committee), the Compensation Committee and the Board will determine the following for each officer as well as the formula for calculating the bonus payment at the end of the year:

Maximum Bonus (cap) : The maximum bonus is the maximum amount an officer will be entitled to receive upon overachievement. The maximum bonus for each officer will be no more than 12 months of fixed monthly compensation.

The total maximum annual Bonus amount of all TIS officers (including the Chairman of the Board) shall not exceed 15% of TIS’s Non-GAAP Operation Profit.

Objectives : The bonus parameters will be determined based on pre-defined measurable and quantified considerations.

Financial indices of the Bonus mainly include (but are not limited to) any one or more of the following criteria:

-	Net Profit

-	Operating Profit

-	Gross Profit

EBITDA

Revenue

-	Meeting the Company's budget

B.S.R Tower 1 // 2 Ben Gurion Street Ramat Gan 52573, Israel // Tel + 972 3 767 9100 // www.topimagesystems.com

All financial indices mentioned above may use either GAAP or NON-GAAP measurements.

The weight which shall be assigned to the component of financial indices, out of the target Bonus, shall be at least 75%.

Other indices of the Bonus may include (but is not limited to) any one or more of the following criteria:

Define and initiate new products and new markets

Customer satisfaction

Compliance with individual milestones (as relevant for each officer)

Promoting strategic targets

In addition, up to 20% of an officer’s annual cash target bonus may be discretionary, based on the evaluation of his or her supervisors.

Thresholds : The Compensation Committee and the Board may, with respect to any period or officer, determine one or more thresholds for the payment of the annual cash bonus or any components thereof, in such manner that if the threshold is not achieved, the annual cash bonus or the particular component thereof, with respect to which the threshold was not achieved, will not be paid.

Compensation Recovery : A claw back provision, allowing the recovery of money paid based on incorrect financial statements, which was later corrected in the Company’s financial reports (restatement). Claw back limit will be applied only in respect of restatements, up to three years from the applicable Bonus payment, and will not exceed the net amount received by the officers. Notwithstanding the aforesaid, the compensation recovery will not be triggered in the event of a financial restatement required due to changes in the applicable financial reporting standards. The officer shall repay to the Company the balance between the original Bonus and the Bonus due to the restated financial statements, pursuant to terms that shall be determined by the Board of Directors.

Reduction of Bonus : The Board of Directors according to its professional experience and the circumstances may reduce the Bonus, at its sole discretion.

B.S.R Tower 1 // 2 Ben Gurion Street Ramat Gan 52573, Israel // Tel + 972 3 767 9100 // www.topimagesystems.com

Special bonus for outstanding achievement

In addition to the bonus detailed in section 3.4, officers may receive a special bonus based on outstanding personal achievement as shall be determined by the Board, following recommendation and approval of the Compensation Committee.

Such special bonus shall not exceed the amount of 3 months of fixed monthly compensation of the Officer, beyond the Bonus described above , and, except as otherwise permitted by applicable law, it shall be approved by the shareholders in accordance with the Companies Law.

3.5.

Equity based compensation

TIS’ long term incentive is variable equity based compensation, designed to retain officers, align officers and shareholders' interests and incentivize achievement of long term goals.

The Company shall be entitled to grant to officers stock options, Restricted Stock Units or any other equity based compensation.

General guidelines for the grant of Options:

The Options shall be granted from time to time and be individually determined and awarded according to the performance, skills, qualifications, experience, role and the personal responsibilities of the officer.

Vesting schedule - the Options will vest and become exercisable annually over a period of between 2 to 4 years, in equal parts.

Exercise price - the exercise price shall not be less than the closing price of the shares on the day before the grant date or grant date itself.

Expiry date - this period shall not be more than 10 years from the date of the issuance.

Cap on the annual value of the Options - the fair market value (according to acceptable valuation practices at the time of grant), at grant date, shall not exceed the amount of 4 months of fixed monthly compensation for each Officer per year of vesting, on a linear basis, and the percentage of the dilution which results from the allocation shall not exceed 1% per year of the company's issued and outstanding share capital on a fully-diluted basis, for any Officer.

B.S.R Tower 1 // 2 Ben Gurion Street Ramat Gan 52573, Israel // Tel + 972 3 767 9100 // www.topimagesystems.com

We believe a grant date cap is more appropriate than an exercise date cap as it better aligns long term value creation objectives.

Any others terms of the equity based compensation will be determined by the Compensation Committee and the Board of Directors, in accordance with the Company's equity compensation policies and programs in place from time to time, subject to any applicable law.

3.6.

Retirement and termination of service arrangements

Pursuant to the officer employment agreement, he or she shall be entitled to an advance notice prior to termination for a period of up to six (6) months (the “ Notice Period ”).

During the Notice Period, the officer is required to keep performing his duties pursuant to his agreement with the Company, unless the Board of Directors has released the officer from such obligation.

During the notice period, officers will be entitled to full payment of compensation.

