February 28, 2008
 
 
 
 
 

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AGREEMENT FOR
THE ISSUE AND SALE OF SHARES IN
LAPIS TECHNOLOGIES, INC.
AND
THE TRANSFER OF SHARES IN
STAR NIGHT TECHNOLOGIES LTD.

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BY AND BETWEEN
 
 
Lapis Technologies, Inc.
 
 
AND
 
 
Harry Mund
 
 
AND
 
 
Mordechai Solomon
 
 
 

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THIS AGREEMENT is made and entered into as of this 28th day of February, 2008 by
and among: 

(1)
Lapis Technologies, Inc., a corporation organized under the laws of the State of
Delaware, the common stock of which is quoted and traded on the OTC Bulletin
Board under the symbol LPST.OB. (“Lapis”); and

(2)
Harry Mund, I.D. 068255470, of 73 Ben-Gurion Street, Kiriat Motzkin, Israel
(“Mund”); and

(3)
Mordechai Solomon, I.D. 30458954, of 11 Dganya St. Ra’anana, Israel
(hereinafter: the “Investor”).

WHEREAS, the Investor is active, through companies under his control, including
S.D.S. (Star Defense Systems) Ltd. a public company registered in the State of
Israel, traded on the Tel-Aviv Stock Exchange under the symbol SDS (א.ס.ד.ס)
(“SDS”), in the field of the defense industry, inter alia, in the development,
manufacturing and marketing of applications for night vision equipment, airplane
equipment and airborne systems upgrading and various safety equipment; and

WHEREAS, Lapis is a holding company, which is active, through its subsidiaries:
(i) Enertec Systems 2001 Ltd. (“Systems”), a private company registered in
Israel and active, inter alia, in Israel, in the field of design, development
and manufacturing of test systems, airborne, ship borne and land electronic
equipment and other various military systems, for military manufacturers; and
(ii) Enertec Electronics Ltd. (“Electronics”), a private company registered and
active in Israel, in the field of manufacturing, marketing and distribution of
power supplies and other related power products and power supply testing
equipment, both on behalf of third party manufacturers; and

WHEREAS, Mund, who is the controlling shareholder of Lapis, acts as chairman of
the board, CEO, president and secretary of Lapis and also as a director of
Systems; and

WHEREAS, Lapis and the Investor wish that Lapis shall issue shares to the
Investor in consideration for his holdings in Star Night Technologies Ltd.
(“SN”), an Israeli company with company number 52-003325-9, whose shares are
quoted and traded on the Tel Aviv Stock Exchange Ltd. under the symbol STNT
((סטנט, which holdings the Investor shall transfer to Lapis.

WHEREAS, Mund is to be granted the Mund Option (as defined below) in respect of
certain shares in Lapis.

NOW, THEREFORE, in consideration of the foregoing and the representation,
warranties, conditions and covenants contained in this Agreement and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the Parties (as defined
below) hereto agree as follows.

 

1.
INTERPRETATION & DEFINITIONS

 
1.1. The preamble and Schedules to this Agreement are an integral part hereof.

 
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1.2. In this Agreement, the following expressions shall bear the meanings set
forth alongside them, insofar as the context does not require otherwise or such
meaning does not contradict the contents or context thereof:

1.2.1. "Acquisition Transaction" shall mean any transaction involving:
 
1.2.1.1. The sale, license, disposition or acquisition of all or a material
portion of Lapis;
 
 
1.2.1.2. The issuance, disposition or acquisition of: (i) any capital stock or
other equity security of Lapis; (ii) any option, call, warrant or right (whether
or not immediately exercisable) to acquire any capital stock or other equity
security of Lapis; or (iii) any security, instrument or obligation that is or
may become convertible into or exchangeable for any capital stock or other
equity security of Lapis; or
 
1.2.1.3. Any merger, consolidation, business combination, reorganization or
similar transaction involving Lapis.

1.2.2. “Agreed Form” means, in relation to a document, the form of that document
which has been agreed by the Parties, acting reasonably, and attached to this
Agreement as a Schedule on the date of this Agreement and/or on Closing.

1.2.3. "Agreement" shall mean this agreement including all Schedules hereto.

1.2.4. "Business" means the business of Lapis as carried out on the date of this
Agreement.

1.2.5. "Certificate of Incorporation" shall mean the Certificate of
Incorporation and By-laws of Lapis and the Memorandum and Articles of
Association in the case of SN.

1.2.6. "Claim" means any claim for breach of the Mund and Lapis Warranties under
this Agreement.

1.2.7. "Closing Date" means the 21st day following the date on which an
information statement under the Exchange Act is mailed to the shareholders of
Lapis, provided that all Conditions have been fulfilled or waived in writing, by
the relevant Party, in accordance with the terms of this Agreement, and on which
the Closing shall take place.

 
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1.1.1. "Conditions" means the conditions to Closing set out in clauses 10, 11
and 12, and a “Condition” means any of them.

1.2.8. "Costs" means losses, damages, costs (including reasonable legal costs)
and expenses, in each case of any nature whatsoever.

1.2.9. "Common Shares" means the shares of common stock of Lapis, par value
$0.001 per share.

1.2.10. "Consent" shall mean any approval, consent, ratification, permission,
waiver or authorization (including any Governmental Authorization) made in
writing duly signed by the consenting party.

1.2.11. "Due Diligence Information " shall mean the due diligence information
and documentation relating to Systems, Lapis and its subsidiaries comprising the
correspondence, contracts, agreements, licences, documents and other information
made available to the Investor and its advisers as listed in the Due Diligence
Information Index List attached to this Agreement.

1.2.12. "Due Diligence Information Index List" shall mean the list of documents
provided to the Investor and his advisors in respect of such due diligence
conducted, which is attached hereto as Schedule 1.2.13.

1.2.13. "Disclosure Letter" means Schedule 1.2.13, the Schedules to clause 5
(save for Schedule 5.30.1) and Schedule 11.4.1 to this Agreement.

1.2.14. "Dollar(s) " or "$" shall mean United States dollar(s).

1.2.15. "Encumbrance" shall mean any lien, pledge, hypothecation, charge,
mortgage, security interest, encumbrance, claim, any restriction on the transfer
of any security or other asset, any restriction on exercise or transfer of any
other attribute of ownership of any asset.

 
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1.2.16. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company), firm or other enterprise, association or organization.

1.2.17. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

1.2.18.  "Fully Diluted Basis" shall mean Lapis’ issued share capital assuming:
(i) the exercise of all outstanding options and warrants exercisable into shares
of Lapis, if any; (ii) the exercise of all options and warrants exercisable into
shares of Lapis, reserved under stock option plans of Lapis, if any; (iii) the
conversion of all outstanding convertible securities of Lapis that are
convertible into shares of Lapis, if any; and (iv) the enforcement of all and
whatsoever obligations and undertakings by Lapis, both oral or in writing, under
which Lapis is obligated to grant or issue any option or warrant, exercisable,
or any security, convertible, into shares of Lapis, if any.

1.2.19. "Governmental Authorization" shall mean any: (a) permit, license,
certificate, franchise, permission, clearance, registration, qualification or
authorization issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Legal Requirement; or
(b) right under any contract with any Governmental Body.

1.2.20. "Governmental Body" shall mean any nation, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any
nature, federal, state, local, foreign or other governmental or
quasi-governmental authority of any nature (including any governmental division,
department, agency, commission, official, organization, unit, body or entity and
any court or other tribunal).

1.2.21. "Intellectual Property" shall mean the following items of intangible and
tangible property:
 
1.2.21.1. Patents, whether in the form of utility patents or design patents and
all pending applications for such patents;
 
 
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1.2.21.2. Trademarks, trade names, service marks, designs, logos, trade dress,
and trade styles, whether or not registered, and all pending applications for
registration of the same; and
 
1.2.21.3. Copyrights, whether or not registered, and all pending applications
for registration of the same.
 
1.2.22. "Investor's SN Shares" shall mean the Investor’s entire personal
holdings of shares in SN, being 4,539,557 common shares of SN, par value NIS
0.01 per share.

1.2.23. "Issued Shares" shall mean 75,129,500 of Common Shares that will grant
the Investor 92% of the issued and outstanding share capital and voting rights
in Lapis on the Closing Date on a Fully Diluted Basis.

1.2.24. "Legal Proceeding" shall mean any legal action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding), hearing, inquiry, audit, examination or
investigation commenced, brought, conducted or heard by or before, or otherwise
involving, any court or other Governmental Body or any arbitrator or arbitration
panel.

1.2.25. "Legal Requirement" shall mean any federal, state, local, municipal,
foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Body.

1.2.26. "LoI" means the Letter of Intent dated 11 October 2007, entered by
Lapis, Mund, the Investor and SDS.

1.2.27. "material adverse effect" means such event, change or effect which is
materially adverse to: (i) the businesses or results of operations of Lapis as a
whole; or (ii) the ability of Lapis to consummate the transactions contemplated
in the Transaction Documents, for the purposes of this Agreement, material shall
be deemed any single or series of connected actions and/or transactions
amounting to an amount that is equal to or greater than five percent (5%) of the
aggregate of Lapis’ and its Subsidiaries’ revenues over the year 2007.

 
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1.2.28. "Material Agreement" shall mean any agreement that is not in the
ordinary course of, and which has a material effect on, the Business.

1.1.2. "Mund Option" shall mean the put option granted to Mund by the Investor
as set out under clause 15 of this Agreement.

1.2.29. "NIS" means New Israeli Shekel(s).

1.2.30. "Parties" shall mean Lapis, Mund and the Investor and each a "Party".

1.2.31. "Permitted Transferee" shall mean: (i) each member of the immediate
family of Mund, meaning for the purposes of this definition: mother, wife and/or
children; (ii) a company in which Mund holds at least fifty (50) per cent of the
issued and outstanding shares; or (iii) a company in which Mund can appoint at
least half of the members of the board of directors.

1.2.32. "Person" shall mean any individual, Entity or Governmental Body.

1.2.33. "Preferred Shares" shall mean the preferred stock of Lapis, par value
$0.001 per share.

1.2.34. "Related Party" shall mean: (i) each of Lapis’ stockholders that owns an
aggregate of five percent (5%) or more of the capital stock of Lapis; (ii) each
individual who is an officer or director of Lapis; (iii) each member of the
immediate family, meaning for the purposes of this definition: next of kin,
parents and children, of each of the individuals referred to in "(i)" and "(ii)"
above; and (iv) any Entity (other than Lapis or any of its Subsidiaries) in
which any one of the individuals referred to in "(i)", "(ii)" and "(iii)" above
holds (or in which more than one of such individuals collectively hold),
beneficially or otherwise, a material voting, proprietary or equity interest.

 
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1.2.35. "Representatives" shall mean officers, directors, employees, agents,
attorneys, accountants and advisors of Lapis.

1.2.36. "SEC" shall mean the United States Securities and Exchange Commission.

1.2.37. "Securities Act" shall mean the Securities Act of 1933, as amended.

1.2.38. "Shareholder Indebtedness" shall mean all indebtedness outstanding
between any of Lapis and/or Mund and/or Lapis’ Subsidiaries.

1.2.39. "Subsidiaries" means Systems, Electronics and Enertec Management Ltd. 

1.2.40. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty) and any related charge or amount (including any fine, penalty
or interest), in each case imposed, assessed or collected by or under the legal
authority of any Governmental Body entitled by applicable law to levy Tax.

1.2.41. "Tax Returns" shall mean returns, reports and information statements
with respect to Tax required to be filed by or on behalf of Lapis with the US
Internal Revenue Authority and any other taxing authority domestic or foreign.

1.2.42. "Third Party Assurances" means all guarantees, indemnities,
counter-indemnities and letters of comfort of any nature whatsoever given to a
third party by Mund and/or Zvi Avni and/or Electronics in respect of any
obligation or liability of Lapis and/or its Subsidiaries other than Electronics,
for the avoidance of doubt, the above shall include all guarantees, obligations
and/or liabilities of any nature whatsoever either Mund and/or Mr. Zvi Avni
and/or Electronics may have towards any bank associated with the business and/or
activities of Systems and/or Lapis.

