COMMTOUCH SOFTWARE LTD (Form: S-8, Received: 03/09/2007 13:27:52)

As filed with the Securities and Exchange Commission on March 8, 2007

Registration No. 333-____

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________

FORM S-8

REGISTRATION STATEMENT

Under

THE SECURITIES ACT OF 1933

____________________

COMMTOUCH SOFTWARE LTD.

(Exact name of registrant as specified in its charter)

Israel (State or other jurisdiction of incorporation or organization)				Not applicable (I.R.S. Employer Identification No.)

1A Hazaron Street Poleg Industrial Park, P.O. Box 8511 Netanya, 42504, Israel (Address of principal executive offices)				N/A (Zip Code)

	Commtouch Software Ltd. Amended and Restated 1999 Nonemployee Directors Stock Option Plan, Amended and Restated 1996 CSI Stock Option Plan, Amended and Restated Israeli Share Option Plan and 2006 U.S. Stock Option Plan
		(Full title of the plans)
Ron Ela Chief Financial Officer Commtouch Software Ltd. c/o Commtouch Inc. 292 Gibraltar Drive, Suite 107 Sunnyvale, CA 94089 (Name and Agent for Service)
(650) 864-2000 (Telephone Number, Including Area Code, of Agent for Service)
			Copies to:
Gary Davis General Counsel & Secretary Commtouch Inc. 292 Gibraltar Drive, Suite 107 Sunnyvale, CA 94089 Tel: (650) 864-2000 Fax: (650) 864-2006			Aaron M. Lampert Naschitz, Brandes & Co. 5 Tuval Street Tel Aviv 67897 Israel Tel: 972-3-623-5000 Fax: 972-3-623-5005		Nathaniel M. Cartmell III Pillsbury Winthrop Shaw Pittman LLP P.O. Box 7880 San Francisco, California 94120 (415) 983-1000

CALCULATION OF REGISTRATION FEE

Title of Securities To Be Registered ⁽¹⁾	Amount To Be Registered ⁽²⁾	Proposed Maximum Offering Price Per Share ⁽³⁾	Proposed Maximum Aggregate Offering Price	Amount of Registration Fee

Ordinary Shares Issuable Under Amended and Restated 1996 CSI Stock Option Plan, Amended and Restated Israeli Share Option Plan and the Commtouch Software Ltd. 2006 U.S. Stock Option Plan, NIS 0.05 Nominal Value
	2,394,000	$1.335	$3,195,990	$98.11 ⁽⁴⁾
	250,00	$1.07	$267,500	$8.21
	125,000	$1.27	$158,750	$4.87
	231,000	$1.04	$240,240	$7.38
	6,460,000	$0.39	$2,519,400	$319.21 ⁽⁵⁾
	5,000,000	$41.81	$209,050,000	$55,189.20 ⁽⁶⁾

Ordinary Shares Issuable Under Amended and Restated 1999 Nonemployee Directors Stock Option Plan, NIS 0.05 Nominal Value
	1,500,000	$1.335	$2,002,500	$61.48 ⁽⁴⁾
	202,500	$0.46	$93,150	$11.80 ⁽⁵⁾
	600,000	$0.28	$168,000	$21.29 ⁽⁵⁾
	100,000	$0.12	$12,000	$1.52 ⁽⁵⁾
	325,000	$0.82	$266,500	$33.76 ⁽⁵⁾
	562,500	$0.39	$219,375	$27.79 ⁽⁵⁾
	250,000	$0.57	$142,500	$35.63 ⁽⁷⁾
	250,000	$41.81	$10,452,500	$2,759.46 ⁽⁶⁾

Totals
Totals	18,250,000	N/A	N/A	$58,579.71

(1)	The securities to be registered include options and rights to acquire Ordinary Shares.

(2)

Pursuant to Rule 416(a) and (b) under the Securities Act of 1933, as amended, this Registration Statement shall also cover any additional ordinary shares which become issuable by reason of any stock dividend, stock split, recapitalization or other similar transaction which results in an increase in the number of the outstanding ordinary shares. Pursuant to General Instruction E of Form S-8, the contents of Registration Statement No. 333-94995 (filed January 20, 2000) and Registration No. 333-65532 (filed July 20, 2001) are incorporated by reference.

(3)

Represents the applicable proposed maximum offering price per share determined in accordance with Rule 457 at the time the registration statement, or post-effective amendment to registration statement, on Form S-8 relating to such shares was previously filed with the Securities and Exchange Commission.

(4)

The price is estimated solely for the purpose of calculating the amount of the registration fee on the basis of the average of the high and low prices as reported for an ordinary share on the Nasdaq Capital Market on March 5, 2007 pursuant to Rule 457(h)(1) and 457(c). Pursuant to Rule 457(o), the registration fee has been calculated on the basis of the maximum aggregate offering price of all the securities listed in the above Table.

(5)	Filing fee previously paid on July 27, 2004 in connection with the filing of a post effective amendment to registration statement on Form S-8 relating to these shares.

(6)	Filing fee previously paid on January 20, 2000 in connection with the filing of a registration statement on Form S-8 relating to these shares.

(7)	Filing fee previously paid on July 20, 2001 in connection with the filing of a registration statement on Form S-8 relating to these shares.

____________________

The Registration Statement shall become effective upon filing in accordance with Rule 462 under the Securities Act.

______________

Pursuant to Rule 429 of the General Rules and Regulations under the Securities Act, the prospectus that is a part of this Registration Statement will be used in connection with the offer and sale of Ordinary Shares of the Registrant previously registered under the Registrant’s Registration Statements on Form S-8 (Registration Nos. 333-94995 and 333-65532).

PART I

INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS

Item 1.

Plan Information.*

Item 2.

Registrant Information and Employee Program Annual Information.*

* Note: The document(s) containing the information specified by Part I of Form S-8 will be sent or given to employees as specified by Rule 428(b)(1).

PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3.

Incorporation of Documents by Reference.