Officers may receive an additional transition period during which the Officer will be entitled to up to an additional 6 months of continued base salary, benefits and perquisites beyond the Advance Notice period described above.

When determining such payments, the Compensation Committee and the Board will generally consider, inter alia, the term of service or employment, Company performance during such term, the contribution of the officer to the achievement of the Company’s goals and maximization of its profits, the circumstances of termination and the officer’s compensation during the term of service or employment.

Officers may receive an adjustment period only if they work in the Company for at least three years.

B.S.R Tower 1 // 2 Ben Gurion Street Ramat Gan 52573, Israel // Tel + 972 3 767 9100 // www.topimagesystems.com

3.7.

Inter-Company Compensation Ratio

In the process of composing this policy, the Committee and the Board examined, among other things, the ratio between overall compensation of officers and the average and median compensation of other employees in Israel, as well as the possible ramifications of such ratio on the work environment in TIS, in order to ensure that levels of officer compensation will not have a negative impact on the positive work relations in TIS.

The possible ramifications of the ratio in the work environment will continue to be examined from time to time in order to ensure that levels of officer's compensation, as compared to that for the other employees, will not have a negative impact on work relations in TIS.

	Ratio – Average*
	Active Chairman		CEO		CFO		CTO		VPs
Target Compensation		6.0		6.0		2.8		3.5		1.8
Maximum Compensation		8.7		8.8		3.8		5.0		3.0

	Ratio – Median*
	Active Chairman		CEO		CFO		CTO		VPs
Target Compensation		6.9		6.9		3.2		4.1		2.1
Maximum Compensation		10.0		10.1		4.3		5.8		3.5

* Refers only to employees who are employed in Israel

3.8.

Non-Employee Directors’ Compensation

The directors of TIS, shall be entitled to remuneration and refund of expenses up to the limits provided under the provisions of the Companies Regulations (Rules on Remuneration and Expenses of Outside Directors), 2000, and the Companies Regulations (Relief for Public Companies Traded on a Stock Exchange Outside of Israel), 2000, as such regulations may be amended from time to time.

B.S.R Tower 1 // 2 Ben Gurion Street Ramat Gan 52573, Israel // Tel + 972 3 767 9100 // www.topimagesystems.com

The Company’s Active Chairman of the Board may be entitled to remuneration according to the criteria specified in Section 3.2-3.7; The Company’s Active Chairman Salary shall be within the range of the CEO's salary.

In case of Change of control event, the chairman's agreement may be terminated by the company; the chairman will be entitled to a 12 months’ notice period.

In addition, the members of TIS's Board (including Company’s Chairman of the Board) may be granted equity based compensation which shall vest and become exercisable annually over a period of between 2 to 4 years, in equal parts. The equity awarded shall have a fair market value (determined according to acceptable valuation practices at the time of grant) not to exceed US$ 30,000 per year of vesting, on a linear basis, with respect to each director, and US$ 115,000 per year of vesting, on a linear basis, with respect to Company’s Active Chairman of the Board, subject to applicable law and regulations.

3.9.

Insurance, Indemnification and Release

The Company will release all current and future directors and executive officers from liability and provide them with indemnification to the fullest extent permitted by law and its Articles of Association.

In addition, until otherwise determined, the Company will purchase and periodically renew, at the Company’s expense, insurance coverage in respect of the liability of its current and future directors and executive officers to the maximum extent permitted by law providing for the coverage of up to US$15 million or any other greater amount reasonably determined as appropriate by the Company, and will include coverage with respect to any public offering of shares or other securities of the Company.

In addition, such insurance coverage may include “run-off” provisions covering the directors and executive officers liability following termination of service or employment.

B.S.R Tower 1 // 2 Ben Gurion Street Ramat Gan 52573, Israel // Tel + 972 3 767 9100 // www.topimagesystems.com

4.	Management and Control

The responsibility for determining the rules of the Compensation Policy, the control thereof and the updating thereof shall rest with the Compensation Committee and the Board of Directors, based on the Compensation Committee’s recommendations.

The Compensation Committee and the Board of Directors will take into account, while examining the policy, inter alia, the company profits and revenue, market conditions, business plan and the effect of the Policy on the performance of the company and work-relations in the company.

The Compensation Policy shall be reapproved as required by the Companies Law, every three years.

B.S.R Tower 1 // 2 Ben Gurion Street Ramat Gan 52573, Israel // Tel + 972 3 767 9100 // www.topimagesystems.com

TOP IMAGE SYSTEMS LTD.