1.2.43. "Trading Day" shall mean a day on which the OTC Bulletin Board is open
for trading or, if Lapis is subsequently listed for trading on a stock exchange,
any day on which such exchange is open for trading.

 
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1.2.44. "Transaction Documents" shall mean this Agreement, the Systems SPA (as
defined below), the Electronics SPA (as defined below), the Escrow Agreement (as
defined below), the Due Diligence Information, the Disclosure Letter and any
other Agreed Form Documents.

1.1.3. "Value" shall mean the value of the Option Shares as calculated in
accordance with clause 15.2 of this Agreement.

2.
ISSUANCE AND PURCHASE OF THE ISSUED SHARES

2.1. Subject to and in accordance with the terms of this Agreement, on the
Closing Date, Lapis shall issue and allot to the Investor and the Investor shall
subscribe to the Issued Shares, which shall be 75,129,500 Common Shares. The
Issued Shares shall constitute immediately following the Closing, 92% of the
issued and outstanding share capital of Lapis on a Fully Diluted Basis. The
Investor shall subscribe to and purchase the Issued Shares, subject to the terms
and conditions of this Agreement, in exchange, inter alia, for the transfer to
Lapis of the Investor's SN Shares and the grant of the Mund Option, both in
accordance with the provisions below.

1.2. The Parties acknowledge that the issue of the Issued Shares shall be
completed on the basis of the share issue and other arrangements set out or
referred to in the document attached hereto as Schedule 1.2.

1.3. Upon the issuance of the Issued Shares to the Investor, the ownership of
the issued share capital of Lapis on a Fully Diluted Basis shall be as detailed,
in the capitalization table attached hereto as Schedule 2.2.

3.
TRANSFER OF THE INVESTOR’S SN SHARES

3.1.  In consideration for the Issued Shares and simultaneously with the issue
of the Issued Shares, the Investor shall unconditionally transfer to Lapis the
Investor’s SN Shares, including any rights accrued thereon per the date of such
transfer.

1.4. The Parties acknowledge that the transfer of the Investor’s SN Shares shall
be completed on the basis of the share transfer and other arrangements set out
or referred to in Schedule 1.4.

4.
CLOSING

 
4.1.  The closing of the issue of the Issued Shares to the Investor, the
transfer to Lapis of the Investor’s SN Shares and the grant of the Mund Option
in accordance with the terms of this Agreement and the consummation of the other
transactions contemplated under this Agreement (the "Closing") shall take place
at the offices of at 10:00a.m. at the offices of Shnitzer, Gotlieb & Co., 7
Menachem Begin Rd., Ramat-Gan 52681, or such other place as the Parties may
agree, on the Closing Date.

 
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4.2. The Parties shall negotiate in good faith with a view to agreeing before
the Closing Date the final form of any Transaction Document, which is not in
Agreed Form at the date of this Agreement.

1.5. At Closing each of the Parties shall deliver or perform (or procure that
there is delivered or performed) all those documents, items and actions
respectively listed in relation to that Party in Schedule 4.3. 

1.6. If the Parties fail or are unable to perform any of their respective
closing obligations as set out in Schedule 1.5, which are required to be
performed by them on or before Closing, and whichever of the Parties is the
defaulting Party, such Party shall be referred to as the “Defaulting Party” and
the other the “Non-Defaulting Party”, the Non-Defaulting Party shall not be
obliged to complete such Party’s obligations under this Agreement and may, in
its absolute discretion, by written notice to the Defaulting Party:

1.6.1. elect to defer Closing by not more than twenty (20) Business Days after
the original date for Closing to such other date as it may specify in such
notice (in which event the provisions of this clause 4.2.1 shall apply, mutatis
mutandis, if any of the Parties fails or is unable to perform any of its closing
obligations as set out in Schedule 1.5 on such other date); or

1.6.2. elect to complete Closing and its obligations under this Agreement on
that date and: (i) specify a further date on which the Defaulting Party shall be
obliged to complete its outstanding obligations; and/or (ii) waive all or some
of the obligations contained in Schedule 1.5 at its discretion.

5.
REPRESENTATIONS AND WARRANTIES OF LAPIS AND MUND

Each of Lapis and Mund, jointly and severally, hereby represents and warrants to
the Investor the below representations and warranties as of the date hereof and
acknowledges that the Investor is entering into this Agreement on the basis of
and in reliance thereon (the “Mund and Lapis Warranties”).

 
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The below Mund and Lapis Warranties are given subject to and are qualified by:
 

 
(i)
any matters fairly disclosed by or under this Agreement, any of the Transaction
Documents, the Disclosure Letter, any document contained in the Due Diligence
Information, any document provided in the course of the financial due diligence
carried out in accordance with any of the Transaction Documents or any other
information provided in writing to the Investor or his advisers during the
course of any investigation by or on behalf of the Investor into the affairs of
Systems, Lapis or any of its Subsidiaries; and

 
 

 
(i)
any other limitations and qualifications as set out in this clause 5 and in
Schedule 5.30.1.

 
5.1. Due Organization and Standing
 
Lapis is a corporation duly organized and validly existing under the laws of the
State of Delaware, the USA. Lapis has all requisite corporate power to own and
operate its assets, and to carry on its business as presently conducted, other
than where such would not have a material adverse effect. Lapis has not taken
any action or failed to take any action, which action or failure would preclude
or prevent Lapis from conducting its Business after the execution of this
Agreement in the manner conducted on the date hereof, subject to changes to the
Business pursuant to the consummation of the transactions contemplated under the
Transaction Documents. Lapis has all permits, licenses and any similar authority
necessary for the conduct of its Business, the lack of which could adversely
affect the business, properties, prospects or financial condition of Lapis.
Lapis is not in default under any of such permits, licenses, or other similar
authority, which default would have a material adverse effect on Lapis.
 
5.2. Organizational Documents
 
Lapis’ Certificate of Incorporation and Bylaws, as in effect on the date hereof
are attached hereto as Schedule 5.2. No act has been effected by Lapis to amend
any of such documents and, to Lapis’ and Mund's knowledge, to wind up Lapis.
 
5.3. Capitalization
 
5.3.1. Lapis’ authorized capital stock is comprised of 5,000,000 shares of
preferred stock, par value $0.001 per share, none of which is outstanding, and
100,000,000 Common Shares, of which 6,483,000 Common Shares are issued and
outstanding. All of such outstanding Common Shares have been validly issued, are
fully paid and nonassessable and were issued in accordance with all applicable
laws, rules and regulations. 

1.6.3. The issued and outstanding share capital of Lapis, on a Fully Diluted
Basis is set forth in Schedule 5.3.2 hereof. At the Closing Date, save as
provided for in accordance with the provisions of this Agreement or the
Transaction Documents and the warrants granted to an historic services provider
to acquire shares in Lapis as set out in Schedule 1.6.3, there will not be any
outstanding or authorized subscriptions, options, warrants, calls, rights,
commitments, convertible securities, or any other agreements of any character
directly or indirectly obligating Lapis to issue any additional shares of Lapis
or any securities convertible into, or exchangeable for, or evidencing the right
to subscribe for any shares of Lapis, except as set forth in Schedule 1.6.3.
There are no agreements or arrangements under which Lapis is obligated to
register the sale of any of its securities under the Securities Act.

 
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5.4. Valid Issuance The Issued Shares to be issued to the Investor in the
transaction contemplated by this Agreement will, when issued and paid for in
accordance with the provisions of this Agreement, upon Closing, be validly
authorized, issued, fully paid and nonassessable and issued in compliance with
an exemption from applicable United States federal securities laws.

5.5. SEC Filings; Financial Statements
 
5.5.1. Lapis has filed all reports required to be filed by Lapis under the
Securities Act and the Exchange Act for the two-year period preceding the date
hereof (or such shorter period as Lapis was required by applicable law or
regulation to file such material) (the “Lapis SEC Documents”), each of which has
complied in all material respects with all applicable requirements of the
Exchange Act and the rules and regulations promulgated thereunder, each as in
effect on the dates such reports were filed and, as of their respective dates of
filing with the SEC, none of the Lapis SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.

 
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5.5.2. A true and complete copy of the audited, consolidated financial
statements of Lapis for the year ended December 31, 2007, will be provided to
the Investor upon Closing (the “Yearly Financial Statements”); a trial balance
sheet for the period ended 2 days prior to the Closing will be provided to the
Investor upon Closing (the "Trial Balance"). The Yearly Financial Statements
will have been prepared in conformity with generally accepted accounting
principles in the U.S. (except: (i) as may be otherwise indicated in such
financial statements or the notes thereto; or (ii) in the case of unaudited
interim statements, to the extent they may not include all required footnotes or
may be condensed or summary statements and are subject to routine year-end
adjustments). Subject to the matters required to appear in such documents in
accordance with the relevant accounting principles, the Yearly Financial
Statements and the Trial Balance present fairly in all material respects the
financial condition, the results of operations, changes in shareholders' equity
and cash flow of Lapis for the periods referred to in such Yearly Financial
Statements, subject, in the case of unaudited statements, to normal year-end
audit adjustments. As of their respective dates, the financial statements of
Lapis included in the Lapis SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto as in effect at the time of filing.
Such financial statements have been prepared in accordance with generally
accepted accounting principles, consistently applied, during the periods
involved (except: (i) as may be otherwise indicated in such financial statements
or the notes thereto; or (ii) in the case of unaudited interim statements, to
the extent they may not include all required footnotes or may be condensed or
summary statements and are subject to routine year-end adjustments) and fairly
present in all material respects the consolidated financial position of Lapis as
of the dates thereof and the results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments as referred to above). Subject to the provisions and
qualifications set out in the Transaction Documents, no other information
provided by or on behalf of Lapis to the Investor which is not included in the
Lapis SEC Documents, including, without limitation, information referred to in
clause 6.14 of this Agreement, contains any untrue statement of a material fact
or deliberately omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstance under which they are or
were made, not misleading. 
 
5.5.3. Other than as disclosed in the Yearly Financial Statements and in the
Trial Balance, Lapis has no financial liabilities, debts or financial
obligations, whether accrued, absolute or contingent, which are required to be
disclosed in the Yearly Financial Statements in accordance with the accounting
principles under which such Yearly Financial Statements were made. 

 
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1.6.4. Except as set forth in Schedule 5.5.4 and Schedule 1.6.3 or as otherwise
contemplated in the Transaction Documents, since 1 January 2007 and until the
date of this Agreement Lapis has not consummated any of the following: (i) a
merger with or an acquisition of a company; (ii) a transaction which represents
a sale of five percent (5%) of Lapis’ activities during the fourth fiscal
quarter of 2007; (iii) created or extended any credit facility, other than in
the ordinary course of business; and (iv) a material transaction which is out of
the ordinary course of the Business of Lapis. Since 1 January 2007, there has
not been any event or condition of any character which has materially adversely
affected Lapis’ Business. 

5.5.4. Lapis’ minute books, share record books, and other records of Lapis are
correct in all material respects and a true and complete copy of all such minute
books and share record books has been provided to the Investor. 

5.6. Tax Matters
 
5.6.1. Lapis has timely filed all Tax Returns required by applicable laws. All
Tax Returns of Lapis were true and correct in all material respects when filed,
and Lapis has paid all taxes and other assessments due. Lapis made the proper
allowance in its financial statements with respect to any taxes that are due but
not yet paid by Lapis.

1.6.5. The Lapis’ Yearly Financial Statements make full provisions for all Taxes
for which Lapis was then or that thereafter became or, if known at the date
hereof, may hereafter become liable or accountable in respect of or by reference
to any income, profit, receipt, gain, transaction, agreement, distribution or
event which was earned, accrued, received, or realized, entered into except as
specifically set forth in Schedule 5.6.2 and Lapis promptly paid or fully
provided in its books of account for all Taxes for which it has or may hereafter
become liable or accountable in the period from the date of its incorporation to
the Closing Date. 

