RETALIX LTD.

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Yoni Stutzen has served as our Executive Vice President, International Sales since January 2004, and served as our Vice President, International Sales from December 1998 until December 2003. He served as our Vice President, Marketing from August 1994 through December 1998. Mr. Stutzen served as a Marketing Manager for Manof Communications from January 1985 to July 1994 and as international SWIFT systems manager for Bank Hapoalim from January 1980 until December 1984. Mr. Stutzen received a B.Sc. in Industrial and Management Engineering from the Technion, Israel Institute of Technology in 1974. Reuben Halevi has served as our Executive Vice President, Product Development since June 2005 and as a Vice President for Development since January 2005. From January to December 2004, Mr. Halevi served as a senior manager in our development group. During 2000 to 2003, Mr. Halevi served as a senior IT consultant for Supersol, the largest grocery chain in Israel. Mr. Halevi received a B.Sc. in Industrial and Management Engineering from the Technion, Israel Institute of Technology in 1983. Saul Simon has served as our Executive Vice President, Business Development and CRM Products since November 2005, as a vice president with the same responsibilities since January 2004, and as our Vice President, Business Development from November 1997 until December 2003. Mr. Simon served as Vice President, U.S. Activities for Adapt Technologies from March 1993 to June 1997. Mr. Simon received a B.Sc. in Computer Science and Mathematics from Tel Aviv University in 1982. David Bresler has served as an external director since June 2006. From 2002 to 2004, Mr. Bresler served as Chief Executive Officer of Golf & Co. From 1999 to 2002, Mr Bresler served as Chief Executive Officer of Tango Ltd. From 1997 to 1998, he served as Chief Executive Officer of Finish IL Ltd. From 1991 to1996, he served as Chief Executive Officer of Shilav Ltd., and from 1985 to 1991 as Chief Financial Officer of Shilav Ltd. Mr. Bresler served as an officer in the Israeli Defense Forces, and received a B.A. in Economics and Management from the Hebrew University in 1982. Louis Berman has served as an external director since June 2006. Since August 1999, Mr. Berman has served in a senior ranked management position in the Israeli civil service. He received a B.A. in Political Sciences from the Haifa University in 2003. Sigal Hoffman has served as a director since May 2004. Ms. Hoffman has worked as an attorney in private practice since 1995. Ms. Hoffman has a B.A. degree in Social Work, an M.B.A. in Educational Consulting and an LL.B. in law from Tel-Aviv University. Brian Cooper has served as a director since August 1984. From December 1999 to June 2001, Mr. Cooper served as our Vice President, Israeli operations. Mr. Cooper also served as our Chief Financial Officer from August 1984 until December 1999. From 1979 to 1984, Mr. Cooper served as an officer in the Israeli Defense Forces as an economist and programmer. Mr. Cooper has been a director of YCD Multimedia Ltd. since June 2003. Mr. Cooper received a B.A. in Economics from Haifa University in 1977. Ian O’Reilly has served as a director since November 2000. Mr. O’Reilly serves as the Chairman of the Cambridge Building Society and as a director of Atlas Cedar Ltd. Mr. O’Reilly has served as a Group IT Manager at Tesco Stores Ltd. between 1991 and 2000. He received a British Computer Society Qualification from the Cambridge College of Arts and Technology in 1972. Amnon Lipkin-Shahak has served as a director since April 2002. Since May 2001, Mr. Lipkin-Shahak has served as the chairman of the board in the TAHAL Group, and as a director in the Kardan Group. Mr. Lipkin-Shahak also serves as a director in El-Al Airlines and Visual Defence and as the Chairman of the Executive Committee of the Peres Center for Peace. Mr. Lipkin-Shahak is also a former director of Granit Hacarmel and NILIT and a former chairman of the Bountiful Israel Council. Between May 1999 and March 2001, Mr. Lipkin-Shahak served as a member of the Israeli parliament (the Knesset). During most of this period, Mr. Lipkin-Shahak served as a cabinet minister in charge of transport (between July 2000 and March 2001) and in charge of tourism (between July 1999 and July 2000). In December 1998, Mr. Lipkin-Shahak retired from his position as the Chief of Staff of the Israeli Defense Forces after thirty-six years of service. B. Compensation The aggregate accrued compensation of all the persons as a group who served in the capacity of a director or an executive officer during the year ended December 31, 2005, was approximately $2.0 million. This amount includes pension, retirement and similar benefits in the aggregate amount of $125,000. This does not include amounts expended by us for business travel, professional and business associated dues and business expense reimbursements. Under our articles of association, no director may be paid any remuneration by us for his services as director except as may be approved pursuant to the provisions of the Companies Law, which require the approval of our audit committee, followed by the approval of our board of directors and then the approval of our shareholders. 59