Amended and Restated

THE 2003 ISRAELI SHARE OPTION PLAN

(*In compliance with Amendment No. 132 of the Israeli Tax Ordinance, 2002)

TABLE OF CONTENTS

‎ 1 . PURPOSE OF THE ISOP	3
‎ 2. DEFINITIONS	3
‎ 3. ADMINISTRATION OF THE ISOP	5
‎ 4. DESIGNATION OF PARTICIPANTS	6
‎ 5. DESIGNATION OF OPTIONS PURSUANT TO SECTION 102	6
‎ 6. GRANT OF OPTIONS AND ISSUANCE OF SHARE IN TRUST	7
‎ 7. SHARES RESERVED FOR THE ISOP; RESTRICTIONS THEREON	8
‎ 8. PURCHASE PRICE	8
‎ 9. ADJUSTMENTS	9
‎ 10. TERM AND EXERCISE OF OPTIONS	10
‎ 11. VESTING OF OPTIONS	11
‎ 12. PURCHASE FOR INVESTMENT	11
‎ 13. RESTRICTIONS ON ASSIGNABILITY AND SALE OF OPTIONS	12
‎ 14. RIGHTS AS SHAREHOLDERS	13
‎ 15. EFFECTIVE DATE AND DURATION OF ISOP	13
‎ 16.AMENDMENTS AND TERMINATION	13
‎ 17. LAWS, GOVERNMENT AND REGULATIONS	13
‎ 18. CONTINUANCE OF EMPLOYMENT OR HIRED SERVICES	13
‎ 19. GOVERNING LAW AND JURISDICTION	14
‎ 20. TAX CONSEQUENCES	14
‎ 21. NON-EXCLUSIVITY OF THE ISOP	14
‎ 22. MULTIPLE AGREEMENTS	14

This plan, as amended from time to time, shall be known as Top Image Systems Ltd. Amended and Restated 2003 Israeli Share Option Plan (the “ ISOP ”).

1.	PURPOSE OF THE ISOP

The ISOP is intended to provide an incentive to retain, in the employ of the Company and its Affiliates (as defined below), persons of training, experience, and ability, to attract new employees, directors, consultants, service providers and any other entity which the Board shall decide their services are considered valuable to the Company, 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, pursuant to the ISOP.

2.	DEFINITIONS

For purposes of the ISOP and related documents, including the Option Agreement, the following definitions shall apply:

2.1	“ Affiliate ” means any “employing company” within the meaning of Section 102(a) of the Ordinance.

2.2	“ Approved 102 Option ” means an Option granted pursuant to Section 102(b) of the Ordinance and held in trust by a Trustee for the benefit of the Optionee.

2.3	“ Board ” means the Board of Directors of the Company.

2.4	“ Capital Gain Option (CGO) ” as defined in Section 5.4 below.

2.5

“ Cause” means, (i) conviction of any felony involving moral turpitude or affecting the Company; (ii) any refusal to carry out a reasonable directive of the chief executive officer, the Board or the Optionee’s direct supervisor, which involves the business of the Company or its Affiliates and was capable of being lawfully performed; (iii) embezzlement of funds of the Company or its Affiliates; (iv) any breach of the Optionee’s fiduciary duties or duties of care of the Company; including without limitation disclosure of confidential information of the Company; (v) any conduct (other than conduct in good faith) reasonably determined by the Board to be materially detrimental to the Company; and (vi) any other event classified under any applicable agreement between the Optionee and the Company or an Affiliate as a “cause” for termination or by other language of similar substance.

2.6	“Chairman” means the chairman of the Committee.

2.7	“Code” means the United States Internal Revenue Code of 1986, as now in effect or as hereafter amended.

2.8

“Committee” means a share option compensation committee of the Board, designated from time to time by the resolution of the Board, which shall consist of no fewer than two members of the Board. The Committee shall consist of directors who are “outside directors” as defined in Section 162(m) of the Code and “Non-Employee Directors” as defined in Rule 16b-3 promulgated by the Securities and Exchange Commission under the United States Securities Exchange Act of 1934.

2.9	“Company” means Top Image Systems Ltd., an Israeli Company.

2.10	“Companies Law” means the Israeli Companies Law 5759-1999.

2.11	“ Controlling Shareholder ” shall have the meaning ascribed to it in Section 32(9) of the Ordinance.

2.12	“Date of Grant” means, the date of grant of an Option, as determined by the Board or authorized Committee and set forth in the Optionee’s Option Agreement.

2.13	"Employee” means a person who is employed by the Company or its Affiliates, including an individual who is serving as a director or an office holder, but excluding Controlling Shareholder.

2.14	“Expiration Date” means the date upon which an Option shall expire, as set forth in Section 10.2 of the ISOP.

2.15	“Fair Market Value” means 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 Board deems reliable.

Without derogating from the above, solely for the purpose of determining the tax liability pursuant to Section 102(b)(3) of the Ordinance, if at the Date of Grant the Company’s shares are listed on any established stock exchange or a national market system or if the Company’s shares will be registered for trading within ninety (90) days following the Date of Grant, the Fair Market Value of a Share at the Date of Grant shall be determined in accordance with the average value of the Company’s shares on the thirty (30) trading days preceding the Date of Grant or on the thirty (30) trading days following the date of registration for trading, as the case may be ;

(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 Board.