The following documents filed by the Registrant with the Securities and Exchange Commission (the “Commission”) are hereby incorporated by reference in this Registration Statement:

(a)	Our Annual Report on Form 20-F for the fiscal year ended December 31, 2005;

(b) Our report on Form 6-K filed on May 19, 2006, containing the Registrant’s press release of May 10, 2006 covering financial results of the Registrant for the first quarter of 2006;

(c) Our report on Form 6-K filed on August 14, 2006, containing the Registrant’s press release of August 2, 2006 covering financial results of the Registrant for the second quarter of 2006;

(d) Our report on Form 6-K filed on November 3, 2006, containing the Registrant’s press release of November 1, 2006 covering financial results of the Registrant for the third quarter of 2006;

(e) Our report on Form 6-K filed on February 22, 2007, containing the Registrant’s press release of February 14, 2007 covering financial results of the Registrant for the fourth quarter and fiscal year ended December 2006;

(f) The description of our ordinary shares contained in the registration statement under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as filed with the Commission on June 25, 1999, and any subsequent amendment or report filed for the purpose of updating this description.

In addition, all subsequent annual reports filed on Form 20-F prior to the termination of this offering are incorporated by reference into this prospectus. Also, we may incorporate by reference our future reports on Form 6-K by stating in those Forms that they are being incorporated by reference into this prospectus.

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

Item 4.

Description of Securities.

Not applicable.

Item 5.

Interests of Named Experts and Counsel.

The validity of the ordinary shares offered hereby is being passed upon for us by Naschitz, Brandes & Co., Tel-Aviv, Israel. The partners of Naschitz, Brandes & Co. and the firm itself, beneficially own, in the aggregate, 15,000 of our ordinary shares.

Item 6.

Indemnification of Directors and Officers.

The Israel Companies Law permits a company to insure an office holder in respect of liabilities incurred by him or her as a result of the breach of his or her duty of care to the company or to another person, or as a result of the breach of his or her duty of loyalty to the company, to the extent that he or she acted in good faith and had reasonable cause to believe that the act would not prejudice the company. A company can also insure an office holder for monetary liabilities as a result of an act or omission that he or she committed in connection with his or her serving as an office holder.

Moreover, a company can indemnify an office holder for (a) any monetary liability imposed upon such an office holder for the benefit of a third party pursuant to a court judgment, including a settlement or an arbitrator’s decision, confirmed by a court, (b) reasonable legal costs, including attorney’s fees, expended by an office holder as a result of an investigation or proceeding instituted against the office holder by a competent authority, provided that such investigation or proceeding concludes without the filing of an indictment against the office holder and either i) no financial liability was imposed on the office holder in lieu of criminal proceedings or ii) financial liability was imposed on the office holder in lieu of criminal proceedings but the alleged criminal offense does not require proof of criminal intent, and (c) reasonable litigation expenses, including legal fees, actually incurred by such an office holder or imposed upon the office holder by a court order, in a proceeding brought against the office holder by or on behalf of the company or by others, or in a criminal action in which he was acquitted, or in a criminal action which does not require proof of criminal intent in which he was convicted. The Companies Law further provides that the indemnification provision in a company’s articles of association (i) may be an obligation to indemnify in advance, provided that, other than litigation expenses, it is limited to events the board of directors can foresee in light of the company’s actual activities when providing the obligation and that it is limited to a sum or standards the board of directors determines is reasonable in the circumstances, and (ii) may permit the company to indemnify an officer or a director after the fact.

Furthermore, a company can, with one limited exception, exculpate an office holder in advance, in whole or in part, from liability for damages sustained by a breach of duty of care to the company.

All of these provisions are specifically limited in their scope by the Companies Law, which provides that a company may not indemnify or exculpate an officer or director nor enter into an insurance contract that would provide coverage for any monetary liability incurred as a result of (i) a breach by the officer or director of the duty of loyalty, unless the officer or director acted in good faith and had a reasonable basis to believe that the act would not prejudice the company, in which case the company is permitted to indemnify and provide insurance to but not to exculpate; (ii) an intentional or reckless breach by the officer or director of the duty of care, other than if solely done in negligence; (iii) any act or omission done with the intent to derive an illegal personal benefit; or (iv) any fine levied or forfeit against the director or officer.

Our Articles of Association allow us to insure, exculpate and indemnify office holders to the fullest extent permitted by law provided such insurance, exculpation or indemnification is approved in accordance with the Israel Companies Law. We have acquired directors’ and officers’ liability insurance covering the officers and directors of Commtouch and its subsidiaries for certain claims. In addition, we entered into an undertaking to indemnify our directors in connection with a shareholder–instigated class action lawsuit, subject to certain limitations, and this undertaking was ratified by shareholders (as this lawsuit has been settled, it is not anticipated that this undertaking will result in any liability to us). Further, at the annual meeting of shareholders held on November 18, 2002, the shareholders approved a form of indemnification, exculpation and insurance agreement that is applicable to all of our directors. The form of this agreement, as well as related provisions in our Amended and Restated Articles of Association, were amended at the annual meeting of shareholders held on December 30, 2005.

Certain members of our management team are officers of our subsidiary, Commtouch Inc., a California Corporation, or reside in California. The Articles of Incorporation of Commtouch Inc. provide that the liability of the directors of the corporation for monetary damages shall be eliminated to the fullest extent permissible under California law and that the corporation is authorized to provide for the indemnification of agents of the corporation, as defined in Section 317 of the California General Corporation Law, in excess of that expressly permitted by Section 317 for breach of duty to the corporation and its shareholders to the fullest extent permissible under California law. With respect to all proceedings other than shareholder derivative actions, Section 317 permits a California corporation to indemnify any of its directors, officers or other agents only if such person acted in good faith and in a manner such person reasonably believed to be in the best interests of the corporation and, in the case of a criminal proceeding, had no reasonable cause to believe the conduct of such person was unlawful. In the case of derivative actions, a California corporation may indemnify any of its directors, officers or agents only if such person acted in good faith and in a manner such person believed to be in the best interests of the corporation and its shareholders. Furthermore, in derivative actions, no indemnification is permitted (i) with respect to any matter with respect to which the person to be indemnified has been held liable to the corporation, unless such indemnification is approved by the court; (ii) of amounts paid in settling or otherwise disposing of a pending action without court approval; or (iii) of expenses incurred in defending a pending action which is settled or otherwise disposed of without court approval. To the extent that a director, officer or agent of a corporation has been successful on the merits in defense of any proceeding for which indemnification is permitted by Section 317, a corporation is obligated by Section 317 to indemnify such person against expenses actually and reasonably incurred in connection with the proceeding.