 
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1.6.6. To Lapis’ knowledge, and except as set forth in Schedule 1.6.5 or where
such would not have a material adverse effect, Lapis has at all times and within
the requisite time limits promptly, fully and accurately observed, performed and
complied with all material obligations or conditions imposed on it, or to which
any claim, deduction, allowance or relief made, claimed by or afforded to it was
made subject, under any legislation relating to Taxes.
 
1.6.7. Except as specifically set forth in Schedule 1.6.5, to the knowledge of
the Lapis, at the date of this Agreement there are no circumstances which will
or may, whether by lapse of time or the issue of any notice of assessment or
otherwise, give rise to any dispute with any relevant Government Body in
relation to its liability or accountability for Taxes, any claim made by it, any
relief, deduction, or allowance afforded to it, or in relation to the status or
character of Lapis any of its enterprises under or for the purpose of any
provision of any legislation relating to Taxes.

5.7. Legal Proceedings; Orders
 
1.6.8. Except as set forth in Schedule 5.7.1 there is no pending Legal
Proceeding, and, to Lapis' knowledge, no Person has threatened to commence any
Legal Proceeding that: (i) involves Lapis or any of the assets owned or used by
Lapis or any Person whose liability Lapis assumed, either contractually or by
operation of law; or (ii) challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with the consummation of, any
of the transactions contemplated by this Agreement. To Lapis’ and Mund's
knowledge no material event has occurred, and no material claim, dispute or
other condition or circumstance exists, that will, or that could reasonably be
expected to, give rise to, or serve as a basis for, the commencement of any such
Legal Proceeding that has a potential material adverse effect on Lapis.

5.7.1. To Lapis’ and Mund's knowledge, there is no order, writ, injunction,
judgment or decree to which Lapis, or any of the assets owned or used by Lapis,
are subject. To Lapis’ and Mund's knowledge, no director, officer, consultant or
employee of Lapis is subject to any order, writ, injunction, judgment or decree
that prohibits such director, officer, consultant or employee from engaging in
or continuing any conduct, activity relating to Lapis' Business.

 
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5.8. Authority; Binding Nature of Agreement Subject to the fulfillment of all
Conditions and other stipulations and provisions set out in the Transaction
Documents: (i) Lapis has the absolute and unrestricted right, power and
authority to enter into and perform its obligations under this Agreement and the
execution, delivery and performance by Lapis of this Agreement (including the
contemplated issuance of the Issued Shares in accordance with this Agreement)
will have been duly authorized by all necessary action on the part of Lapis’
board of directors at Closing; and (ii) this Agreement constitutes the legal,
valid and binding obligation of Lapis, enforceable against it in accordance with
its terms.

5.9. Non-Contravention; Consents
 
5.9.1. Except as set forth in this Agreement and/or as contemplated under any of
the Transaction Documents or where such would not have a material adverse
effect: (1) the execution, delivery or performance of this Agreement or any of
the Transaction Documents; and (2) the consummation of any of the transactions
contemplated by this Agreement or any of the Transaction Documents, will not
directly or indirectly (with or without notice or lapse of time):

5.9.1.1. contravene, conflict with or result in a violation of: (i) any of the
provisions of the Certificate of Incorporation or Bylaws; (ii) any resolution
adopted by the shareholders of Lapis, the board of directors or any committee of
the board of directors of Lapis, and will not trigger any right of first
refusal, tag-along right or preemptive right in respect of Lapis’ securities;

5.9.1.2. except where such would not have a material adverse effect on the
Business, contravene, conflict with or result in a violation of any applicable
law, rule or regulation or give any Governmental Body or other Person the legal
right to challenge any of the transactions contemplated by this Agreement or to
exercise any remedy or obtain any relief under, any Legal Requirement or any
order, writ, injunction, judgment or decree to which Lapis, or any of the assets
owned or used by Lapis is subject;

 
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5.9.1.3. except where such would not have a material adverse effect on the
Business, contravene, conflict with or result in a violation of any of the terms
or requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate or modify, any Governmental Authorization that is
held by Lapis or that otherwise relates to the Business or to any of the assets
owned or used by Lapis;

5.9.1.4. except where such would not have a material adverse effect on the
Business, contravene, conflict with or result in a violation or breach of, or
result in a default under, any provision of any agreement to which Lapis is a
party (including instruments, leases, licenses, arrangements, or undertakings of
any nature, written or oral) that is or would constitute an agreement, or give
any Person the right to: (i) declare a default or exercise any remedy under any
such agreement, which would have a material adverse effect on the Business;
(ii) accelerate the maturity or performance of any such agreement in a manner
which would have a material adverse effect on the Business; or (iii) cancel,
terminate or modify any such agreement in a manner which would have a material
adverse effect on the Business; or

5.9.1.5. result in the imposition or creation of any Encumbrance upon or with
respect to any asset owned or used by Lapis. 

5.10. Other than as set out in the Conditions and/or in any other stipulation or
provision of the Transaction Documents and except for filings required under
applicable federal and/or state securities laws, Lapis is not required to take
any action or obtain any authorization, consent, waiver or order of, give any
notice to, or make any filing or registration with, any court or other federal,
state, local or other Governmental Body or other Person in connection with its
execution, delivery and performance of the transactions contemplated by this
Agreement.

 
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5.11. Subsidiaries At the date of this Agreement, except for Electronics,
Enertec Management Ltd. and Systems, Lapis has no subsidiaries, and does not
own, of record or beneficially, directly or indirectly, any interest or share
capital or equity interest in any other Entity.

1.7. Outstanding Debt Except as set forth in Schedule 5.12 or as set out under
this Agreement or any of the Transaction Documents or in Lapis’ and/or its
Subsidiaries’ financial statements, Lapis has no outstanding loans, and is not a
guarantor of any debt or monetary obligation. Given the nature of the
information set forth in the Schedule 1.7, which will be subject to changes in
the ordinary course of business from time to time, Schedule 1.7 will be amended
and updated immediately prior to Closing to contain information in respect of
all outstanding loans and guarantees granted by Lapis for any debt or obligation
immediately prior to Closing.

1.8. Contracts and Contractual Arrangements Lapis is not in a material default
under any indenture, mortgage, lease, contract, purchase order or other
instrument, or agreement: (i) to which Lapis is a party and which is material
for the Business; or (ii) by which Lapis may be materially adversely affected;
or (iii) in respect of which any of its property which is material for the
Business of Lapis may be materially adversely affected. To Lapis’ and Mund's
knowledge, no third party is in material default under any material contract or
other instrument or agreement to which Lapis is a party or by which it or any of
its assets are affected. Except as detailed in Schedule 5.12 and other than
where such would not have a material adverse effect on the Business, there is no
contract, license, commitment or undertaking to which Lapis is a party that will
be in effect after Closing: (i) that prohibits or substantially restricts Lapis
from freely engaging in any business in any part of the world; or (ii)
obligating Lapis to share, license or develop any product or technology.

5.12. Indebtedness of or to Major Shareholders; Conflicts of Interest
 
1.8.1. Except as detailed in Schedule 5.12.1 or in Lapis’ and/or its
Subsidiaries’ financial statements or any of the Transaction Documents and other
than in the ordinary course of business, none of Lapis’ holders of ten percent
(10%) or more of Lapis’ share capital on a fully diluted basis (a “Major
Shareholder”), directors, officers or employees is indebted to Lapis for an
amount exceeding NIS 50,000, and Lapis has no debt or obligation to any of them
in an amount exceeding NIS 50,000.

 
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5.12.1. Other than as contemplated under any of the Transaction Documents, none
of the Subsidiaries, Major Shareholders, directors, officers or employees: (i)
has any interest in the assets, technology or know-how used or owned by Lapis or
which is required for Lapis to operate its Business; (ii) is a party to any
contract or business arrangement with Lapis affecting the ownership of assets,
technology or know-how used or owned by Lapis or which is required for Lapis to
operate its Business; or (iii) has any interest in any other transaction related
to the assets, technology or know-how used or held by Lapis or which is required
for Lapis to operate its Business. Except as set forth in the Lapis SEC
Documents or as contemplated under any of the Transaction Documents, none of the
officers, directors or employees of Lapis is presently a party to any
transaction with Lapis or any of its Subsidiaries (other than for ordinary
course services as employees, officers or directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the
knowledge of Lapis or Mund, any corporation, partnership, trust or other entity
in which any such officer, director, or employee has an interest or is an
officer, director, trustee or partner.

5.12.2. All Shareholder Indebtedness shall have been repaid in full immediately
prior to Closing.

5.13. Employees; Directors and Major Shareholders
 
1.8.2. Schedule 5.13.1 contains a complete and accurate list of all employees of
Lapis. 

5.13.1. To the knowledge of Lapis and Mund, no key employee, key officer, or
director of Lapis (each, a "Representative" and collectively, the
"Representatives") is a party to, or otherwise bound by, any agreement or
arrangement (including any confidentiality, non-competition, proprietary rights
agreement, licenses, covenants or commitments of any nature), between such
Representative and any other person, or subject to any order or any other
restriction that in any way materially adversely affects the performance of such
Representative’s duties as an employee, officer or director of Lapis. Other than
as contemplated under any of the Transaction Documents, none of the directors,
key officers, or key employees of Lapis has informed Lapis that he or she
intends to terminate his employment with it.

 
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5.14. Labor Relations; Compliance
 
5.14.1. Lapis is not bound by or subject to any contracts, commitments or
arrangements with any labor union.

5.14.2. Lapis has complied in all material respects with all material legal
requirements relating to employment, wages, hours, benefits, the payment of
social security and similar taxes and occupational safety and health.

5.14.3. Lapis does not have any labor relations problem pending, or to the
knowledge of Lapis, threatened and its labor relations, to its knowledge, are
satisfactory.
 
1.8.3. All present key employees and directors of Lapis and key employees and
directors of Lapis during the 2 years immediately prior to Closing, as listed in
Schedule 5.14.4, who materially contributed to the development of the business
of Lapis, have entered into a written agreement with Lapis, under which all
copyrights on any invention or patents invented by one of the above in the
framework of his or her service with Lapis and during the term of his or her
engagement with Lapis, belong solely to Lapis.

5.15. Stock Option Plan Lapis’ 2002 Stock Option Plan (the “Plan”) has been duly
authorized and adopted by the board of directors and the shareholders of Lapis.
Lapis has no other equity or phantom equity plans in existence. Lapis has no
options outstanding under the Plan and has never issued any options under the
Plan.

5.16. Intellectual Property Rights
 
1.8.4. So far as Lapis and Mund are aware, Lapis has good title to and/or
ownership of, and/or valid and enforceable licenses to use all of its
Intellectual Property that can be registered for ownership or requires licensing
and which is used in the conduct of Lapis’ Business, save where such would not
have a material adverse effect on the Business. A list of all such licenses,
other than licenses for off-the-shelf products, and registered ownership of
Intellectual Property is attached hereto as Schedule 5.16.1.

 
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5.16.1. Lapis has taken reasonable security measures, including measures against
unauthorized disclosure, to protect the secrecy, confidentiality and value of
its trade secrets and other confidential technical information, save where such
would not have a material adverse effect on the Business.

5.16.2. To Lapis’ and Mund’s knowledge, the use of the Intellectual Property of
Lapis in the Business does not constitute an infringement, misappropriation or
misuse of any intellectual property rights of any third party, save where such
would not have a material adverse effect on the Business. There are no claims
pending and, to Lapis’ and Mund's knowledge, no claims threatened against Lapis
or its directors regarding the use of, or challenging or questioning the right
or title of Lapis in the Intellectual Property of Lapis or the use of it.