2.16	“ISOP” means this Amended and Restated 2003 Israeli Share Option Plan.

2.17	“ ITA” means the Israeli Tax Authorities.

2.18	“Non-Employee” means a consultant, adviser, service provider, Controlling Shareholder or any other person who is not an Employee.

2.19	“ Ordinary Income Option (OIO) ” as defined in Section 5.5 below.

2.20	“Option” means an option to purchase one or more Shares of the Company pursuant to the ISOP.

2.21	“102 Option” means any Option granted to Employees pursuant to Section 102 of the Ordinance.

2.22	“3(i) Option” means an Option granted pursuant to Section 3(i) of the Ordinance to any person who is Non- Employee.

2.23	“Optionee” means a person who receives or holds an Option under the ISOP.

2.24	“Option Agreement” means the share option agreement between the Company and an Optionee that sets out the terms and conditions of an Option.

2.25	“ Ordinance” means the 1961 Israeli Income Tax Ordinance [New Version] 1961 as now in effect or as hereafter amended.

2.26	“Purchase Price” means the price for each Share subject to an Option.

2.27	“Section 102” means section 102 of the Ordinance as now in effect or as hereafter amended.

2.28	“Share” means the ordinary shares, NIS 0.04 par value each, of the Company.

2.29	“Successor Company” means any entity the Company is merged to or is acquired by, in which the Company is not the surviving entity.

2.30	“Transaction” means (i) merger, acquisition or reorganization of the Company with one or more other entities in which the Company is not the surviving entity, (ii) a sale of all or substantially all of the assets of the Company.

2.31	“Trustee” means any individual appointed by the Company to serve as a trustee and approved by the ITA, all in accordance with the provisions of Section 102(a) of the Ordinance.

2.32	“ Unapproved 102 Option ” means an Option granted pursuant to Section 102(c) of the Ordinance and not held in trust by a Trustee.

2.33	“Vested Option” means any Option, which has already been vested according to the Vesting Dates.

2.34	“Vesting Dates” means, as determined by the Board or by the Committee, the date as of which the Optionee shall be entitled to exercise the Options or part of the Options, as set forth in section 11 of the ISOP.

3.	ADMINISTRATION OF TH E ISOP

3.1

The Board shall have the power to administer the ISOP either directly or upon the recommendation of the Committee, all as provided by applicable law and in the Company’s Articles of Association. Notwithstanding the above, the Board shall automatically have residual authority: (i) if no Committee shall be constituted or; (ii) if such Committee shall cease to operate for any reason or; (iii) with respect to the rights not delegated by the Board to the Committee.

3.2	The Committee shall select one of its members as its 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.

3.3

The Committee shall have the power to recommend to the Board and the Board shall have the full power and authority to: (i) designate participants; (ii) determine the terms and provisions of the respective Option Agreements, including, but not limited to, the number of Options to be granted to each Optionee, the number of Shares to be covered by each Option, provisions concerning the time and the extent to which the Options may be exercised and the nature and duration of restrictions as to the transferability or restrictions constituting substantial risk of forfeiture and to cancel or suspend awards, as necessary; (iii) determine the Fair Market Value of the Shares covered by each Option; (iv) make an election as to the type of Approved 102 Option; and (v) designate the type of Options. The Board shall be entitled to delegate its powers detailed herein above to the Committee according to its discretion and to the extent permitted by law.

The Committee shall have full power and authority to (i) interpret the provisions and supervise the administration of the ISOP; (ii) accelerate the right of an Optionee to exercise in whole or in part, any previously granted Option; (iii) determine the Purchase Price of the Option;

3.4

Notwithstanding the above, the Committee shall not be entitled to grant Options to the Optionees, however, it will be authorized to issue Shares underlying Options which have been granted by the Board and duly exercised pursuant to the provisions herein in accordance with section 112(a)(5) of the Companies Law.

3.5

The Board shall have the authority to grant, at 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 of the original Option so surrendered and canceled and containing such other terms and conditions as the Committee may prescribe in accordance with the provisions of the ISOP.

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

3.7	No member of the Board or of the Committee shall be liable for any act or determination made in good faith with respect to the ISOP or any Option granted thereunder.

4.	DESIGNATION OF PA R TICIPANTS

4.1	The persons eligible for participation in the ISOP as Optionees shall include any Employees and/or Non-Employees of the Company or of any Affiliate; provided, however, that (i) Employees may only be granted 102 Options; (ii) Non-Employees may only be granted 3(i) Options.

4.2	The grant of an Option hereunder shall neither entitle the Optionee to participate nor disqualify the Optionee from participating in, any other grant of Options pursuant to the ISOP or any other option or share plan of the Company or any of its Affiliates .

4.3	Anything in the ISOP to the contrary notwithstanding, all grants of Options to directors and office holders shall be authorized and implemented in accordance with the provisions of the Companies Law or any successor act or regulation, as in effect from time to time.