Item 7.

Exemption From Registration Claimed.

Not applicable.

Item 8.

Exhibits.

Exhibit No.	Description

5.1	Opinion of Naschitz, Brandes & Co.
23.1	Consent of independent auditors.
23.2	Consent of Naschitz, Brandes & Co. (included in Exhibit 5.1).
24.1	Power of Attorney.
99.1	Amended and Restated Commtouch Software Ltd. 1999 Nonemployee Directors Stock Option Plan.
99.2	Commtouch Software Ltd. Amended and Restated 1996 CSI Stock Option Plan.
99.3	Commtouch Software Ltd. Amended and Restated Israeli Share Option Plan.
99.4	Commtouch Software Ltd. 2006 U.S. Stock Option Plan.

Item 9.

Undertakings.

(a ) The undersigned registrant hereby undertakes:

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

(i)	To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; and

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and

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

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

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and

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

(b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to section 13(a) or section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Netanya, State of Israel, on the 8th day of March, 2007.


COMMTOUCH SOFTWARE LTD.

By:	/s/ Ron Ela

	Ron Ela
	Chief Financial Officer

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

Name	Title	Date


*	Chief Executive Officer (Principal Executive Officer) and Chairman of the Board Directors	March 8 , 2007

Gideon Mantel

/s/ Ron Ela	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	March 8 , 2007

Ron Ela

*	Director	March 8 , 2007

Orna Berry

*	Director	March 8 , 2007

Amir Lev

*	Director	March 8 , 2007

Aviv Raiz

*	Director	March 8 , 2007

Ofer Segev

*	Director	March 8 , 2007

Nahum Sharfman

*	Director	March 8 , 2007

Lloyd E. Shefsky

*/s/ Ron Ela	Attorney-In-Fact and Authorized U.S. Representative	March 8 , 2007

Ron Ela

INDEX TO EXHIBITS

Exhibit No.	Description

5.1	Opinion of Naschitz, Brandes & Co.
23.1	Consent of independent auditors.
23.2	Consent of Naschitz, Brandes & Co. (included in Exhibit 5.1).
24.1	Power of Attorney.
99.1	Amended and Restated Commtouch Software Ltd. 1999 Nonemployee Directors Stock Option Plan.
99.2	Commtouch Software Ltd. Amended and Restated 1996 CSI Stock Option Plan.
99.3	Commtouch Software Ltd. Amended and Restated Israeli Share Option Plan.
99.4	Commtouch Software Ltd. 2006 U.S. Stock Option Plan.

Exhibit 5.1

NASCHITZ BRANDES

NASCHITZ, BRANDES & CO. ADVOCATES

5 TUVAL STREET, TEL-AVIV 67897 ISRAEL

TEL. 972-3-623-5000 FAX: 972-3-623-6006

BRANCH OFFICE: 2 PAL-YAM AVENUE,

CITY WINDOWS, OREN BUILDING, HAIFA 33095 ISRAEL

TEL: 972-4-864-4433 FAX: 972-4-864-4833

WWW. NBLAW.COM

Tel-Aviv, March 8, 2007

Commtouch Software Ltd.

1A Hazoran Street Poleg Industrial Park, P.O. Box 8511

Netanya, 42504, Israel

Ladies and Gentlemen:

We refer to the Registration Statement on Form S-8 (the "Registration Statement") of Commtouch Software Ltd., a company organized under the laws of the State of Israel (the "Company"), relating to18,250,000 Ordinary Shares, nominal value NIS 0.05 per share, of the Company (the "Ordinary Shares") available for issuance under the Commtouch Software Ltd. Amended and Restated Israeli Share Option Plan, the Commtouch Software Ltd. Amended and Restated 1996 CSI Stock Option Plan, the Commtouch Software Ltd. U.S. Stock Option Plan and the Amended and Restated Commtouch Software Ltd. 1999 Nonemployee Directors Stock Option Plan (collectively, the "Plans").

Opinions of counsel as to the legality of 13,750,000 of the Ordinary Shares referred to in the Registration Statement have been previously filed with the Securities and Exchange Commission as exhibits to the Company's Registration Statements on Form S-8 (Registration Nos. 333-65532 and 333-94995) (the "Initial Registration Statements"). This opinion relates to the remaining 4,500,000 Ordinary Shares not referred to in the Initial Registration Statements (the "Additional Shares").

As special Israeli counsel to the Company, we have examined such corporate records, certificates and other documents, and such questions of law, as we have considered necessary or appropriate for the purpose of our opinion. Upon the basis of such examination, we are of the opinion that, when the Additional Shares are issued and sold pursuant to the terms of the Plans and in accordance with the Registration Statement, the Additional Shares will be legally and validly issued, fully paid and non-assessable.

The opinion expressed herein is limited to Israeli law, and we do not express any opinion as to the laws of any other jurisdiction.

We consent to the filing of this opinion as an exhibit to the Registration Statement. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended.

Very truly yours,

/s/ NASCHITZ, BRANDES & CO.

Naschitz, Brandes & Co.

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement (Form S-8), pertaining to the “Amended and Restated 1999 Nonemployee Directors Stock Option Plan”, “Amended and Restated 1996 CSI Stock Option Plan”, “Amended and Restated Israeli Share Option Plan” and “2006 U.S. Stock Option Plan” of Commtouch Software Ltd., of our report, dated February 21, 2006 (except for Note 9, as to which the date is June 26, 2006), with respect to the consolidated financial statements of Commtouch Software Ltd. included in its Annual Report (Form 20-F) for the year ended December 31, 2005, filed with the Securities and Exchange Commission.

