RETALIX LTD.

Stock Option Plan of Subsidiaries
On December 4, 2000, the board of directors of one of our subsidiaries, StoreAlliance.com Ltd., approved an employee stock option plan. Pursuant
to this subsidiary plan, as of May 31, 2006, 233,922 ordinary shares, or approximately 6.6% of the issued and outstanding share capital of the subsidiary as
of such date, are reserved for issuance upon the exercise of options granted to some of our and the subsidiary’s employees. The options vest as follows:
33.33% after the first year after their grant, another 33.33% after the second year and another 33.33% after the third year, but only during the period the
employee is employed either by us or by the subsidiary. In addition, the options are not exercisable prior to the earliest of the following events: (1) the
consummation of a public offering of the subsidiary’s securities, (2) a merger or acquisition of the subsidiary, or (3) the lapse of seven years from the date
of grant. Any vested options not exercised within the later of 90 days of (a) the end of the optionee’s status as our or the subsidiary’s employee, or (b) the
first to occur of such exerciseability events, will expire. The rights of ordinary shares obtained upon exercise of the options will be identical to those of the
other ordinary shares of the subsidiary. Any option not exercised within 10 years of the grant date thereof will expire. Some of the options under this
subsidiary plan are subject to the terms stipulated by Section 102 of the Israeli Income Tax Ordinance (as in effect prior to January 1, 2003). Among other
things, the Section 102 to the Income Tax 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.
On November 23, 2004, the board of directors of StoreAlliance.com Ltd. approved an additional employee stock option plan. Pursuant to this Plan,
options to purchase 36,000 ordinary shares, NIS 0.01 par value, were granted on December 31, 2004, to certain employees of the subsidiary all subject to
the “capital gains taxation route” under Section 102 of the Income Tax Ordinance [New Version], 1961. All options granted under this plan bear an
exercise price of $5.55 per share 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 Retalix or its subsidiary - provided that the employee is still employed by Retalix or its subsidiary at
the date of vesting). In addition, the options are not exercisable prior to: (1) the consummation of an initial public offering of the subsidiary’s securities; (2)
a merger of the subsidiary; or (3) seven years from the date of grant.
As of May 31, 2006, options to purchase 269,922 ordinary shares of the subsidiary were outstanding under the above subsidiary employee plans, at
exercise prices ranging from NIS0.01 per share to $5.55 per share. The rest of the above options were forfeited.
On December 1, 2004, the board of directors of our subsidiary StoreNext USA approved an employee stock option plan. Pursuant to this plan,
options to purchase up to 1,500,000 shares of StoreNext USA may be granted to employees and service providers of the subsidiary or any affiliate. In
addition, the plan stipulates that options, may not be exercised prior to: (1) the conversion of the corporate entity of StoreNext USA from a limited liability
company to a C-corporation; or (2) the consummation of an initial public offering of StoreNext USA’s securities; or (3) a merger or a significant change of
control in StoreNext USA; or (4) five years from the date of grant.
On December 14, 2004, StoreNext USA granted options to acquire 1,169,000 of its shares to its employees and directors. These options bear an
exercise price of $0.3748 per share, which reflects the market value according to an independent valuation. These options will fully vest seven years from
grant or upon an initial public offering or change of control or, in the option committee’s discretion, accelerated vesting in the event of a merger, a sale or a
disposition. In addition, these options will vest upon an initial public offering of the majority interest of StoreNext USA. The options will terminate and
expire ten years from grant.
Although Nasdaq rules generally require shareholders’ approval of our equity compensation plans and material amendments thereto, Israeli practice
is to have such plans and amendments approved only by the board of directors.
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