5.	DESIGNATION OF OPTIONS PUR SU ANT TO SECTION 102

5.1	The Company may designate Options granted to Employees pursuant to Section 102 as Unapproved 102 Options or Approved 102 Options.

5.2	The grant of Approved 102 Options shall be made under this ISOP adopted by the Board as described in Section 15 below, and shall be conditioned upon the approval of this ISOP by the ITA as required by Section 102.

5.3	Approved 102 Option may either be classified as Capital Gain Option (“ CGO ”) or Ordinary Income Option (“ OIO ”).

5.4	Approved 102 Option elected and designated by the Company to qualify under the capital gain tax treatment in accordance with the provisions of Section 102(b)(2) shall be referred to herein as CGO .

5.5	Approved 102 Option elected and designated by the Company to qualify under the ordinary income tax treatment in accordance with the provisions of Section 102(b)(1) shall be referred to herein as OIO .

5.6

The Company’s election of the type of Approved 102 Options as CGO or OIO granted to Employees (the “ Election ”), shall be appropriately filed with the ITA before the Date of Grant of an Approved 102 Option. Such Election shall become effective beginning the first Date of Grant of an Approved 102 Option under this ISOP and shall remain in effect until the end of the year following the year during which the Company first granted Approved 102 Options. The Election shall obligate the Company to grant only the type of Approved 102 Option it has elected, and shall apply to all Optionees who were granted Approved 102 Options during the period indicated herein, all in accordance with the provisions of Section 102(g) of the Ordinance. For the avoidance of doubt, such Election shall not prevent the Company from granting Unapproved 102 Options simultaneously.

5.7	All Approved 102 Options must be held in trust by a Trustee, as described in Section 6 below.

5.8	For the avoidance of doubt, the designation of Unapproved 102 Options and Approved 102 Options shall be subject to the terms and conditions set forth in Section 102 of the Ordinance and the regulations promulgated thereunder.

5.9

With regards to Approved 102 Options, the provisions of the ISOP and/or the Option Agreement shall be subject to the provisions of Section 102 and the Tax Assessing Officer’s permit, and the said provisions and permit shall be deemed an integral part of the ISOP and of the Option Agreement. Any provision of Section 102 and/or the said permit which is necessary in order to receive and/or to keep any tax benefit pursuant to Section 102, which is not expressly specified in the ISOP or the Option Agreement, shall be considered binding upon the Company and the Optionees.

5.10

Furthermore, Approved 102 Options may be granted only 30 (thirty) days (or a shorter period as and if approved by the ITA) following the delivery by the Company to the ITA of a request to approve the ISOP and the Trustee according to Section 102. Notwithstanding the above, if within 90 (ninety) days of delivery of the aforesaid request, the ITA notifies the Company of its decision not to approve the ISOP, any Options intended to be granted as Approved 102 Options shall be deemed as Unapproved 102 Options, unless otherwise approved by the ITA.

6.	GRANT OF OPTIONS AND ISSUANCE OF SH ARE S IN TRUST

6.1

Approved 102 Options which shall be granted under the ISOP and/or any Shares allocated or issued upon exercise of such Approved 102 Options and/or other shares received subsequently following any realization of rights, including without limitation bonus shares, shall be allocated or issued to the Trustee and held for the benefit of the Optionees for such period of time as required by Section 102 or any regulations, rules or orders or procedures promulgated thereunder (the “ Holding Period ”). In the case the requirements for Approved 102 Options are not met, then the Approved 102 Options may be treated as Unapproved 102 Options, all in accordance with the provisions of Section 102 and regulations promulgated thereunder.

6.2

Notwithstanding anything to the contrary, the Trustee shall not release any Shares allocated or issued upon exercise of Approved 102 Options prior to the full payment of the Optionee’s tax liabilities arising from Approved 102 Options which were granted to him and/or any Shares allocated or issued upon exercise of such Options.

6.3

With respect to any Approved 102 Option, subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, an Optionee shall not be entitled to sell or release from trust any Share received upon the exercise of an Approved 102 Option and/or any share received subsequently following any realization of rights, including without limitation, bonus shares, until the lapse of the Holding Period required under Section 102 of the Ordinance.

6.4	Upon receipt of Approved 102 Option, the Optionee will sign an undertaking to release the Trustee from any liability in respect of any action or decision duly taken and bona fide executed in relation with the ISOP, or any Approved 102 Option or Share granted to him thereunder.

7.	SHARES RESERVED FOR T HE ISOP; RESTRICTION THEREON

7.1

The Company may reserve any number authorized unissued Shares, for the purposes of the ISOP and for the purposes of any other share option plans which reservation may be increased from time to time by the Company, subject to the Company's Articles of Association and to adjustment as set forth in Section 9 below.. Any Shares which remain unissued and which are not subject to the outstanding Options at the termination of the ISOP shall cease to be reserved for the purpose of the ISOP, but until termination of the ISOP the Company shall at all times reserve sufficient number of Shares to meet the requirements of the ISOP. 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 ISOP or under the Company’s other share option plans.