1.8.5. Except as set forth in Schedule 5.16.3, Lapis’ has no registered patents,
trademarks and registered copyrights, pending applications for registration of
patents, trademarks and copyrights. 

1.8.6. Lapis’ Intellectual Property rights as set forth in Schedules
1.8.4 and 1.8.5 is, in combination with certain off-the-shelf products to which
it has a license, the required Intellectual Property to enable Lapis to carry on
its Business.

1.9. Related Party Transactions Except for the transactions contemplated by or
disclosed in the Transaction Documents, in Lapis’ and/or any of the
Subsidiaries’ financial statements, and as disclosed in Schedule 5.17: (i) no
Related Party has any direct or indirect interest (other than through the
holding of securities in Lapis or any of its Subsidiaries) in any material asset
used in the Business of Lapis; (ii) no Related Party is indebted to Lapis, other
than under inter-company agreements or pursuant to loans and guarantees provided
by Mund to Lapis and/or the Subsidiaries; (iii) no Related Party has any direct
or indirect financial interest in, any material agreement, material transaction
or material business dealing involving Lapis, other than any interest due to
such Related Party being a shareholder, employee or director of Lapis or its
Subsidiaries; (iv) no Related Party is competing directly or indirectly, with
Lapis (for the avoidance of doubt, the business conducted by Electronics, is
deemed to be an activity that does not compete with Lapis or its Subsidiaries);
and (v) no Related Party has any claim against Lapis other than in respect of
Inter-Entity Indebtedness (as such term is defined in the Systems SPA).

 
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1.10. Title to Property and Assets  Except as set forth in Schedule 5.17, Lapis
owns its assets which are material to the Business of Lapis free and clear of
all Encumbrances. With respect to the property and assets which are material to
the Business and which are leased or licensed, Lapis is in compliance with all
applicable material terms of the lease or license agreements. Schedule
5.20 contains a correct and complete list of all leases under which Lapis leases
real estate property or assets.

1.11. Insurance Schedule 5.17 hereto lists all policies of insurance to which
Lapis is a party. Such policies are valid, outstanding, and enforceable, and
taken together, they provide adequate insurance coverage against such insured
risks including and in such amounts as the management of Lapis believes to be
prudent in the businesses in which Lapis is engaged.

1.12. Directors, Officers A list of the directors and key officers of Lapis as
at the date this Agreement is attached as Schedule 5.17 hereto.

5.17. Brokers No broker, finder or investment banker, for which Lapis and/or
Mund may be liable, is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement.

5.18. No Undisclosed Events, Liabilities, Developments or Circumstances To
Lapis’ knowledge, since January 1, 2006 through February 22, 2008, no event,
liability, development or circumstance has occurred or exists, or is
contemplated to occur with respect to Lapis or its Business, properties,
prospects, operations or financial condition, that would be required to be
disclosed by Lapis under applicable securities laws on a Form 8-K (other than
the transactions contemplated in this Agreement and/or in the Transaction
Documents) relating to an issuance and sale by Lapis of its Common Shares and
which has not been publicly announced.

5.19. Foreign Corrupt Practices Neither Lapis nor, or to Lapis’ knowledge, any
director, officer, agent, employee or other Person authorized to act on behalf
of Lapis has, in the course of its actions for, or on behalf of, Lapis: (i)
directly or indirectly used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity;
(ii) made any direct or indirect unlawful payment to any foreign or domestic
government officials or employee or to any foreign or domestic political parties
or campaigns from corporate funds or failed to disclose fully any contribution
made by Lapis (or made by any person acting on its behalf of which Lapis is
aware) which is  in violation of applicable law; or (iii) violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended.

 
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5.20. Internal Accounting and Disclosure Controls Lapis maintains a system of
internal accounting controls sufficient to provide reasonable assurance that:
(i) transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any material differences. Lapis maintains a standard disclosure
controls and procedures (as such term is defined in Rule 13a-14 under the
Exchange Act) established and administered in accordance with generally accepted
accounting principles in the U.S. and the applicable requirements of the
Exchange Act. Lapis’ officers certified Lapis’ internal controls as of the
filing of Lapis’ Form 10-QSB for the quarter ended September 30, 2007 and since
that date, there have been no significant changes in Lapis’s internal controls
(as such term is defined in Section 307(b) of Regulation S-K) or, to Lapis’s
knowledge, any other facts that would significantly affect Lapis’s internal
controls.
 
5.21. Off Balance Sheet Arrangements There is no transaction, arrangement, or
other relationship between Lapis and an unconsolidated or other off balance
sheet entity that is required to be disclosed by Lapis in its Exchange Act
filings and is not so disclosed or that otherwise would be reasonably likely to
have a material adverse effect, except where such noncompliance would not have,
individually or in the aggregate, a material adverse effect on Lapis.

5.22. Independent Auditors Gvilli & Co., which has certified certain financial
statements of Lapis, is an independent registered public accounting firm as
required by the Securities Act and the rules and regulations thereunder.

5.23. Full Disclosure Other than where such would not have a material adverse
effect on the Business, this Agreement does not contain any representation,
warranty or information that is false or misleading with respect to any
statement of a material fact, the omission of which causes the statement from
which it was omitted to become materially untrue, materially inaccurate or
materially misleading. To Lapis’ and Mund’s knowledge, all documents and
information requested by the Investor and/or his advisors within the framework
of the due diligence conducted by the Investor in respect of Lapis that are in
the possession of Lapis and/or Mund and that could be provided by employing
reasonable efforts, have been provided.

 
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5.24. Warranties The Investor acknowledges and agrees that:

1.12.1. Any Claims shall be subject to the limitations on liabilities and other
provisions set out in Schedule 5.24.1.

5.24.1. The Mund and Lapis Warranties are the only warranties or representations
of any kind given by or on behalf of Mund and/or Lapis on which the Investor may
rely in entering into this Agreement.

5.24.2. At the time of entering into this Agreement, the Investor is not aware
of any facts or circumstances which are likely to result in a Claim being made
against Mund and/or Lapis or any misrepresentation by or on behalf of Mund
and/or Lapis in connection with any of the Transaction Documents.

5.24.3. Each of the Mund and Lapis Warranties shall be separate and independent
and, save as expressly provided to the contrary in this Agreement, shall not be
limited by reference to or inference from any other representation of warranty
in this Agreement

6.
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR 

The Investor makes the following representations and warranties to Lapis and
Mund:
6.1. This Agreement and the Transaction Documents, which are to be entered into
by the Investor will, when executed, constitute valid and binding obligations of
the Investor enforceable in accordance with their respective terms.

6.2. Subject to fulfillment of the Conditions neither entry into this Agreement
nor entry into, and implementation of, any of the Transaction Documents will:

6.2.1. result in violation or breach of any applicable laws or regulations in
any relevant jurisdiction;

6.2.2. amount to a violation or default with respect to any statute, regulation,
order, decree or judgment of any court or any governmental or regulatory
authority in any jurisdiction; or

 
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6.2.3. result in a breach of, or give rise to a default under, any contract or
other instrument,

by the Investor, which, in each case, would affect its ability to enter into or
perform its obligations under this Agreement and/or any Transaction Document to
which it is a party.

6.3. No order has been made or petition filed to request the bankruptcy or
insolvency of the Investor. No order has been made, petition presented or
meeting convened for the winding up of any company in which the Investor holds
securities and there are no cases or proceedings under any applicable
insolvency, reorganisation or similar laws in any relevant jurisdiction, and no
events have occurred which, under applicable laws, would justify any such cases
or proceedings against the Investor or any company in which the Investor holds
securities.

6.4. Organization SN is a company duly organized and validly existing under the
laws of the State of Israel. SN has all requisite corporate power to own and
operate its properties and assets, and to carry on its business as presently
conducted. SN is in good standing in each jurisdiction in which the nature of
its business and its ownership or leasing of property requires that SN becomes
so qualified, except to the extent that the failure to be so qualified or be in
good standing would not have an adverse effect on SN and its subsidiaries,
properties and assets. SN has not taken any action or failed to take any action,
which action or failure would preclude or prevent SN from conducting its
business after the execution of this Agreement in the manner conducted on the
date hereof. SN has all permits, licenses and any similar authorizations and
Consents necessary for the conduct of its business as now being conducted by it,
the lack of which could adversely affect the business, properties, prospects or
financial condition of SN. SN is not in default under any of such permits,
licenses, or other similar authority, which default would have an adverse effect
on SN.

6.5. Organization and Organizational Documents
 
6.5.1. To the Investor’s and SN's knowledge: (i) no order has been made,
petition presented or meeting convened for the winding up of SN or for any of
its direct or indirect holding companies or subsidiaries, or for the appointment
of any provisional liquidator in respect of them or any of their respective
assets and properties; (ii) there are no cases or proceedings under applicable
insolvency, reorganization or similar laws, and no events have occurred which,
under applicable laws, would justify any such cases or proceedings; or (iii) no
action has been taken or prepared to have SN struck out from the Israeli
Registrar or have SN’s shares delisted from trading on the Tel Aviv Stock
Exchange.

 
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6.5.2. SN’s Memorandum and Articles of association, as in effect on the date
hereof, are attached hereto as Schedule 6.5.2. No act has been effected by SN
and/or its shareholders to amend any of such documents in a manner, which would
alter the form of the documents attached hereto as Schedule 6.5.2.

6.6. Authorization; Binding Authority; Enforceability The Investor has obtained
all authorizations from SN and all applicable governmental, statutory,
regulatory or other consents, licences, authorizations, waivers or exemptions
required to empower him to enter into and to perform his obligations hereunder,
to consummate the transactions contemplated by this Agreement and by any other
Transaction Document to which he is (or is proposed to be) a party, and to
purchase the Issued Shares from Lapis pursuant and subject to the provisions of
this Agreement.

6.7. Ownership and Title The Investor represents and warrants that: (i) he has
full title and ownership of the Investor's SN Shares; (ii) the Investor's SN
Shares are fully paid up and non-assessable and at Closing, the Investor shall
deliver to Lapis good title to, and all rights to vote, all of the Investor's SN
Shares to be sold and transferred to Lapis hereunder, free and clear of any
Encumbrance; (iii) the Investor did not enter into any agreement or arrangement
pursuant to which any Person has the right (exercisable now or in the future and
whether contingent or not) to any of the Investor's SN Shares; (iv) the Investor
is entitled to transfer or procure the transfer of the Investor's SN Shares on
the terms set out in this Agreement; and (v) the Investor's SN Shares constitute
the Investor’s entire personal holdings in SN. 

1.13. No Violations Subject to the fulfillment of the Conditions set out in
clause 10, neither the entry into nor the execution, delivery and performance of
this Agreement and the Transaction Documents and the consummation by the
Investor of the transactions contemplated thereunder will: (i) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument to which SN is a party; (ii) result in any relevant jurisdiction in a
violation of any law, rule, regulation, order, judgment or decree applicable to
the Investor or SN, which, in each case, would adversely affect the Investor’s
ability to enter into or perform his obligations under this Agreement and/or any
Transaction Document to which he is a party; and (iii) neither entry into this
Agreement nor entry into the Transactions Documents and the transactions
contemplated therein, will result in, now or in the future, a requirement for
the Investor to obtain any consent or approval, or give any notice to or make
any registration with, any governmental regulatory or other authority which has
not been obtained or made as at the date of this Agreement and could affect the
implementation or consummation of the transactions contemplated under the
Transaction Documents. 

 
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6.8. No Investigations So far as the Investor is aware, neither the Investor nor
SN are subject to any order, judgment, direction, investigation or other
proceedings by any Governmental Body or regulatory authority, which will, or are
reasonably likely to, prevent or delay the fulfillment of any of the Conditions
to this Agreement or the Transaction Documents.