Tel-Aviv, Israel

March 8, 2007

KOST FORER GABBAY & KASIERER

A Member of Ernst & Young Global

Exhibit 24.1

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Gideon Mantel and Ron Ela, or either of them, with full power to each of them to act alone, with full power of substitution and resubstitution, as his or her true and lawful attorney-in-fact and agent for him or her and on his or her behalf and in his or her name, place and stead as a director or officer or both of Commtouch Software Ltd. (the “Registrant”) to sign the registration statement relating to the Company’s offer and sale of ordinary shares and any and all plan interests under the 2006 U.S. Stock Option Plan , Amended and Restated 1996 CSI Stock Option Plan, Amended and Restated Commtouch Software Ltd. Israeli Share Option Plan and Amended and Restated Commtouch Software Ltd. 1999 Nonemployee Directors Stock Option Plan, and any and all amendments (including post-effective amendments) to the registration statement under the Securities Act of 1933 (and any amendments thereto); and to file the same, with exhibits and any and all other documents filed with respect thereto, with the Securities and Exchange Commission (or any other governmental or regulatory authority), granting unto said attorney full power and authority to do and to perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as he or she himself or herself might or could do if personally present, hereby ratifying and confirming all that said attorney-in-fact and agent, or his or her substitute, may lawfully do or cause to be done by virtue hereof.

Name	Title	Date
___________________________ Gideon Mantel	Chief Executive Officer and Director (Principal Executive Officer)	September 19, 2006
___________________________ Ron Ela	Chief Financial Officer (Principal Financial and Accounting Officer)	September 19, 2006
___________________________ Orna Berry	Director	September 19, 2006
___________________________ Amir Lev	Director	September 19, 2006
___________________________ Aviv Raiz	Director	September 19, 2006
___________________________ Ofer Segev	Director	September 19, 2006
___________________________ Nahum Sharfman	Director	September 19, 2006
___________________________ Lloyd E. Shefsky	Director	September 19, 2006

Exhibit 99.1

AMENDED AND RESTATED COMMTOUCH SOFTWARE LTD.

1999 NONEMPLOYEE DIRECTORS STOCK OPTION PLAN

1.	PURPOSE .

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

2.	DEFINITIONS .

As used herein, the following definitions shall apply:

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

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

(c) “Annual Option” shall have the meaning set forth in Section 6(b).

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

(e) “ Change in Control” shall mean the occurrence of any one of the following:

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

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

(iii) the dissolution or liquidation (partial or total) of the Company or a sale of assets involving 50% or more of the assets of the Company, or any merger or reorganization of the Company, whether or not another entity is the survivor, or other transaction pursuant to which the holders, as a group, of all of the shares of the Company outstanding prior to the transaction hold, as a group, less than 50% of the shares of the Company outstanding after the transaction .

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

(g) “Company” shall mean CommTouch Software Ltd., an Israeli corporation.

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

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

(j) “Expiration Date” shall mean the last day of the term of an Option established under Section 6(e).

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

(l) “Initial Option” shall have the meaning set forth in Section 6(a).

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

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

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

(p) “Optionee” shall mean a Nonemployee Director who holds an Option.

(q) “Ordinary Shares” shall mean the Ordinary Shares of the Company.

(r) “Plan” shall mean this Amended and Restated Commtouch Software Ltd. 1999 Nonemployee Directors Stock Option Plan, as it may be amended from time to time.

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

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

(u) “Tax Date” means the date defined in Section 7(c).

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

3.	ADMINISTRATION .

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

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

4.	ELIGIBILITY.

Only Nonemployee Directors may receive Options under this Plan.

5.	SHARES SUBJECT TO PLAN.

(a) Aggregate Number. Subject to Section 9, the total number of Ordinary Shares reserved and available for issuance pursuant to Options under this Plan shall be 3,790,000 shares. Such shares may consist, in whole or in part, of authorized and unissued shares or shares reacquired in private transactions or open market purchases, but all shares issued under the Plan regardless of source shall be counted against the 3,790,000 share limitation. If any Option terminates or expires without being exercised in full, the shares issuable under such Option shall again be available for issuance in connection with other Options. If Ordinary Shares issued pursuant to an Option are repurchased by the Company, such Ordinary Shares shall not again be available for issuance in connection with Options. To the extent the number of Ordinary Shares issued pursuant to an Option is reduced to satisfy withholding tax obligations, the number of shares withheld to satisfy the withholding tax obligations shall not be available for later grant under the Plan.

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

6.	GRANT OF OPTIONS.

(a) Mandatory Initial Option Grants . Subject to the terms and conditions of this Plan, if any person who is not presently an officer or employee of the Company is elected or appointed a member of the Board, then on the effective date of such appointment or election the Company shall grant to such new Nonemployee Director an Option to purchase 150,000 shares at an exercise price equal to the Fair Market Value of such Shares on the date of such option grant. Any Option granted pursuant to this Section 6(a) shall be referred to as an “Initial Option.”

(b) Mandatory Annual Option Grants. Subject to the terms and conditions of this Plan, on the date of the first meeting of the Board immediately following the annual meeting of shareholders of the Company (even if held on the same day as the meeting of shareholders), the Company shall grant to each Nonemployee Director then in office (other than a Nonemployee Director who received a grant under Section 6(a) on or after the record date for such annual meeting) an Option to purchase up to 50,000 shares at an exercise price equal to the Fair Market Value of such shares on the date of such option grant; provided, however, that (i) in lieu of such annual grant for 2001, each Nonemployee Director in office immediately after the annual general meeting of shareholders in August 2001 shall be granted a one-time Option grant of 33,750 shares, (ii) each Nonemployee Director in office immediately after the extraordinary general meeting of shareholders in February 2002 shall be granted a one-time Option grant of 150,000 shares, and (iii) in lieu of such annual grant for 2002, each Nonemployee Director in office immediately after the annual general meeting of shareholders in November 2002 shall be granted a one-time Option grant of 50,000 shares. Any Option granted pursuant to this Section 6(b) shall be referred to as an “Annual Option.”