7.2

Each Option granted pursuant to the ISOP, shall be evidenced by a written Option Agreement between the Company and the Optionee, in such form as the Board or the Committee shall from time to time approve. Each Option Agreement shall state, among other matters, the number of Shares to which the Option relates, the type of Option granted thereunder (whether a CGO, OIO, Unapproved 102 Option or a 3(i) Option), the Vesting Dates, the Purchase Price per share, the Expiration Date and such other terms and conditions as the Committee or the Board in its discretion may prescribe, provided that they are consistent with this ISOP.

8.	PURCHA SE PRICE

8.1

The Purchase Price of each Share subject to an Option 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. Each Option Agreement will contain the Purchase Price determined for each Optionee.

8.2	The Purchase 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.

8.3	The Purchase Price shall be denominated in the currency of the primary economic environment of, either the Company or the Optionee (that is the functional currency of the Company or the currency in which the Optionee is paid) as determined by the Company.

9.	ADJUS T MENTS

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

9.1

In the event of Transaction, the unexercised Options then outstanding under the ISOP shall, at the sole discretion of the Board, either be assumed or substituted by an appropriate number of shares of each class of shares or other securities of the Successor Company (or a parent or subsidiary of the Successor Company) as shall be determined within the Transaction. In the case of such assumption and/or substitution of Options, appropriate adjustments shall be made to the Purchase Price for reflection of such action and all other terms and conditions of the Option Agreements shall remain unchanged, including but not limited to the vesting schedule, all subject to the determination of the Board, which determination shall be in its sole discretion and final. The Company shall notify the Optionee of the Transaction in such form and method as it deems applicable at least fifteen (15) days prior to the effective date of such Transaction.

9.2

Notwithstanding the above and subject to any applicable law, the Board shall have full power and authority to determine that in certain Option Agreements there shall be a clause instructing that if in any such Transaction as described in section 9.1 above, the Successor Company (or parent or subsidiary of the Successor Company) does not agree to assume or substitute for the Options, the Vesting Dates of the Options of all or part of the Optionees shall be accelerated so that any unvested Option or any portion thereof shall be immediately vested as of the date which is fifteen (15) days prior to the effective date of the Transaction. Subject to the foregoing, the Board shall notify the Optionees that the vested Options are exercisable for a period of fifteen (15) days from the date of such notice, and the Options shall terminate upon the expiration of such period.

9.3

For the purposes of Section 9.2 above, an Option shall be considered assumed or substituted if, following the Transaction, the Option confers the right to purchase or receive, for each Share underlying an Option immediately prior to the Transaction, the consideration (whether shares, options, cash, or other securities or property) received in the Transaction by holders of shares held on the effective date of the Transaction (and if such holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the Transaction is not solely common stock (or their equivalent) of the Successor Company or its parent or subsidiary, the Board may, with the consent of the Successor Company, provide for the consideration to be received upon the exercise of the Option to be solely common stock (or their equivalent) of the Successor Company or its parent or subsidiary equal in fair market value to the per Share consideration received by holders of a majority of the outstanding shares in the Transaction; and provided further that the Board may determine, in its discretion, that in lieu of such assumption or substitution of Options for options of the Successor Company or its parent or subsidiary, such Options will be substituted for any other type of asset or property including cash which is fair under the circumstances.

9.4

If the Company is liquidated or dissolved while unexercised Options remain outstanding under the ISOP, then the Board, in its own discretion, may determine that all such outstanding Options may be exercised in full by the Optionees as of the effective date of any such liquidation or dissolution of the Company without regard to the vesting provisions of Section 11 of the ISOP. If the Board determines that the outstanding Options may be exercised, all such outstanding Options may be exercised in full by the Optionees giving notice in writing to the Company of their intention to so exercise. If an Option becomes fully vested and exercisable under this Section, the Board shall notify the Optionee in writing or electronically that the Option shall be fully exercisable for a period of fifteen (15) days from the date of such notice, and the Option shall terminate upon the expiration of such period.

9.5

If the outstanding shares of the Company shall at any time be changed or exchanged by declaration of a share dividend (bonus shares), share 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 the Shares subject to the ISOP or subject to any Options therefore granted, and the Purchase Prices, shall be appropriately and equitably adjusted so as to maintain the proportionate number of Shares without changing the aggregate Purchase Price, provided, however, that no adjustment shall be made by reason of the distribution of subscription rights (rights offering) on outstanding shares. Upon happening of any of the foregoing, the class and aggregate number of Shares issuable pursuant to the ISOP (as set forth in Section 7 hereof), in respect of which Options have not yet been exercised, shall be appropriately adjusted, all as will be determined by the Board whose determination shall be final.