6.9. Consideration The Investor has available cash or loan facilities, which
will, at the time set out therefore under this Agreement, provide in immediately
available funds the necessary cash resources to meet its obligations in respect
of the Mund Option, including, but not limited to the payment of the Minimum
Value, or any guarantee granted to Mund and, in the case of loan facilities,
they involve no material pre-conditions and the Investor will be able to satisfy
all conditions of drawdown to such loan facilities at or prior to the time the
obligations in respect of the Mund Option will materialize and meet the
Investor’s other obligations under this Agreement and the Transaction
Documents. 

6.10. No Public Sale or Distribution The Investor is acquiring the Issued Shares
for its own account and not with a view towards, or for resale in connection
with, the public sale or distribution thereof, except pursuant to sales
registered or exempted under the 1933 Act; provided, however, that by making the
representations herein, the Investor does not agree to hold any of the Issued
Shares for any minimum or other specific term and reserves the right to dispose
of the Issued Shares at any time in accordance with or pursuant to an effective
registration statement or an exemption under the Securities Act.

6.11. Accredited Investor Status At the time the Investor was offered the Issued
Shares and as the date hereof and will be at the Closing Date, either; (i) an
“accredited investor” as that term is defined under Regulation D; or (ii) not a
“U.S. “Person” as that term is defined in Rule 902(b) of Regulation S and the
sale of the Issued Shares constituted an “offshore transaction” as that term is
defined in Rule 902(i) of Regulation S.

6.12. Restricted Securities The Investor understands that the Issued Shares are
being offered and sold to him in reliance on specific exemptions from the
registration requirements of the Securities Act which depends upon, among other
things, the bona fide nature of the investment intent and the truth and accuracy
of the Investor’s representations, warranties, agreements, acknowledgments and
understandings expressed herein and the Investor’s compliance therewith. The
Investor understands that the Issued Shares are “restricted securities” under
applicable U.S. federal and state securities laws and that, pursuant to these
laws, the Issuer must hold the Issued Shares indefinitely unless they are
registered with the SEC and qualified by state authorities, or an exemption from
such registration and qualification requirements is available. The Investor
acknowledges that Lapis has no obligation to register or qualify the Issued
Shares for resale.

 
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6.13. Information The Investor acknowledges that, prior to entering into this
Agreement and the Transaction Documents to which the Investor is a party, the
Investor and its advisors have been furnished with all materials relating to the
business, finances and operations of Lapis and materials relating to the offer
and sale of the Issued Shares which have been requested by or on behalf of the
Investor in order to evaluate the investment and verify the accuracy of all
information furnished to it regarding Lapis, and access to all of the Lapis SEC
Documents. The Investor and its advisors, if any, have been afforded the
opportunity to ask questions to and receive answers from Lapis concerning the
terms and conditions of the offering of the Issued Shares. The Investor
understands that its investment in the Issued Shares involves a high degree of
risk and is able to afford a complete loss of such investment. The Investor has
sought such accounting, legal and tax advice as he has considered necessary to
make an informed investment decision with respect to his acquisition of the
Issued Shares.

6.14. No Governmental Review The Investor understands that no United States
Governmental Body has passed on or made any recommendation or endorsement of the
Issued Shares or the fairness or suitability of the investment in the Issued
Shares nor have such authorities passed upon or endorsed the merits of the
offering of the Issued Shares.

6.15. General Solicitation The Investor is not purchasing the Issued Shares as a
result of any advertisement, article, notice or other communication regarding
the Issued Shares published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

6.16. Legends The Investor understands that the certificates representing the
Issued Shares until such time as the resale of the Issued Shares have been
registered under the 1933 Act, except as set forth below, shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
 
 
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NEITHER THE ISSUANCE AND SALE OF THE COMMON SHARES REPRESENTED BY THIS
CERTIFICATE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SHARES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO LAPIS,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SHARES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SHARES.

7.
COVENANTS OF LAPIS AND MUND

Lapis and Mund hereby covenant:
 
1.14. Access and Investigation During the period from the date of this Agreement
through the Closing Date, or the earlier termination hereof in accordance with
clause 13 (the "Pre-Closing Period"), Lapis and Mund shall, and shall cause
their Representatives to: (a) provide the Investor and the Investor's
representatives with reasonable access at reasonable times upon reasonable prior
notice, to Lapis’ representatives, personnel and assets and to all existing
books, records, Tax Returns, work papers and other documents and information
relating to Lapis, which is held, controlled or can be reasonably obtained by
Lapis; and (b) provide the Investor and Investor's representatives with copies
of such existing books, records, Tax Returns, work papers and other documents
and information relating to Lapis, which is held, controlled or can be
reasonably obtained by Lapis, and with such additional financial, operating and
other data and information regarding Lapis, as the Investor may reasonably
request, and which is held, controlled or can be reasonably obtained by Lapis.

7.1. Operation of Lapis’ Business Other than as contemplated or disclosed under
any of the Transaction Documents, or as required in order to facilitate the
transactions contemplated under any of the Transaction Documents, during the
Pre-Closing Period:

7.1.1. Lapis shall conduct its business and operations in the ordinary course
and in substantially the same manner as such business and operations have been
conducted prior to the date of this Agreement;

1.14.1. Lapis shall keep, to the extent required, in full force all insurance
policies referred to in Schedule 1.11;

 
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7.1.2. unless the Consent of the Investor is obtained and save as contemplated
in this Agreement or under the Transaction Documents or as required in order to
facilitate and effect the transactions contemplated under this Agreement or
under the Transaction Documents, Lapis shall not declare, accrue, set aside or
pay any dividend or make any other distribution in respect of any shares of
capital stock of Lapis, and shall not repurchase, redeem or otherwise reacquire
any shares of capital stock or other securities of Lapis;

7.1.3. unless the Consent of the Investor is obtained and save as contemplated
or disclosed in this Agreement or under the Transaction Documents or as required
in order to facilitate and effect the transactions contemplated under this
Agreement or under the Transaction Documents, Lapis shall not sell, issue or
authorize the issuance of: (i) any capital stock or other security; (ii) any
option or right to acquire any capital stock or other security; or (iii) any
instrument convertible into or exchangeable for any capital stock or other
security;

7.1.4. unless the Consent of the Investor is obtained and save as contemplated
or disclosed in this Agreement or under the Transaction Documents or as required
in order to facilitate and effect the transactions contemplated under this
Agreement or under the Transaction Documents, Lapis, shall not amend or permit
the adoption of any amendment to the Certificate of Incorporation or Bylaws or
effect or permit Lapis to become a party to any of the following transactions in
Lapis’ securities: acquisition, recapitalization, reclassification of
securities, stock split, reverse stock split or similar transaction;

7.1.5. unless the Consent of the Investor is obtained and save as contemplated
in this Agreement or under the Transaction Documents or as required in order to
facilitate and effect the transactions contemplated under this Agreement or
under the Transaction Documents, Lapis, shall not form any subsidiary or acquire
any equity interest or other interest in any other Entity;

7.1.6. unless the Consent of the Investor is obtained and other than in the
ordinary course of business, or in respect of obligations or liabilities under
Lapis’ financial statements or as contemplated or disclosed under the
Transaction Documents, Lapis shall not make any capital expenditure;

 
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7.1.7. unless the Consent of the Investor is obtained and other than in the
ordinary course of business or as contemplated or disclosed under the
Transaction Documents, Lapis shall not: (i) enter into, or permit any of the
assets owned or used by it to become bound by, any contract that is or would
constitute a Material Agreement; or (ii) amend or prematurely terminate, or
waive any right or remedy under, any such Material Agreement;

7.1.8. unless the Consent of the Investor is obtained and save as contemplated
in this Agreement or under the Transaction Documents or as required in order to
facilitate and effect the transactions contemplated under this Agreement or
under the Transaction Documents, Lapis shall not, other than in the ordinary
course of business: (i) acquire, lease or license any right or other asset from
any other Person, the value of which exceeds an amount that is equal to or
greater than five percent (5%) of the aggregate of Lapis’ and its Subsidiaries’
revenue over the year 2007; (ii) sell or otherwise dispose of, or lease or
license, any right or other asset to any other Person, the value of which
exceeds an amount that is equal to or greater than five percent (5%) of the
aggregate of Lapis’ and its Subsidiaries’ revenue over the year 2007; or
(iii) waive or relinquish any right that would have a material adverse effect on
the Business;

7.1.9.  unless the Consent of the Investor is obtained and save as contemplated
in this Agreement or under the Transaction Documents or as required in order to
facilitate and effect the transactions contemplated under this Agreement or
under the Transaction Documents, Lapis shall not: (i) establish, adopt or amend
any employee benefit plan; (ii) other than in accordance with past practices or
as previously agreed by Lapis or disclosed to the Investor, pay any bonus or
make any profit-sharing payment, cash incentive payment or similar payment to,
or increase the amount of the wages, salary, commissions, fringe benefits or
other compensation or remuneration payable to, any of its directors, officers,
consultants or employees; or (iii) other than in accordance with past practices
hire any new employee;

 
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7.1.10. Lapis shall not change any of its methods of accounting or accounting
practices;

7.1.11. Lapis shall not make any Tax election; and

7.1.12. Lapis shall not commence or settle any material Legal Proceeding.

7.2. Notification; Updates to Disclosure Schedule
 
7.2.1. During the Pre-Closing Period, Lapis and Mund shall promptly notify the
Investor in writing of:
 
7.2.1.1. the discovery by Lapis of any event, condition, fact or circumstance
that occurred or existed on or prior to the date of this Agreement and that
caused or constitutes a material inaccuracy in or breach of any representation
or warranty made by Lapis in this Agreement;

7.2.1.2. any event, condition, fact or circumstance that occurs, arises or
exists prior to Closing and that causes or constitutes a material inaccuracy in
or breach of any representation or warranty made by Lapis in this Agreement if:
(A) such representation or warranty had been made as of the time of the
occurrence, existence or discovery of such event, condition, fact or
circumstance; or (B) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement;

7.2.1.3. any material breach of any representation, warranty, covenant or
obligation of Lapis; and

1.14.1.1. any event, condition, fact or circumstance that would make the timely
satisfaction of any of the Conditions set forth in clause 10 or clause 11
impossible or unlikely;

 
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7.2.1.4. other than in the ordinary course of business and save as disclosed or
required in order to facilitate the transactions contemplated in the Transaction
Documents, any engagement of Lapis, oral or written, resulting in an exposure to
Lapis of a sum equal to or exceeding fifty thousand Dollars ($50,000).

1.14.2. If any event, condition, fact or circumstance that is required to be
disclosed pursuant to clause 7.2.1 requires any change in Lapis’ Disclosure
Letter, or if any such event, condition, fact or circumstance would require such
a change assuming Lapis’ Disclosure Letter were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then Lapis shall promptly deliver to the Investor an update of
Lapis’ Disclosure Letter specifying such change.

7.3. No Negotiation Except as disclosed or required in order to facilitate the
transactions contemplated under the Transaction Documents, during the
Pre-Closing Period, Lapis and Mund shall not directly or indirectly:
 
7.3.1. solicit or encourage the initiation of any inquiry, proposal or offer
from any Person (other than the parties to the Transaction Documents) relating
to a possible Acquisition Transaction;

7.3.2. participate in any discussions or negotiations or enter into any
agreement with, or provide any non-public information to, any Person (other than
the parties to the Transaction Documents) relating to or in connection with a
possible Acquisition Transaction; or

7.3.3. consider, entertain or accept any proposal or offer from any Person
(other than the parties to the Transaction Documents) relating to a possible
Acquisition Transaction.

7.4. Lapis Shareholder Consent Lapis will take, in accordance with applicable
law and its Certificate of Incorporation, the actions necessary to seek written
consent of holders of a majority of the Common Shares (the “Lapis Shareholder
Consent”) to consider and vote for the approval of this Agreement, the
Transaction Documents and the transactions contemplated thereby, to the extent
such approval is required under applicable laws, including without limitation,
filing with the SEC and mailing to Lapis’ shareholders an information statement
under the Exchange Act. Lapis’s board of directors shall recommend such approval
and Lapis shall take reasonable action to solicit such approval.