Our external directors receive annual compensation of approximately $8,400 each and in addition $310 per board meeting or per board committee meeting in which they participate, and $190 per such meeting by telephone in which they participate. In addition, Mr. Barry Shaked, our Chairman and Chief Executive Officer, is entitled to receive an annual bonus based on our attainment of certain performance milestones. For the first million dollars of our net income earned, he is entitled to receive a bonus of $65,000. For each subsequent million dollars of our net income, he is entitled to receive an additional bonus, which is to be $5,000 less than the prior bonus level, down to $35,000 for seven million dollars of net income and for each million dollars earned thereafter. As compensation for his services to us, Mr. Shaked is entitled to receive, at the beginning of each calendar year, options to purchase a number of our ordinary shares equal to 1.0% of our then outstanding ordinary shares. This options are vested at the grant date, but are blocked, in thirds for one year, two years and three years. According to this arrangement, in January of 2004, January 2005 and January 2006, Mr. Shaked was granted options to purchase a total of up to 129,767 and 176,556 and 194,090 of our ordinary shares, respectively, at exercise prices of $23.19, $21.86 and $24.46 per share, respectively. The options have a term of four years from the date of grant. According to our employment agreement with Mr. Shaked, he is entitled to severance pay equal to one month’s salary for every year of employment. In addition, he is entitled to full compensation and benefits during the first three month period following termination of employment in exchange for posttermination cooperation during such period, and to full compensation and benefits also during the second three month period following termination of employment in exchange for post employment consulting during such period, and an additional payment equal to five months’ salary in the event of termination of employment, other than by us for cause. In October 2002, the shareholders of the Company approved the replacement of the employment agreement with Mr. Shaked, with a management agreement with a private company controlled by Mr. Shaked. This arrangement has not changed in any material respect the previous terms of employment, including the terms described above. Our employment agreements with most of our employees located in Israel, including executive officers and those that are also members of our board of directors, provide for standard Israeli benefits, such as managers’ insurance and an educational fund. We make payments under these programs as follows: pension–5.0% of gross salary; severance pay–8.33% of gross salary; disability insurance–up to 2.5% of gross salary (all of which are considered part of managers’ insurance); and educational fund–7.5% of gross salary. The total amount we expensed in 2005 under these arrangements for all executive officers as a group was approximately $120,000. During 2005, all our directors and executive officers as a group, were granted options to purchase an aggregate of 242,556 shares under our stock option plans. The exercise prices of these options range from $21.86 to $23.02 and their expiration dates range from December 31, 2008 to June 30, 2009. Of these options, 80,852 became exercisable on January 1, 2006, 73,519 will become exercisable on January 1, 2007, 73,519 will become exercisable on January 1, 2008 and 14,666 will become exercisable on January 1, 2009. C. Board Practices Our articles of association provide for a board of directors of not less than three and not more than ten directors. Each director is elected at the annual general meeting of shareholders and holds office until the election of his successor at the next annual general meeting, except for external directors, who, subject to the provisions of the Companies Law, hold office for one or two three-year terms. In addition, any vacancy on the board of directors, however occurring, including a vacancy resulting from an enlargement of the board, may be filled by a vote of a simple majority of the directors then in office. A director elected thereby may serve on the board of directors until the next annual general meeting. Our officers serve at the discretion of the board of directors. There are no family relationships among our directors and executive officers. According to the Companies Law, a public company’s chairman of the board may not serve as its chief executive officer, unless otherwise approved by the shareholders for periods of up to three years. The required shareholder approval is a majority of the shares voted on the matter, including at least two-thirds of the shares of non-controlling shareholders voted on the matter, unless the votes of the opposing non-controlling shareholders constitute less than 1% of the voting power of the company (in which case a simple majority of shares voted on the matter will be sufficient). Barry Shaked, one of our founders, has served as our president, chief executive officer and chairman of the board since our inception in 1982. His most recently approved three-year period expires in 2007. 60