10.	TERM AND EXERCISE OF OP TIONS

10.1

Options shall be exercised by the Optionee by giving written notice to the Company and/or to any third party designated by the Company (the “ Representative ”), in such form and method as may be determined by the Company and when applicable, by the Trustee in accordance with the requirements of Section 102, which exercise shall be effective upon receipt of such notice by the Company and/or the Representative and the payment of the Purchase Price at the Company’s or the Representative’s principal office. The notice shall specify the number of Shares with respect to which the Option is being exercised.

10.2	Options, to the extent not previously exercised, shall terminate forthwith upon the earlier of: (i) the date set forth in the Option Agreement; and (ii) the expiration of any extended period in any of the events set forth in section 10.5 below.

10.3

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 and exercisable, prior to the Expiration Date, and provided that, subject to the provisions of section 10.5 below, the Optionee is employed by or providing services to the Company or any of its Affiliates, at all times during the period beginning with the granting of the Option and ending upon the date of exercise.

10.4

Subject to the provisions of section 10.5 below, in the event of termination of Optionee’s employment or services, with the Company or any of its Affiliates, all Options granted to such Optionee will immediately expire upon his termination date. For the avoidance of doubt, in case of such termination of employment or service, the unvested portion of the Optionee’s Option shall not vest and shall not become exercisable unless such vesting is scheduled prior to the date of termination.

10.5

Notwithstanding anything to the contrary hereinabove and unless otherwise determined in the Optionee’s Option Agreement, an Option may be exercised after the date of termination of Optionee's employment or service with the Company or any Affiliates during an additional period of time beyond the date of such termination, but only with respect to the number of Vested Options at the time of such termination according to the Vesting Dates, if :

(i)	termination is without Cause, in which event any Vested Option still in force and unexpired may be exercised within a period of ninety (90) days after the date of such termination; or-

(ii)	termination is the result of death or disability of the Optionee, in which event any Vested Option still in force and unexpired may be exercised within a period of twelve (12) months after the date of such termination; or -

(iii)

prior to the date of such termination, the Committee or the Board shall authorize an extension of the terms of all or part of the Vested 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.

For avoidance of any doubt, if termination of employment or service is for Cause, any outstanding unexercised Option (whether vested or non-vested), will immediately expire and terminate, and the Optionee shall not have any right in connection with such outstanding Options.

10.6

Notwithstanding any other provision of this ISOP, the Company shall have no obligation to issue or deliver Shares under the ISOP unless the exercise of the Option and the issuance and delivery of the underlying Shares comply with, and do not result in a breach of, all applicable laws, to the satisfaction of the Company in its sole discretion, and have received, if deemed desirable by the Company, the approval of legal counsel for the Company with respect to such compliance

10.7	Any form of Option Agreement authorized by the ISOP may contain such other provisions as the Committee may, from time to time, deem advisable.

10.8

With respect to Unapproved 102 Option, if the Optionee ceases to be employed by the Company or any Affiliate, the Optionee shall extend to the Company and/or its Affiliate a security or guarantee for the payment of tax due at the time of sale of Shares, all in accordance with the provisions of Section 102 and the rules, regulation or orders promulgated thereunder.

11.	VESTING OF OPT IONS

11.1	Subject to the provisions of the ISOP, each Option shall vest following the Vesting Dates and for the number of Shares as shall be provided in the Option Agreement. However, no Option shall be exercisable after the Expiration Date.

11.2	An Option may be subject to such other terms and conditions on the time or times when it may be exercised, as the Committee may deem appropriate. The vesting provisions of individual Options may vary.

12.	PURCHASE FOR INVES TME NT

The Company’s obligation to issue or allocate Shares upon exercise of an Option granted under the ISOP is expressly conditioned upon: (a) the Company’s completion of any registration or other qualifications of such Shares under all applicable laws, rules and regulations or (b) representations and undertakings by the Optionee (or his legal representative, heir or legatee, in the event of the Optionee’s death) to assure that the sale of the Shares complies with any registration exemption requirements which the Company in its sole discretion shall deem necessary or advisable. Such required representations and undertakings may include representations and agreements that such Optionee (or his legal representative, heir, or legatee): (a) is purchasing such Shares for investment and not with any present intention of selling or otherwise disposing thereof; and (b) agrees to have placed upon the face and reverse of any certificates evidencing such Shares a legend setting forth (i) any representations and undertakings which such Optionee has given to the Company or a reference thereto and (ii) that, prior to effecting any sale or other disposition of any such Shares, the Optionee must furnish to the Company an opinion of counsel, satisfactory to the Company, that such sale or disposition will not violate the 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.

13.	RESTRICTIONS ON AS SI GNABILITY AND SALE OF OPTIONS

13.2

No Option or any right with respect thereto, purchasable hereunder, whether fully paid or not, shall be assignable, transferable or given as collateral or any right with respect to it given to any third party whatsoever, except as specifically allowed under the ISOP, 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.

Any such action made directly or indirectly, for an immediate validation or for a future one, shall be void.

