RETALIX LTD.

NOTE 9 – SHAREHOLDERS’ EQUITY(continued):
RETALIX LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Some of the options under the Subsidiary Plan are subject to the terms stipulated by Section 102 of the Israeli
Income Tax Ordinance. Among other things, the Ordinance provides that the subsidiary will be allowed to claim
as an expense for tax purposes the amounts credited to the employees as a benefit, when the related tax is payable
by the employee.
During 2001, the subsidiary granted the said 270,000 options partly at an exercise price per share of NIS 0.01,
and to two employees at an exercise price of $5.55. Through December 31, 2005, 112,101 of these options were
forfeited and 76,023 were regranted.
The compensation (income) expenses attributable to the Subsidiary’s Plan - in accordance with the provisions of
APB 25 - that have been charged against income in the years ended December 31, 2005, 2004 and 2003 were $0,
$81,000 and $(63,000), respectively.
On November 23, 2004, the above subsidiary’s board of directors approved an additional employee stock option
plan (“the Subsidiary 2004 Plan”). Pursuant to the Subsidiary 2004 Plan, options to purchase 36,000 ordinary
shares, of NIS 0.01 par value each, were granted on December 31 2004, to certain employees of the subsidiary all
subject to the taxation route for grants under Section 102 of the Income Tax Ordinance [New Version], 1961. All
options granted under the Subsidiary 2004 Plan bear an exercise price of $5.55 and vest as follows: 33.33% after
the first year, another 33.33% after the second year and another 33.33% after the third year (in cases where the
optionee is an employee of the Company or its subsidiary - provided that the employee is still employed by the
subsidiary or the Company at the date of vesting). In addition, the options are not exercisable prior to: (1) the
consummation of an IPO of the subsidiary’s securities, (2) a merger of the subsidiary or (3) seven years from the
date of grant.
The fair value of each option grant from the above grants was between $2 and $4 estimated on the date of grant
under the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield
of 0%; expected volatility of 50%; risk free interest rate of 2.25%-3%; and weighted expected life of 3 years.
b. On December 1, 2004, the board of directors of another Subsidiary approved an employee stock option plan (“the
Additional Subsidiary Plan”). Pursuant to the Additional Subsidiary Plan, up to 1,500,000 options to purchase up
to 1,500,000 shares of the Additional Subsidiary, can be granted to its employees, officers and other service
provider providing services to the Company or any affiliate. In addition, the Additional Subsidiary Plan stipulates
that options granted pursuant to it, are not to be exercised prior to: (1) the conversion of the corporate entity of
the Additional Subsidiary from a Limited Liability Company, to a C corporation or (2) the consummation of an
IPO of the Additional Subsidiary’s securities, (3) a merger or a significant change of control in the Additional
Subsidiary or (4) five years from the date of grant.
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