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UNITED STATES SECURITIES AND EXCHAN
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PART I TABLE OF CONTENTS Item 1. ID
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PART II PART III G. Statement by Ex
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ITEM 3 - KEY INFORMATION A. Selecte
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the uncertainty regarding the adopt
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changing customer needs; and frequ
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If we are unsuccessful in establish
Page 15 and 16: Antitrust scrutiny of e-marketplace
Page 17 and 18: The dollar cost of our operations i
Page 19 and 20: It could be difficult to enforce a
Page 21 and 22: ITEM 4 - INFORMATION ON THE COMPANY
Page 23 and 24: Our Market Opportunity The customer
Page 25 and 26: Our solutions provide for both reta
Page 27 and 28: Leverage our integrated suite of pr
Page 29 and 30: Enterprise Headquarters Solutions:
Page 31 and 32: Retalix HQC - Retalix HQ for C-Stor
Page 33 and 34: • Ordering, receiving • Load ba
Page 35 and 36: StoreLine.net StoreLine.net is a th
Page 37 and 38: create and sustain customer interes
Page 39 and 40: The Retalix InSync Solution Portfol
Page 41 and 42: Customers Our software has been dep
Page 43 and 44: Direct Sales Our direct sales force
Page 46 and 47: ITEM 5 - OPERATING AND FINANCIAL RE
Page 48: The following table shows the impac
Page 51 and 52: Revenues from on-line application,
Page 54 and 55: Product Sales Product sales primari
Page 56 and 57: Gain Arising from Issuance of Share
Page 58 and 59: The increase in cost of product sal
Page 60 and 61: SFAS No. 154. In May 2005, the FASB
Page 62 and 63: The following table presents inform
Page 64 and 65: D. Trend Information Trends we iden
Page 68 and 69: The Companies Law and Nasdaq listin
Page 70 and 71: D. Employees Set forth are tables p
Page 72 and 73: Options granted under our Second 19
Page 74 and 75: ITEM 7 - MAJOR SHAREHOLDERS AND REL
Page 76 and 77: PalmPoint In December 2002, a legal
Page 78 and 79: The following table sets forth, for
Page 80 and 81: The oversight of the management of
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Page 84 and 85: In addition, provisions of the Comp
Page 86 and 87: The amount of a distribution with r
Page 88 and 89: Backup Withholding A U.S. holder ma
Page 90 and 91: The benefits available to an approv
Page 92 and 93: Generally, up until the 2006 tax ye
Page 94 and 95: The table below presents principal
Page 96 and 97: ITEM 15 - CONTROLS AND PROCEDURES P
Page 98 and 99: Our audit committee has adopted a p
Page 100 and 101: SIGNATURES The registrant hereby ce
Page 102 and 103: REPORT OF INDEPENDENT REGISTERED PU
Page 104 and 105: RETALIX LTD. CONSOLIDATED BALANCE S
Page 106 and 107: RETALIX LTD. STATEMENTS OF CHANGES
Page 108 and 109: RETALIX LTD. CONSOLIDATED STATEMENT
Page 110 and 111: RETALIX LTD. CONSOLIDATED STATEMENT
Page 112 and 113: NOTE 1 - SIGNIFICANT ACCOUNTING POL
Page 114 and 115: RETALIX LTD NOTES TO CONSOLIDATED F
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RETALIX LTD. NOTES TO CONSOLIDATED
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NOTE 2 - ACQUISITIONS (continued):
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NOTE 2 - ACQUISITIONS (continued):
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NOTE 4 - GOODWILL AND OTHER INTANGI
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NOTE 6 - OTHER LIABILITIES: RETALIX
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NOTE 9 - SHAREHOLDERS’ EQUITY (co
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NOTE 9 - SHAREHOLDERS’ EQUITY (co
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NOTE 10 - TAXES ON INCOME (continue
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NOTE 15 - SELECTED INCOME STATEMENT
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RETALIX LTD. REPORT OF INDEPENDENT
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Report of Independent Registered Pu
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I, Barry Shaked, certify that: File
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I, Danny Moshaioff, certify that: F
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Certification Pursuant to Section 9
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Consent of Independent Registered P
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Retalix Holdings, Inc. Plano, Texas
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RETALIX LTD.

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