(c) Vesting of Initial Option and Annual Option. Each Option granted under Section 6(a) or 6(b) shall become exercisable at a rate of 1/16th of the shares every three months.

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

(e) Limitation on Other Grants. The Administrator shall have no discretion to grant Options under this Plan other than as set forth in Sections 6(a) and 6(b).

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

(g) Transferability. No Option shall be transferable except that (I) an Option may be distributed by will or the laws of descent and distribution; or (ii) Optionee may transfer or assign an Option to (a) any family member or trust for the benefit of Optionee or a family member of Optionee, or (b) any entity which is an investor in the Company and of which Optionee is a general or limited partner or a member of senior management. The terms of this Plan shall be binding upon the executors, administrators, heirs, successors, assigns and transferees of the Optionee.

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

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

(j) Termination. In the event of Termination, Options held at the date of Termination, to the extent then exercisable, may be exercised in whole or in part at any time within three months after the date of Termination, (but in no event after the Expiration Date), but not thereafter. With respect to an Optionee who has performed his/her duties to the Company for a period of at least three years, upon Termination, any outstanding Options that are not vested at the time of Termination will be accelerated and become fully vested and exercisable for a period of 180 days thereafter, unless termination was due to the Optionee’s resignation or for one of the causes set forth in the Israel Companies Law. Notwithstanding the foregoing, if Termination is due to death or Disability, Options held at the date of Termination, to the extent then exercisable, may be exercised in whole or in part at any time within two years from the date of Termination (but in no event after the Expiration Date) by the Optionee or by the Optionee’s guardian or legal representative in the case of Disability or in the case of death, by the person to whom the Option is transferred by will or the laws of descent and distribution.

7.	PAYMENT AND TAXES UPON EXERCISE OF OPTIONS.

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

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

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

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

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

8.	USE OF PROCEEDS.

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

9.	ADJUSTMENT OF SHARES.

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

10.

EFFECT OF CHANGE IN CONTROL.

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

11.

NO RIGHT TO DIRECTORSHIP.

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

12.

LEGAL REQUIREMENTS.

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

13.

DURATION AND AMENDMENTS.

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

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

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

14.

Rule 16b-3.

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

Approved by the Board of Directors on April 18, 1999.

Approved by the Shareholders of the Company on June 8, 1999, to be effective on the date of the closing of the Company’s initial public offering of its ordinary shares.

Last amended by the Board of Directors on January 19, 2006.

Exhibit 99.2

COMMTOUCH SOFTWARE LTD.

AMENDED AND RESTATED 1996 CSI STOCK OPTION PLAN

as amended and restated on December 26, 2003

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

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

(a)

“ Administrator ” means the Board or any of its Committees appointed pursuant to Section 4 of the Plan, in its capacity as an administrator of the Plan.

(b)

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

(c)

“ Code ” means the Internal Revenue Code of 1986, as amended.

(d)	“ Committee ” means a Committee appointed by the Board in accordance with Section 4 of the Plan.
(e)	“ Company ” means Commtouch Software Ltd., an Israeli company.
(f)	“ Consultant ” means any person who is engaged by the Company or the Subsidiary to render consulting or advisory services and is compensated for such services, and any Director of the Company or the Subsidiary whether compensated for such services or not. If the Company registers any class of any equity security pursuant to the Exchange Act, the term Consultant shall thereafter not include Directors who are not compensated for their services or are paid only a Director’s fee.
(g)	“ Continuous Status as an Employee or Consultant ” means that the employment or consulting relationship with the Company or the Subsidiary is not interrupted or terminated. Continuous Status as an Employee or Consultant shall not be considered interrupted in the case of (i) any leave of absence approved by the Company or the Subsidiary or (ii) transfers between locations of the Company or the Subsidiary or between the Subsidiary and the Company or any successor. A leave of absence shall include sick leave, military leave, or any other personal leave approved by an authorized representative of the Company or the Subsidiary, as applicable. For purposes of Incentive Stock Options, no such leave may exceed 90 days, unless reemployment upon expiration of such leave is guaranteed by statute or contract, including policies of the Company or the Subsidiary, as applicable. If reemployment upon expiration of a leave of absence approved by the Company or the Subsidiary is not so guaranteed, on the 181st day of such leave any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option.

(h)	“ CI ” means Commtouch Inc., a California corporation.

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

(j) “ Employee ” means any person, including Officers, (i) employed by the Company or the Subsidiary. The payment of a Director’s fee by the Company or the Subsidiary shall not be sufficient to constitute “employment.”

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

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

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

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

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

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

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

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

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

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

(r) “ Optionee ” means an Employee or Consultant who receives an Option or Stock Purchase Right.

(s)	“ Ordinary Shares ” means the Ordinary Shares of stock of the Company.
(t)	“ Plan ” means the Amended and Restated 1996 CSI Stock Option Plan.

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

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

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

(x) “ Subsidiary ” means Commtouch Inc., a California corporation, one of the Company’s wholly-owned U.S. subsidiaries.

3. Stock Subject to the Plan . Subject to the provisions of Section 13 of the Plan, the aggregate number of Ordinary Shares that may be subject to option and sold under this Plan and the Company’s Amended and Restated Israeli Share Option Plan is 11,460,000, unless amended by the Board or the shareholders of the Company. The Ordinary Shares may be authorized but unused, or reacquired Ordinary Shares.

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

4.	Administration of the Plan .

(a) General (i) Multiple Administrative Bodies . If permitted by Rule 16b-3, the plan may be administered by different bodies with respect to, Officers and Employees who are not Officers.