 
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7.5. Inter-Entity Indebtedness All Inter-Entity Indebtedness (as such term is
defined in the Systems SPA) shall have been repaid, or waived, by and to Mund,
Lapis and its Subsidiaries in full immediately prior to Closing.

7.6. Lapis and Mund shall promptly notify the Investor in writing of any
inquiry, proposal or offer, which they have knowledge of, relating to a possible
Acquisition Transaction that is received by Lapis or any of its Representatives
during the Pre-Closing Period.

8.
COVENANTS AND UNDERTAKINGS OF THE INVESTOR 

The Investor hereby covenants:

8.1. Release of Guarantees To procure the release of Mund and Zvi Avni and
Electronics not later than the Closing Date from all Third Party
Assurances. Notwithstanding any other provision of this Agreement or any of the
Transaction Documents, the Investor hereby covenants that if the Condition set
out in clause 11.4 “Guarantees and other Third Party Assurances Closing” will
have been waived, and Closing will have become effective, the Investor shall
comply with its obligations under the above clause notwithstanding such waiver
and upon the waiver of such Condition, the provisions thereof shall become a
post Closing covenant as set out in clause 14.1.

8.2. Filings and Consents The Investor will take all action reasonably requested
by Lapis and Mund (but without the obligation to incur any costs or expenses in
connection therewith) to assist Lapis and Mund to obtain any Consents to be
obtained by them, if any, under the Transaction Documents.

8.3. Investor’s Undertaking The Investor procures and undertakes that the
obligations of the Investor under this Agreement and the Transaction Documents
shall be binding upon his successor and assignees.

9.
ADDITIONAL COVENANTS OF THE PARTIES 

9.1. Filings and Consents As promptly as practicable after the execution of this
Agreement, each Party: (a) shall make all filings (if any) and give all notices
(if any) required to be made and given by such Party in connection with the
transactions contemplated under the Transaction Documents; and (b) shall use all
commercially reasonable efforts to obtain all Consents (if any) required to be
obtained (pursuant to any applicable Legal Requirement or contract, or
otherwise) by such Party in connection with or for the purpose of effecting the
transactions contemplated under the Transaction Documents. Each party to the
Transaction Documents shall (upon request) promptly deliver to the other parties
of the Transaction Documents a copy of each such filing made, each such notice
given and each such Consent obtained by such party to the Transaction Documents
during the Pre-Closing Period or thereafter.

 
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9.2. Public Announcements During the Pre-Closing Period, the Parties shall not
issue any press release or make any public statement or disclosure regarding the
Transaction Documents, or regarding any of the transactions contemplated under
the Transaction Documents, without the other Parties’ prior written consent.
Notwithstanding the provisions of the preceding sentence, each Party shall be
permitted to issue any press release or make any public statement or disclosure
as such Party is advised by counsel is legally required to be issued or made
under any applicable laws, stock exchange regulation or other supervisory body
or Governmental Body to whose rules the press release, public statement or
disclosure is subject; provided, however, that in such event the Party issuing
such press release or making such public statement or disclosure, such Party
will provide the other Parties with prompt written notice of such requirement
and a copy of the press release to be issued or public statement to be made, and
the Parties shall consult each other and use reasonable efforts to agree on the
content of such press release or public statement.

9.3. Additional Purchase of Company's Shares In the event any of Lapis’
shareholders shall, pursuant to the transactions contemplated under the
Transaction Documents, offer or request to sell any of their Common Shares
holdings in Lapis to the Investor on the same, or similar, terms that Mund is
entitled to sell his Common Shares to the Investor pursuant to the Mund Option
or the Transaction Documents, the Investor shall purchase such shares from such
shareholders of Lapis and Mund will participate with the Investor -in financing
the purchase of shares offered by members of the public on a pro rata basis.
Notwithstanding the above: (A) Mund shall not participate in financing the sale
of shares held by Zvi Avni; and (B) Mund’s participation in the financing set
out in this sub clause 9.3: (i) will be limited to an amount of two hundred
thousand Dollars ($200,000); and (ii) will be financed by reducing the
consideration to be paid by the Investor for the Mund Option.

9.4. Documents in Agreed Form The following documents in Agreed Forms shall be
provided to the Parties and/or finalized prior to Closing:

 
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1.14.3. A legal opinion from Lapis’ US legal counsel, in the form to be attached
hereto as Schedule 9.4.1, and addressed to the Investor and dated as of the
Closing Date. 

1.14.4. A legal opinion of legal counsel to SN, in the form to be attached
hereto as Schedule 9.4.1, addressed to Lapis and dated as of the Closing Date.

1.14.5. A fairness opinion from Tesuot/Mr. Jacob Eshed, in the form to be
attached hereto as Schedule 9.4.1, in respect of all the transactions
contemplated by this Agreement and the Transaction Documents.

9.4.1. A letter by Bank Leumi LeIsrael B.M. and a letter by Bank Hapoalim B.M.
(each a “Bank” and collectively the “Banks”), to be attached hereto prior to
Closing as Schedules 9.4.4.1 and 9.4.4.2 in which the Banks provide their
consent to: (i) the Closing and consummation of the transactions contemplated in
the Transaction Documents; and (ii) release Mund and Mr. Zvi Avni and
Electronics form all Third Party Assurances per the Closing.

9.4.2. An employment agreement in respect of Mr. Zvi Avni’s employment as CEO of
Systems attached hereto as Schedule 9.4.5 shall have been entered into prior to
Closing.

10.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE INVESTOR

Closing shall be conditional on fulfillment at or before the Date of Closing of
the following Conditions. The conditions set out in this clause 10 may be only
waived by written notice from the Investor.
 
10.1. Consents and other documents The following Consents and other documents
shall have been obtained by Lapis and Mund and delivered to the Investor without
conditions and shall be in full force and effect:
 
1.14.6. a true and correct copy of the resolution or written consent of the
majority Lapis’ shareholders approving this Agreement and the consummation of
the transactions contemplated herein, substantially in the form to be attached
prior to Closing as Schedule 10.1.1 or as otherwise reasonably agreed between
the Investor and Mund;
 
10.1.1. an information statement under the Exchange Act shall have been filed
with the SEC and mailed to Lapis’ shareholders and a period of 20 days following
the mailing of the information statement to Lapis’ shareholders shall have
lapsed;
 
 
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10.1.2. a Closing Balance which shall be either balanced (Zero) or positive. For
the purpose of this clause 10.1.3;

10.1.2.1. the “Closing Balance” shall mean: the audited financial statements of
Systems and Lapis (excluding Lapis’ Subsidiaries), audited by Systems' and
Lapis’ external accountants prepared in accordance with generally accepted
accounting principles, for the year ended December 31, 2007;

10.1.2.2. “either balanced (Zero) or positive” shall mean in respect of Systems
that: the aggregate of the balance sheet items featured under assets on the
Closing Balance, minus the aggregate of the balance sheet items featured under
liabilities on the Closing Balance, results in an amount that is zero or larger
than zero; and

10.1.2.3. “either balanced (Zero) or positive” shall mean in respect of Lapis
that: the aggregate of the balance sheet items featured under assets on the
Closing Balance, minus the balance sheet items featured under liabilities,
results in an amount that is zero or larger than zero. For the above
calculation: (i) the financial assets, liabilities and financial contribution
and/or provisions of any Subsidiaries of Lapis shall not be taken into account;
and (ii) the financial effect and cash-flow on Lapis’ Closing Balance of the
transactions contemplated under the Electronics SPA shall be taken into account
as if Closing of the Electronics SPA was effected on the date of the Closing
Balance.

10.2. No Restraints No temporary restraining order, preliminary or permanent
injunction or other order preventing the consummation of the transactions
contemplated by this Agreement shall have been issued by any court of competent
jurisdiction and remain in effect, unless such will not have a material adverse
effect, and there shall not be any Legal Requirement enacted or applicable to
the transactions contemplated under the Transaction Documents that makes
consummation of the transactions contemplated under the Transaction Documents
illegal, which Legal Requirement shall not have been removed within thirty (30)
days of enactment.
 
 
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10.3. No Legal Proceedings No Person shall have commenced or taken steps
challenging or seeking the recovery of a material amount of damages from Lapis,
due to Lapis being a Party to this Agreement, or seeking to prohibit or limit
the exercise by Lapis of any material right pertaining to the issue of the
Issued Shares.

11.
CONDITIONS PRECEDENT TO OBLIGATIONS OF LAPIS 

The obligations of Lapis and Mund to consummate the transactions contemplated by
this Agreement and/or other Transaction Documents to which they are a party, are
subject to the satisfaction or waiver at or prior to the Closing, of the
following conditions. The conditions set out in this clause 11 may be only
waived by written notice by Mund.
 
11.1. Securities Law Requirements Lapis, the Investor and, where necessary or
required, SN have obtained all applicable governmental, statutory, regulatory,
permits, licenses, or other consents and approvals and/or waivers or exemptions,
necessary under any laws relating to the consummation of the transactions
contemplated under this Agreement, and an information statement under the
Exchange Act shall have been filed with the SEC and mailed to the Lapis’
shareholders and the a period of 20 days following the mailing of the
information statement to Lapis’ shareholders shall have lapsed, and no such
applicable governmental, statutory, regulatory, permit, license, or other
consent or approval and/or waiver or exemption shall have been revoked,
cancelled, terminated, suspended or made the subject of any stop order or
proceeding thereof.

11.2. No Restraints No temporary restraining order, preliminary or permanent
injunction or other order preventing the consummation of the transactions
contemplated under the Transaction Documents shall have been issued by any court
of competent jurisdiction and remain in effect, and there shall not be any Legal
Requirement enacted or applicable to the transactions contemplated under the
Transaction Documents that makes consummation of the transactions contemplated
by this Agreement illegal, which Legal Requirement shall not have been removed
within thirty (30) days of enactment.

 
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11.3. No Legal Proceedings No Person shall have commenced any Legal Proceeding
challenging or seeking the recovery of a material amount of damages from the
Investor in connection with the transactions contemplated by the transaction
Documents.

11.4. Guarantees and other Third Party Assurances 
 
11.4.1. Mund, Zvi Avni and Electronics are released in full from all Third Party
Assurances. Such Third Party Assurances shall include but shall not limited to
all outstanding personal guarantees and liabilities provided by Mund and/or Zvi
Avni and/or Electronics for the benefit of any bank or third party, to secure
Lapis’ (and/or its Subsidiaries’ other than Electronics) credit lines,
liabilities, undertakings and debts and all of Mund's and/or Zvi Avni’s and/or
Electronics’ assets encumbered in favor of any bank or third party including,
but not limited to the Third Party Assurances listed in Schedule 11.4.1. Given
the nature of the Business, the Third Party Assurances set forth in the
Schedule 11.4.1 are, from time to time, subject to changes in the ordinary
course of business and, therefore, Schedule 11.4.1 will be amended and updated
immediately prior to Closing.
 
1.14.7. Without prejudice to clause 11.4.1 above:
 
 

 
11.4.1.1.
the Investor shall use its reasonable endeavours to procure that, as soon as
reasonably practicable after becoming aware of any Third Party Assurance not
released on Closing, Mund, Electronics and/or Zvi Avni shall be released in full
from such Third Party Assurance; and

 

 
11.4.1.2.
pending release of any Third Party Assurance, the Investor undertakes to
indemnify Mund, Electronics and/or Zvi Avni against any and all Costs arising
under or by reason of that Third Party Assurance.

11.5. Escrow Agreement and Security The signing and closing of the Escrow
Agreement and the grant by the Investor of an irrevocable security over
sufficient assets, which would ensure the payment of the Minimum Value and the
discharge of the Investor’s obligations under the Mund Option in a form
acceptable to Mund.