13.3	As long as Options and/or Shares are held by the Trustee on behalf of the Optionee, all rights of the Optionee over the Shares are personal, cannot be transferred, assigned, pledged or mortgaged, other than by will or pursuant to the laws of descent and distribution.

13.4

No transfer of Options and/or Shares by an Optionee by will or by the laws of descent shall be effective against the Company, unless and until: (a) the Company shall have been furnished with written notice thereof, accompanied by an authenticated copy of probate of a will together with the will or inheritance order and/or such other evidence as the Board may deem necessary to establish the validity of the transfer; and (b) the contemplated transferee(s) shall have confirmed to the Company in writing its acceptance of the terms and conditions of the ISOP and Option Agreement with respect to the Shares or Options being transferred, to the satisfaction of the Board.

13.5

Following the exercise of Vested Options, the Shares shall be transferable; provided, however, that (i) sale or transfer of Shares by the Optionee shall be subject to all restrictions set forth in the Company's Articles of Association, applicable securities regulations, lock up periods and such other conditions and restrictions as may be included in the Articles of Association of the Company, the ISOP and the applicable Option Agreement, (ii) the transferee confirms in writing its/his acceptance of the terms and conditions of the ISOP and the applicable Option Agreement with respect to the Shares being transferred, to the satisfaction of the Board; and (iii) actual payment of all taxes required to be paid upon such sale and transfer of the Shares has been made to the ITA, and the Trustee (if applicable) received confirmation therefrom that all taxes required to be paid upon such sale and transfer have been paid. Upon request by the Company, the Optionee shall execute any agreement or document evidencing such transfer restrictions prior to the receipt of Shares hereunder, and shall promptly present to the Company any and all certificates representing the Shares for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.

13.6	Any transfer that is not made in accordance with the ISOP, the Company's Articles of Association or the applicable Option Agreement shall be null and void.

14.	RIGHTS AS SHAREHO LDE R

14.2

To avoid doubt, the Optionees 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 Option, nor shall they be deemed to be a class of shareholders or creditors of the Company for purpose of the operation of sections 350 and 351 of the Companies Law or any successor to such section, until registration of the Optionee as holder of such Shares in the Company’s register of shareholders upon exercise of the Option in accordance with the provisions of the ISOP, and in case of Options and Shares held by the Trustee, subject also to the provisions of Section 6 of the ISOP.

14.3

With respect to all Shares (but excluding, for avoidance of any doubt, any unexercised Options) allocated or issued upon the exercise of Options purchased by the Optionee and held by the Optionee or by the Trustee, as the case may be, the Optionee shall be entitled to receive dividends in accordance with the quantity of such Shares, subject to the provisions of the Company’s Articles of Association (and all amendments thereto) and subject to any applicable taxation on distribution of dividends, and when applicable subject to the provisions of Section 102 and the rules, regulations or orders promulgated thereunder.

15.	EFFECTIVE DAT E AND DURATION OF THE ISOP

The ISOP shall be effective as of the day of its amendment and restatement by the Board and shall terminate at the end of ten (10) years from such day of adoption.

16.	AMENDMENTS OR TERMINATION

The Board may at any time, but when applicable, after consultation with the Trustee, amend, alter, suspend or terminate the ISOP. No amendment, alteration, suspension or termination of the ISOP shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Company, which agreement must be in writing and signed by the Optionee and the Company. Termination of the ISOP shall not affect the Committee’s ability to exercise the powers granted to it hereunder with respect to Options granted under the ISOP prior to the date of such termination.

17.	LAWS, GOVER NM ENT REGULATIONS

The ISOP, 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 the Ordinance and to such approvals according to any law and/or by any governmental agencies or national securities exchanges as may be required. The Company may require the Optionee to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with applicable laws. Nothing herein shall be deemed to require the Company to register the Shares under the securities laws of any jurisdiction.

18.	CONTINUANCE OF EMPLOYMENT OR HIRED SERVICES

Neither the ISOP nor the Option Agreement with the Optionee shall impose any obligation on the Company or an Affiliate thereof, to continue any Optionee in its employ or service, and nothing in the ISOP or in any Option granted pursuant thereto shall confer upon any Optionee any right to continue in the employ or service of the Company or an Affiliate thereof or restrict the right of the Company or an Affiliate thereof to terminate such employment or service at any time.

19.	GOVERNING LAW & JURISD ICT ION

The ISOP 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 the ISOP.

20.	TAX CONSEQUENCES

20.2

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 and/or its Affiliates, the Trustee or the Optionee), hereunder, shall be borne solely by the Optionee. The Company and/or its Affiliates 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/or its Affiliates and/or 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.

20.3	The Company and/or, when applicable, the Trustee shall not be required to release any Share certificate to an Optionee until all required payments have been fully made.

21.	NON-EXCLUSIVITY OF THE ISOP

The adoption of the ISOP 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 Options otherwise than under the ISOP, and such arrangements may be either applicable generally or only in specific cases.

22.	MULTIPLE AGREEMENTS

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