(ii) Administration With Respect to Officers . With respect to grants of Options and Stock Purchase Rights to Employees who are also Officers, the Plan shall be administered by (A) the Board if the Board may administer the Plan in compliance with applicable Israeli securities laws, the rules under Rule 16b-3 promulgated under the Exchange Act or any successor thereto (“Rule 16b-3”) relating to the disinterested administration of

employee benefit plans under which Section 16(b) exempt discretionary grants and awards of equity securities are to be made, or (B) a Committee designated by the Board to administer the Plan, to the extent that applicable Israeli law so allows, which Committee shall be constituted to comply with the applicable laws of Israel, rules under Rule 16b-3 relating to the disinterested administration of employee benefit plans under which Section 16(b) exempt discretionary grants and awards of equity securities are to be made. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by applicable laws of Israel, the rules under Rule 16b-3 relating to the disinterested administration of employee benefit plans under which Section 16(b) exempt discretionary grants and awards of equity securities are to be made.

(iii) Administration With Respect to Other Employees and Consultants . With respect to grants of Options and Stock Purchase Rights to Employees or Consultants who are not Officers, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board to administer the Plan, to the extent that applicable Israeli law so allows, which committee shall be constituted in such a manner as to satisfy the legal requirements relating to the administration of incentive stock option plans, if any, of the laws and regulations of Israel, of California laws and regulations, of the Code, and of any applicable stock exchange (collectively, the “Applicable Laws”). Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by the Applicable Laws.

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

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

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

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

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

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

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

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

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

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

5.	Eligibility .

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

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

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

6. Term of Plan . The Plan shall become effective upon the earlier to occur of its adoption by the Board or its approval by the shareholders of the Company, as described in Section 19 of the Plan. It shall continue in effect for a term of ten (10) years as from the original date of approval by the shareholders, as detailed below, unless sooner terminated under Section 15 of the Plan.

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

8.	Option Exercise Price, Consideration and Taxes .

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

(i)	In the case of an Incentive Stock Option

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

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

(ii)	In the case of a Nonstatutory Stock Option

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

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

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

9.	Exercise of Option .

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

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

An Option shall be deemed to be exercised when written notice of such exercise in the form attached hereto as Exhibit C has been given to the Company in accordance with terms of the Option by the person entitled to exercise the Option and full payment for the Ordinary Shares with respect to which the Option is exercised has been received by the Company. Full payment may, as authorized by the Administrator, consist of any consideration and method of payment allowable under Section 8(b) hereof. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Ordinary Shares, no right to vote, receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly upon exercise of the Option. No adjustment shall be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 13 hereof.

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

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

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

(d) Death of Optionee . In the event of the death of an Optionee, the Optionee’s estate or any person who acquired the right to exercise the Option by bequest or inheritance shall be entitled, but only within twelve (12) months from the date of such termination (and in no event later than the expiration date of the term of such Option as set forth in the relevant option agreement), to exercise all Options such Employee or Consultant would have received had such Employee or Consultant remained employed for two (2) years from the date of such termination. All remaining Ordinary Shares covered by the unexercisable portion of the Option shall immediately revert to the Plan. If, after the Optionee’s death, the Optionee’s estate or a person who acquires the right to exercise the Option by bequest or inheritance does not exercise the Option within the time specified herein, the Option shall terminate, and the Ordinary Shares covered by such Option shall revert to the Plan.

(e) Rule 16b-3 . Options granted to a person subject to Section 16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such additional conditions or restrictions as may be required thereunder to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions.10. Non-Transferability of Options and Stock Purchase Rights . Options and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee.

11.	Restricted Shares .
	(a)	Awards of Restricted Shares.

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

(b)	Restrictions .

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

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

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

(c)

Vesting.

If the Optionee ceases to be an Employee for any reason, the Company shall have the right, but not the obligation, to repurchase certain of the Shares at their original Exercise Price. The Company’s right to repurchase the Shares at their original Exercise Price shall lapse, unless the stock option agreement provides otherwise, as to one-fourth (1/4) of the Shares at the end of the first year of continuous employment and as to one thirty-sixth (1/36) of the remaining Shares per month of continuous employment over the next thirty-six (36) months. Shares that are subject to repurchase at their original Exercise Price are referred to as “Restricted Shares.”

(d)	Section 83(b) Election.

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

12.	Stock Purchase Rights .

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

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

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

13.	Adjustments Upon Changes in Capitalization or Merger .

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

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

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

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

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

15.	Amendment and Termination of the Plan .

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

(b) Effect of Amendment or Termination . Any such amendment or termination of the Plan shall not affect Options or Stock Purchase Rights already granted, and such Options and Stock Purchase Rights shall remain in full force and effect as if this Plan had not been amended or terminated, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company.

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

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

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

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

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

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

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

Approved by the Board of Directors: January 1, 1996, and last amended on December 26, 2003

Approved by the Shareholders: January 1, 1996, and last amended on December 26, 2003

COMMTOUCH SOFTWARE LTD.

1996 CSI STOCK OPTION PLAN, AS AMENDED TO DECEMBER 26, 2003

Exhibit 99.3

__________________________________________________________________________________________

COMMTOUCH SOFTWARE LTD.

AMENDED AND RESTATED 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	6

4. DESIGNATION OF PARTICIPANTS	7


5. DESIGNATION OF OPTIONS PURSUANT TO SECTION 102		7

6. TRUSTEE		8

7. SHARES RESERVED FOR THE ISOP		9

8. PURCHASE PRICE		9

9. ADJUSTMENTS	10

10. TERM AND EXERCISE OF OPTIONS	11

11. VESTING OF OPTIONS	12


12. PURCHASE FOR INVESTMENT	12

12. DIVIDENDS	13

13. RESTRICTIONS ON ASSIGNABILITY AND SALE OF OPTIONS	13

14. EFFECTIVE DATE AND DURATION OF THE ISOP	13

15. AMENDMENTS OR TERMINATION	14

16. GOVERNMENT REGULATIONS	14

17. CONTINUANCE OF EMPLOYMENT	13

18. GOVERNING LAW & JURISDICTION	14

19. TAX CONSEQUENCES	14

20. NON-EXCLUSIVITY OF THE ISOP	15

21. MULTIPLE AGREEMENTS	15

This plan, as amended from time to time, shall be known as Commtouch Software Ltd Amended and Restated Israeli Share Option Plan (the “ ISOP ”) [formerly known as the Amended and Restated 1999 3(i) Share Option Plan], and was amended and adopted on June 22, 2003 by the Board and further amended by the shareholders on December 26, 2003.