12.
CONDITIONS PRECEDENT TO CLOSING

12.1. Consummation of Additional Transactions Under Documents in Agreed Form The
obligations of the Parties to consummate the transactions contemplated by this
Agreement and/or other Transaction Documents to which they are a party, are
subject to the consummation of the following transactions under documents in
Agreed Form:
 
 
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12.1.1. A transaction between Enertec Management Ltd. and Mund as sellers and
SDS as purchaser for the purchase and sale of the entire outstanding share
capital of Systems (the "Systems SPA"), shall have been entered into and all
conditions precedent therein shall have been fulfilled or waived.

12.1.2. A transaction between Mund or a company wholly owned by Mund and Lapis,
dated the date of this Agreement, in which Mund or a company wholly owned by
Mund shall acquire the entire outstanding share capital of Electronics (the
"Electronics SPA"), shall have been entered into and all conditions precedent
therein shall have been fulfilled or waived.

12.2. Waiver Provided, however, that the Conditions set out in this clause 12
shall automatically be waived if: (i) all conditions in the Systems SPA shall
have been fulfilled or waived, save for the conditions in clause 7.2 of that
agreement in respect of the closing of the Electronics SPA and the closing of
this Agreement; and (ii) all conditions in the Electronics SPA shall have been
fulfilled or waived, save for the conditions in clauses 6.1.1 and 6.1.6 of that
agreement in respect of the closing of the Systems SPA and the closing this
Agreement

13.
TERMINATION

13.1. Termination Events This Agreement may be immediately terminated prior to
the Closing upon the provision of written notice as provided for below:

13.1.1. by either Mund or the Investor if a court of competent jurisdiction or
Governmental Body shall have issued an order, decree (which order, decree or
ruling the Parties shall use their best efforts to remedy or release) and such
was not at the request of a Party or a Party’s Related Person, in each case
permanently restraining or otherwise prohibiting the Closing of this Agreement
or any other material transaction under the Transaction Documents, and such
order, decree, ruling or other action shall have become final and
non-appealable;

 
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13.1.2. by Lapis and Mund acting together, if the Closing has not taken place on
or before 30 April, 2008 (other than as a result of any failure on the part of
Lapis to comply with or perform any covenant or obligation of Lapis and/or Mund
set forth in this Agreement);

13.1.3. by the Investor, if the Closing has not taken place on or before 30
April, 2008 (other than as a result of the failure on the part of the Investor
to comply with or perform any covenant or obligation set forth in this
Agreement); and/or

13.1.4. by the mutual consent of Lapis, Mund and the Investor.

1.15. Termination Procedures If a Party wishes to terminate this Agreement
pursuant to clause 13.1, such Party shall deliver to the other Parties the basis
for terminating this Agreement. If this Agreement is terminated pursuant to this
clause 13 prior to the Closing, then all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party;
provided, however, that notwithstanding termination of this Agreement, clauses
16, 17.1, 17.2, 17.4 and 17.14 hall remain in full force and effect.

14.
POST CLOSING COVENANTS AND INDEMNIFICATION 

14.1. Release of Guarantees and other Third Party Assurances In the event
that, notwithstanding that the Condition set out in clause 11.4 will have been
waived and Closing will have become effective, Mund and/or Electronics and/or
Zvi Avni shall not have been released from any and all Third Party Assurances
per the Closing, then the Investor will take promptly all action required and/or
necessary to fulfill the Conditions set out in clause 11.4 to release Mund,
Electronics and Zvi Avni from any and all Third Party Assurances from which they
were not released per the date of Closing.

14.2. Indemnification
 
1.15.1. From and after the Closing Date, the Investor may seek, subject to the
terms of this Agreement and Schedule 5.30.1, indemnification from Lapis and/or
Mund (the "Indemnitors" and each an "Indemnitor") for any proven Costs that are
wholly and directly suffered or incurred by the Investor and which arise from or
as a result of: (i) any inaccuracy in or breach of any of the Mund and Lapis
Warranties set forth in clause 5; or (ii) any breach of any covenant or
obligation of Lapis and Mund under this Agreement; provided, however, that the
amount of indemnification sought by the Investor shall not exceed the portion of
the Minimum Value, as adjusted hereunder, actually and wholly received by Mund
minus the sum the is equal to the Purchase Price as such term is defined in the
Systems SPA.

 
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14.2.1.  If the Investor becomes aware of any claim or potential claim by a
third party (“a third party claim”) which might result in a Claim being made,
the Investor shall:

14.2.1.1. promptly (and in any event within 30 days of it becoming aware of it)
give notice of such third party claim to the Mund and procure that the Mund is
given all reasonable facilities to investigate it;

14.2.1.2. not make any admission of liability, agreement or compromise with any
person, body or authority in relation to that third party claim without prior
written approval of Mund;

14.2.1.3. subject to the Investor being indemnified by Mund against all
reasonable out of pocket costs and expenses incurred in respect of that third
party claim;

14.2.1.4. take such action as Mund may reasonably request to avoid, resist,
dispute, appeal, compromise or defend such third party claim;

14.2.1.5. allow Mund to take over the conduct of all proceedings and/or
negotiations of whatsoever nature arising in connection with the third party
claim in question; and

14.2.1.6. provide such information and assistance as Mund may reasonably require
in connection with the preparation for and conduct of any proceedings and/or
negotiations relating to that third party claim.

 
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14.2.2. If the Investor makes a Claim against Lapis and/or Mund or notifies
Lapis and/or Mund of any third party claim which might lead to such a Claim
being made, the Investor shall make available to accountants and other
representatives appointed by Mund such access to the personnel, records and
information of Lapis as Mund reasonably request in connection with such Claim or
third party claim.

14.2.3. After Closing, the sole remedy of a Party for any breach of any of the
representations and warranties by another Party or any other breach of this
Agreement or any Transaction Document by such other Party, shall be an action
for indemnification under this clause 14.

15.
THE MUND OPTION  

                Subject to the terms and conditions hereof and in reliance upon
the representations, warranties and agreements contained herein and subject to
Mund exercising the Mund Option (as such term is defined below), the Investor
shall acquire the Option Shares (as such term is defined below) in accordance
with the terms set out below. For the purpose of this Agreement the term “Mund
Option” shall mean a non assignable (other than to a Permitted Transferee, to
whom the Mund Option can be assigned requiring no other action than a
notification in writing to the Investor) put option, exercisable by Mund, at his
sole discretion, under the terms set forth herein, to sell to the Investor and
oblige the Investor to purchase 4,750,000 of Common Shares, par value $0.001 per
share of Lapis (the “Option Shares”) owned by Mund, for a price per Common Share
equal to $0.6038 (the "Basic Option Share Price") for a total consideration in
the amount of the Minimum Value, as defined hereunder. The Basic Option Share
Price is subject to all the adjustments provided for herein.

15.1. Right to Exercise and Exercise Price 
 
1.15.2. Mund, at his sole discretion, shall be entitled to exercise the Mund
Option and sell to the Investor the Option Shares if and only if the Value of
the Option Shares, calculated in accordance with clause 15.2 below was not
higher for a period of 65 consecutive calendar days during a period of up to 24
months following the Closing Date (the "Strike Period"), than two million and
eight hundred and sixty eight thousand Dollars ($2,868,000) (the “Minimum
Value”), subject to the adjustments provided for herein to the Minimum Value in
clause 15.4.3.
 
 
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1.15.3. If the Value of the Option Shares, calculated in accordance with clause
15.2 below, during the Strike Period is equal to, or exceeds, the Minimum Value,
for a period of 65 consecutive calendar days commencing 120 days after the
Closing Date (so long as Mund may sell his Common Shares pursuant to Rule 144
under the Securities Act after such 120-day period), then the Mund Option will
become null and void and shall have no force and effect. Notwithstanding the
above, in the event Mund shall give an order or attempt to sell the Option
Shares during such period of 65 consecutive calendar days and Mund does not
succeed in selling the all of Option Shares or a portion thereof during such
period of 65 consecutive calendar days for a price per Option Share reflecting
at least the Minimum Value, then the Mund Option shall not become void and null
and shall be extended in respect of the Option Shares or the unsold portion
thereof for a period ending the earlier of: (i) the last day of the period of 24
months following the Closing Date; or (ii) the date on which all Option Shares
will have been sold for a price per Option Share equal to or exceeding the Basic
Option Share Price, during which period Mund can exercise the Mund Option in
accordance with this clause 15. 
 
15.1.1. A third party purchaser of the Option Shares or any part thereof shall
not be entitled to the Mund Option unless written consent of the Investor is
obtained prior to such sale of Option Shares.
 
15.2. Value of Option Shares The Value of the Option Shares will be calculated
according to the average value of the Common Shares as determined by the closing
sales price of Lapis’ Common Shares as reported by either the NASDAQ Small Cap
Market or the Over the Counter Bulletin Board (www.otcbb.com) upon which Lapis’
securities are listed and traded as of such date during a period of 60
consecutive Trading Days, within a period of 24 months from the Closing date.

In the event that for whatever reason the Value of the Option Shares cannot be
determined in the manner set forth above or if the Parties do not agree on the
Value as determined above, the Value shall be determined by Tamir Fishman or
Poalim Capital Markets, or such other party as determined and agreed upon
between by the Parties.

1.16. Exercise Period and Sum of Option Shares Exercised 

               Subject to Mund’s right to exercise as per clause 15.1 above, the
Mund Option may be exercised and the Option Shares sold by Mund to the Investor
during a period of 90 calendar days immediately following the dates set below
and in respect to such number of the Option Shares as set out below (the “Option
Exercise Period”):
 
 
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1.16.1. after the first anniversary of the Closing Date - a sum of Option Shares
equal to up to fifty percent (50%) of the total number of Option Shares, for a
consideration per one Common Share equal to the Basic Option Share Price,
subject to the adjustments determined in accordance with clause 15.3.1 below and
for a total consideration determined in accordance with clause 15.3.1; and
 
1.16.2. after the second anniversary of the Closing Date - a sum of Option
Shares equal to all or part of the Option Shares, for a consideration per one
Common Share equal to the Basic Option Share Price, subject to the adjustments
determined in accordance with clause 15.3.2 below and for a total consideration
determined in accordance with clause 15.3.2. 
 
15.3. Exercise Price 
 
The Basic Option Share Price shall be subject to the adjustments set forth below
(the Basic Option Share Price, as adjusted, shall be referred to as the
“Exercise Price”):
 
1.16.3. In the event the Mund Option is exercised in accordance with clause
1.16.1 above, the Exercise Price shall be equal to $0.5434 per Option Share,
subject to all adjustments set forth in clauses 15.3.3 and15.3.4 below and
reflecting a consideration (the “First Anniversary Consideration”) to be paid by
the Investor to Mund for the Option Shares sold on that date of one million, two
hundred and ninety thousand and five hundred seventy five US Dollars
($1,290,575). 
 
1.16.4. In the event the Mund Option is exercised in accordance with clause
1.16.2 above, the Exercise Price shall be equal to $0.6038 per Option Share,
subject to all adjustments set forth in clauses 15.3.2 and15.3.3 below and
reflecting a consideration (the “Second Anniversary Consideration”) to be paid
by the Investor to Mund of two million and eight hundred and sixty eight
thousand Dollars ($2,868,000).
 
15.3.1. In the event Mund sells any of the Option Shares to a third party who is
not a Permitted Transferee within the 24 months period following the Date of the
Closing, the Minimum Value shall be adjusted pro rata to reflect such number of
the Option Shares actually sold by reducing the Minimum Value by the sum that is
equal to the number of Option Shares sold by Mund multiplied by the Exercise
Price per Option Share.
 
 
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15.3.2. In the event Lapis shall subdivide or consolidate its Common Shares
and/or otherwise alter its share capital, then the Basic Option Share Price
shall be adjusted in order to ensure that the economic value attributed to the
Mund Option is not altered pursuant to changes to the share capital of the
Company. Notwithstanding the above, the adjustment to the Basic Option Share
Price shall be effected provided that Mund shall be entitled to the sum that is
equal to the Minimum Value upon the exercise of the Mund Option.
 