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; and (v) any conduct (other than conduct in good faith) reasonably determined by the Board to be materially detrimental to the Company.

2.6	“Chairman” means the chairman of the Committee.

2.7	“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.

2.8	“Company” means Commtouch Software Ltd, an Israeli company.

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

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

2.11	“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.

2.12	“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.

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

2.14	“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.

2.15	“ISOP” means this 2003 Israeli Share Option Plan.

2.16	“ ITA” means the Israeli Tax Authorities.

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

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

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

2.20	“102 Option” means any Option granted to Employees pursuant to Section 102 of the Ordinance.

2.21	“3(i) Option” means an Option granted pursuant to Section 3(i) of the Ordinance to any person who is Non- Employee.

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

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

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

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

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

2.27	“Share” means the ordinary shares, NIS 0.05 par value each, of the Company.

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

2.31	“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.

2.30	“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.

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

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

2.33	“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 THE 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. In the event that no Committee shall be appointed, any reference to the Committee in the ISOP or in the Option Agreement shall refer to the Board.

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 full 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 Committee shall have full power and authority to :(i) alter any restrictions and conditions of any Options or Shares subject to any Options (ii) interpret the provisions and supervise the administration of the ISOP; (iii) accelerate the right of an Optionee to exercise in whole or in part, any previously granted Option; (iv) determine the Purchase Price of the Option; (v) prescribe, amend and rescind rules and regulations relating to the ISOP; and (vi) make all other determinations deemed necessary or advisable for the administration of the ISOP.

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 Board may prescribe in accordance with the provisions of the ISOP.

3.6

Subject to the Company’s Articles of Association, all decisions and selections made by the Board or the Committee pursuant to the provisions of the ISOP shall be made by a majority of its members except that no member of the Board or the Committee shall vote on, or be counted for quorum purposes, with respect to any proposed action of the Board or the Committee relating to any Option to be granted to that member. Any decision reduced to writing shall be executed in accordance with the provisions of the Company’s Articles of Association, as the same may be in effect from time to time.

3.7	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.

3.8

Subject to the Company’s Articles of Association and the Company’s decision, and to all approvals legally required, including, but not limited to the provisions of the Companies Law, each member of the Board or the Committee shall be indemnified and held harmless by the Company against any cost or expense (including counsel fees) reasonably incurred by him, or any liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with the ISOP unless arising out of such member's own fraud or bad faith, to the extent permitted by applicable law. Such indemnification shall be in addition to any rights of indemnification the member may have as a director or otherwise under the Company's Articles of Association, any agreement, any vote of shareholders or disinterested directors, insurance policy or otherwise.

4.	DESIGNATION OF PARTICIPANTS

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; and (iii) Controlling Shareholders 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 PURSUANT 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.

6.	TRUSTEE

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 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. Notwithstanding the above, if any such sale or release occurs during the Holding Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedures promulgated thereunder shall apply to and shall be borne by such Optionee.

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 THE ISOP; RESTRICTION THEREON

7.1

The Company has reserved 11,460,000 authorized Shares for the purposes of the ISOP and for the purposes of the Commtouch Software Ltd. Amended and Restated 1996 CSI Stock Option Plan and any other share option plans which may be adopted by the Company in the future, subject 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.	PURCHASE 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 Option is paid) as determined by the Company.

9.	ADJUSTMENTS

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 may be assumed or substituted for 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 were distributed to the shareholders of the Company in connection with the Transaction. In the case of such assumption and/or substitution of Options, appropriate adjustments shall be made to the Purchase Price so as to reflect such action, all as subject to the determination of the Committee or the Board, which determination shall be in their sole discretion and final. In the event the Successor Company does not agree to assume or substitute as described in this Section 9.1, the Options shall terminate as of the date of the closing of the Transaction.

9.2

Notwithstanding the above and subject to any applicable law, the Board or the Committee 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 shall be accelerated so that any unvested Option or any portion thereof shall be immediately vested as of the date which is ten (10) days prior to the effective date of the Transaction.

9.3

For the purposes of section 9.1 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 ordinary shares (or their equivalent) of the Successor Company or its parent or subsidiary, the Committee may, with the consent of the Successor Company, provide for the consideration to be received upon the exercise of the Option to be solely ordinary shares (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 Committee 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

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

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 OPTIONS

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

Each Option granted under this ISOP shall be exercisable following the Vesting Dates and for the number of Shares as shall be provided in Exhibit B to the Option Agreement. 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. A notice of termination of employment or service shall be deemed to constitute termination of employment or service. 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.

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 ninety (90) days after the date of such termination; or -

(iii) the Committee 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 to such outstanding Options.

10.6

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, but in case of Options and Shares held by the Trustee, subject to the provisions of Section 6 of the ISOP.

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 OPTIONS

11.1

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

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 appropriate. 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.

DIVIDENDS

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.

14.

RESTRICTIONS ON ASSIGNABILITY AND SALE OF OPTIONS

14.1

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.

14.2	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, can not be transferred, assigned, pledged or mortgaged, other than by will or pursuant to the laws of descent and distribution.

15.

EFFECTIVE DATE AND DURATION OF THE ISOP

The ISOP shall be effective as of the day it was adopted by the Board and shall terminate at the end of ten (10) years from such day of adoption, unless otherwise extended by the Board, subject to any further requirements under applicable law.

The Company shall obtain the approval of the Company’s shareholders for the adoption of this ISOP or for any amendment to this ISOP, if shareholders’ approval is necessary or desirable to comply with any applicable law including without limitation the US securities law or the securities laws of other jurisdiction applicable to Options granted to Optionees under this ISOP, or if shareholders’ approval is required by any authority or by any governmental agencies or national securities exchanges including without limitation the US Securities and Exchange Commission.

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.

GOVERNMENT 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 by any governmental agencies or national securities exchanges as may be required. 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 & JURISDICTION

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

20.1

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.

20.2	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.

* * *

Exhibit 99.4

COMMTOUCH SOFTWARE LTD.

2006 U.S. STOCK OPTION PLAN

as adopted on December 15, 2006

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

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

(b)	“ Board ” means the Board of Directors of the Company.
(c)	“ Code ” means the Internal Revenue Code of 1986, as amended.

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

(e)	“ Company ” means Commtouch Software Ltd., an Israeli company.

(f)

“ Consultant ” means any person who is engaged by the Company or the Subsidiary to render consulting or advisory services and is compensated for such services, and any Director of the Company or the Subsidiary whether compensated for such services or not.

(g)

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

(h)	“ CI ” means Commtouch Inc., a California corporation.

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

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

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

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

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

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

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

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

(o) “ Officer ” means a person who is an officer of the Company or the Subsidiary as defined under applicable law.

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

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

(r) “ Optionee ” means an Employee or Consultant who receives an Option or Stock Purchase Right.

(s)	“ Ordinary Shares ” means the Ordinary Shares of stock of the Company.
(t)	“ Plan ” means the Commtouch Software Ltd. 2006 US Stock Option Plan.

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

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

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

(x) “ Subsidiary ” means Commtouch Inc., a California corporation, a wholly-owned U.S. subsidiary of the Company.

3. Stock Subject to the Plan . Subject to the provisions of Section 13 of the Plan, the aggregate number of Ordinary Shares that may be subject to option and sold under this Plan is 3,000,000, unless amended by the Board or the shareholders of the Company. The Ordinary Shares may be authorized but unused, or reacquired Ordinary Shares. The Administrator is authorized to draw additional Ordinary Shares from other Company stock option plans for usage under this Plan or, conversely, to draw Ordinary Shares from this Plan for usage under other Company stock option plans.

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

4.	Administration of the Plan .

(a) General (i)With respect to grants of Options and Stock Purchase Rights under this Plan, the Plan shall be administered by (A) the Board if the Board may administer the Plan in compliance with applicable Israeli securities laws, or (B) a Committee designated by the Board to administer the Plan, to the extent that applicable Israeli law so allows, which Committee shall be constituted to comply with the applicable laws of Israel and California, the Code, relevant securities laws and, so long as the Company’s Ordinary Shares are listed on NASDAQ, the Marketplace Rules thereof. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board.

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

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

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

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

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

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

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

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

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

5.	Eligibility .

6. Term of Plan . The Plan shall become effective upon its approval by the shareholders of the Company, as described in Section 19 of the Plan. It shall continue in effect for a term of ten (10) years as from the original date of approval by the shareholders, as detailed below, unless sooner terminated under Section 15 of the Plan.

8.	Option Exercise Price, Consideration and Taxes .

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

(i)	In the case of an Incentive Stock Option

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

(ii)	In the case of a Nonstatutory Stock Option

(b) The consideration to be paid for the Ordinary Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant). Such consideration may consist of, among other things, (1) cash, (2) cashiers check, (3) promissory note (to the extent permitted by applicable law), secured at a minimum by a pledge of the shares issued pursuant to a share, or (4) any combination of the foregoing methods of payment. In making its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company. For exercises not effected through an online options management service (i.e. Etrade), Optionee shall also deliver a properly executed exercise notice together with such other documentation as the Administrator and a broker, if applicable, shall require to effect an exercise of the Option.

9.	Exercise of Option .

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

An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with terms of the Option by the person entitled to exercise the Option, or when an exercise order has been executed by an online options management service (i.e. Etrade), and full payment for the Ordinary Shares with respect to which the Option is exercised has been received by the Company. Full payment may, as authorized by the Administrator, consist of any consideration and method of payment allowable under Section 8(b) hereof. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate or electronic share transference evidencing such Ordinary Shares, no right to vote, receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate or cause such electronic share transference as soon as possible following exercise of the Option. No adjustment shall be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued or electronic share transference is effected, except as provided in Section 13 hereof.

(b) Termination of Employment or Consulting Relationship . In the event of termination of an Optionee’s Continuous Status as an Employee or Consultant (but not in the event of an Optionee’s change of status from Employee to Consultant (in which case an Employee’s Incentive Stock Option shall automatically convert to a Nonstatutory Stock Option on the date three (3) months and one day following such change of status) or from Consultant to Employee) for reasons other than for cause, such Optionee shall have an additional ninety days to exercise her or her Option to the extent that the Optionee was entitled to exercise it at the date of termination (but in no event later than the expiration date of the term of such Option as set forth in the option agreement). In the case of a Nonstatutory Stock Option, the Administrator shall have the discretion to extend the exercise period beyond ninety days on a case by case basis (but in no event later than the expiration date of the term of such Option as set forth in the option agreement). To the extent that the Optionee was not entitled to exercise the Option at the date of such termination, or if the Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate.

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

11.	Restricted Shares .
	(a)	Awards of Restricted Shares.

(b)	Restrictions .

(iii) With respect to each receipt of Restricted Shares by an Optionee, such Optionee shall execute a Restricted Share Purchase Agreement in a form to be provided by the Company or the Subsidiary.

(c)

Vesting.

(d)	Section 83(b) Election.

12.	Stock Purchase Rights .

13.	Adjustments Upon Changes in Capitalization or Merger .

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

15.	Amendment and Termination of the Plan .

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

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

18. Agreements . Options and Stock Purchase Rights shall be evidenced by written agreements in such form as the Administrator shall approve from time to time and/or by records appearing with the online options management service (i.e. Etrade).

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

20. Information to Optionees and Purchasers . The Company shall provide to each Optionee and to each individual who acquires Ordinary Shares pursuant to the Plan, not less frequently than annually during the period such Optionee has one or more Options or Stock Purchase Rights outstanding, and, in the case of an individual who acquires Ordinary Shares pursuant to the Plan, during the period such individual owns such Ordinary Shares, copies of annual financial statements. The Company may fulfill this requirement by filing such financial statements with the Securities and Exchange Commission, or by posting to the Company’s website.

Approved by the Board of Directors: September 19, 2006

Approved by the Shareholders: December 15, 2006