15.3.3. In the event that at any time prior to the exercise of the Mund Option
in full, Lapis shall distribute a cash or stock dividend, the Basic Option Share
Price shall be adjusted from and after the date of such distribution is made, by
reducing the Basic Option Share Price with an amount equal to the Dollar
equivalent of the net per-share distribution after taxes and other compulsory
payments, received by Mund for an Option Share. Notwithstanding the above, the
adjustment to the Basic Option Share Price shall be effected provided that Mund
shall be entitled to the sum that is equal to the Minimum Value upon the
exercise of the Mund Option minus any sum actually received by him pursuant to
the distribution of the cash dividend contemplated under this sub-clause.
 
1.16.5.  Notwithstanding the stipulations of the above sub-clauses 15.3, in the
event the adjustment set out in the above sub-clauses 15.3 shall result in Mund
receiving upon exercise of the Mund Option a total consideration for the Option
Shares below the First Anniversary Consideration set out in clause 1.16.3 (if
exercised in accordance with clause 1.16.1) or the Second Anniversary
Consideration set out in clause 1.16.4 (if the Mund Option will be exercised in
accordance with clause 1.16.2), then the Investor shall pay Mund the difference
between the consideration received after such adjustment set out in the above
sub-clauses 15.3 and the consideration that should have been paid according to
the First Anniversary Consideration as set out in clause 1.16.3 or the Second
Anniversary Consideration as set out in clause 1.16.4.
 
 
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15.4. Exercise of the Option 
 
1.16.6. The Mund Option or any portion thereof is exercisable by delivery of a
written notice of exercise to the Investor in a form similar to the form
attached hereto in Schedule 15.4.1 (the “Notice of Exercise”) duly completed and
executed. In the Notice of Exercise, Mund shall indicate the portion of Option
Shares under the Mund Option to be exercised on the Exercise Date (as defined
below).
 
15.4.1. The payment of the consideration for the portion of the Option Shares
under the Mund Option covered by a Notice of Exercise shall take place within
ten (10) business days following the delivery of the Notice of Exercise to the
Investor (the “Exercise Date”). On each Exercise Date, the following
transactions shall occur, which transactions shall be deemed to take place
simultaneously and no transaction shall be deemed to have been completed or any
document delivered until all such transactions have been completed and all
required documents delivered:
 

 
15.4.1.1.
Mund shall deliver to the Investor share transfer deeds executed by Mund or such
other document evidencing the transfer of such Option Shares from Mund to the
Investor; and

 

 
15.4.1.2.
the Investor shall deliver to Mund the sum equal to the First Anniversary
Consideration or the Second Anniversary Consideration, as applicable, for the
Option Shares purchased under a specific Notice of Exercise, by wire transfer of
immediately available funds to the bank account designated by Mund in writing.

 
15.5. Guarantee and Escrow
 
15.5.1. The Investor will provide an irrevocable security over assets in an
amount equal to the Minimum Value, as set out in Schedule 15.6.1 attached
hereto, under the documents to be executed at Closing and to be attached hereto
in Schedule 15.6.1.
 
 
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1.16.7. Mund, the Investor and a third party escrow agent will enter into an
escrow agreement (the “Escrow Agreement”) to be executed the date hereof and to
take effect on Closing, in the form attached hereto in Schedule 15.5.2, under
which the Investor shall deposit two personal cheques with the escrow agent to
facilitate the payment to Mund by the Investor of the consideration under the
Mund Option. 

16.
Confidentiality

1.17. Each Party undertakes that it shall (and shall procure that each of its
Representatives shall) maintain all information received from another Party or a
Subsidiary that is marked or deemed confidential (“Confidential Information”) in
confidence and not disclose that Confidential Information to any person except
as permitted by this clause 16 or with the prior written approval of the other
Parties.

16.1. No Party shall, without the prior written consent of the other Parties,
disclose any information to any person about the contents of this Agreement or
any of the transactions contemplated under the Transaction Documents, unless it
is compelled to do so by any rule of law or by any applicable stock exchange
regulation. If a Party is compelled to disclose the aforesaid information to any
person on the basis of any rule of law or any stock exchange regulation, it
shall consult with the other Parties as to the contents and the form of the
disclosure to be made.

1.18. The provisions of this clause 16 shall survive termination and/or Closing
of this agreement.

17.
MISCELLANEOUS

17.1. Tax Liability Each Party shall be responsible for all its respective tax
obligations deriving from the transactions contemplated in this Agreement.
 
17.2. Fees & Expenses Each Party shall bear its own legal fees and all related
expenses incurred in connection with the negotiation, preparation, entering into
and completion of the transactions contemplated under the Transaction Documents.
The fees and expenses incurred by Lapis in respect of advise by US advisors on
matters of US law and regulations, including, inter alia, dealing with
shareholders’ meetings and resolutions, board resolutions, regulatory advice and
amendments to the by-laws of Lapis, will shall be borne by Lapis, after Closing.

1.19. Survival Subject to any time limitations specifically set forth in this
Agreement and the other provisions of this Agreement, all representations and
warranties set forth in clauses 5 and 6 above shall survive the Closing.

 
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17.3. Notices All notices, consents, approvals, waivers and other communications
in relation to or hereunder shall be in writing sent by e-mail, by personal
delivery or registered mail with confirmation of receipt and shall be deemed to
have been duly given when delivered in person (against confirmation of receipt),
or when confirmation of transmission is received when sent by telecopy, or seven
(7) business days after delivery (prepaid) to any commercial overnight courier,
or within 12 hours after the e-mail was sent, provided, however, that in each
case where delivery by hand or by telecopy occurs after 18:00p.m. on a business
day or at any time on a day which is not a business day, service shall be deemed
to occur at 09:00a.m. on the next following business day.

All notices and other communications shall be addressed as follows:

If to the Lapis and Mund:
Lapis Technologies, Inc.
 
19 West 34th Street, Suite 1008
 
New York, New York 10001, the USA
 
enertec@netvision.net.il
     
Harry Mund
 
73 Ben-Gurion Street
 
Kiriat Motzkin, Israel
 
Tel: 04-8404177
 
Fax: 04-8732324
 
enertec@netvision.net.il

With a copy to:
Tomer Maharshak
 
Balter, Guth, Aloni & Co.
 
96 Yigal Alon, Tel Aviv, 67891, Israel
 
Tel: 03-5111111
 
Fax: 03-5102166
 
tmaharshak@bgalaw.co.il

If to the Investor:
Mordechai Solomon
 
11 Dganya Street
 
Ra’anana, Israel
 
Tel: 073-2324501
 
Fax: 073-2324509
 
uri.nissani@star-ds.com

 

With a copy to:
David Gotlieb, Adv.
 
Shnitzer, Gotlieb & Co.
 
7 Menachem Begin Street,
 
Ramat Gan 52521, Israel
 
Tel: 03-6113000
 
Fax: 03-6113001
 
david@sglaw.co.il

or to such other address as the parties may from time to time designate in
writing.

 
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17.4. Waiver Any waiver hereunder must be in writing, duly authorized and signed
by the Party to be bound, and shall be effective only in the specific instance
and for the purpose for which given. Except as otherwise provided in this
agreement, no failure or delay on the part of any Party in exercising any right,
power or privilege under the Transaction Documents or remedy under any
applicable law shall operate as a waiver thereof or impair or preclude the
exercise of such right, power, remedy or privilege at any subsequent time, nor
shall any single or partial exercise of any right, power, remedy or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power, remedy or privilege.

17.5. Entire Agreement This Agreement and the Transaction Documents constitute
the entire agreement among the Parties in respect of the transactions
contemplated under the Transaction Documents and supersede any other agreement
that may have been made or entered into by the Parties solely relating to the
transactions contemplated under the Transaction Documents, including the Letter
of Intent dated 11 October 2007, entered into by the Investor, SDS, Lapis and
Mund.

17.6. Amendments This Agreement may be amended or modified in whole or in part
only by a duly authorized written instrument that refers to this Agreement and
is signed by the Parties.
 
17.7. Headings The headings in this Agreement are inserted for convenience of
reference only and shall not be considered a part of or affect the construction
or interpretation of any provision of this Agreement.
 
17.8. Counterparts This Agreement may be executed in counterparts and by
facsimile signature, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
 
17.9. Further Assurances The Parties agree that they shall execute and deliver
such additional documents and shall take such additional actions (including
without limitation procuring such resolutions or regulatory approvals) as may
required by or be reasonably necessary or appropriate to effect and implement
the provisions and purposes of the Transaction Documents and the consummation of
the transactions contemplated thereunder. In the absence of specific
stipulations or agreements, each Party shall be responsible for its own costs
and expenses incurred in giving effect to the provisions of this clause 17.10.
 
 
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17.10. Severability If any provision of this Agreement is by way of law or held
by a court of competent jurisdiction to be or otherwise be deemed invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected, impaired or invalidated
thereby. Notwithstanding the foregoing, the Parties shall thereupon negotiate in
good faith in order to agree to the terms of a mutually satisfactory provision,
achieving as nearly as possible the same commercial effect, to be substituted
for the provisions so found to be invalid, illegal or unenforceable.

17.11. Manner of Payment All payments to be made pursuant to this Agreement
shall be made in Dollars to each Party’s respective bank accounts, as shall be
designated by or on behalf of such Party from time to time in writing or as
otherwise agreed between the Parties. All payments shall be made by initiating
such payments on a day the banks are open for business in Israel or the United
States, before 11.00 a.m., Israel time, by bank wire transfer in immediately
available funds, marked for attention as indicated, or as otherwise agreed
between the Parties. 

17.12. Conflict with Other Agreements In the event of any conflict between this
Agreement and any other Transaction Document, this Agreement shall prevail (as
between the Parties to this Agreement) unless: (i) such other Transaction
Document expressly states that it (or any part of it) overrides this Agreement;
or (ii) the Parties otherwise expressly agree in writing that such other
agreement shall override this Agreement.
 
17.13. Governing Law & Jurisdiction This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Israel. Any
dispute arising under or with respect to this Agreement shall be resolved
exclusively in the competent court in the District of Tel Aviv, Israel.
 

 
 
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IN WITNESS WHEREOF, Lapis, Mund and the Investor have each caused this Agreement
to be duly executed as of the date first above written.
 
 
Lapis and Mund:
The Investor:
 
 
/s/ Lapis Technologies, Inc.
Lapis Technologies, Inc.
By: /s/ Harry Mund
Title: Chief Executive Officer 
 
 
/s/ Harry Mund
 
 /s/ Mordechai Solomon
 
 
 

 
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List of Schedules

Schedule 1.2.13
Due Diligence Information Index List
   
Schedule 2.3
Capitalization Table after issue of the Issued Shares
   
Schedule 4.3
Closing Obligations
   
Schedule 5.2
Organizational Documents Lapis
   
Schedule 5.3.2
Capitalization Table per the Date of this Agreement
   
Schedule 5.5.4
List of: (i) mergers with or an acquisition of a company; (ii) transactions
representing a sale of five percent of Lapis’ activities during Q4 of 2007;
(iii) created or extended any credit facilities not in the ordinary course of
business; and (iv) transactions which are not in the ordinary course of business
of Lapis, since 1 January 2007
   
Schedule 5.6.2
List of Tax provisions
   
Schedule 5.7.1
Legal Proceedings
   
Schedule 5.12
Outstanding Loans, Guarantees, Debts and Obligations
   
Schedule 5.13
Restricting Agreements
   
Schedule 5.14.1
Indebtedness of or to Major Shareholders
   
Schedule 5.15.1
List of Employees
   
Schedule 5.16.4.1
List of Key Employees
   
Schedule 5.18.1
List of Licensees for the use of Lapis' Intellectual Property
   
Schedule 5.18.4
List of Registered Patent, Trademarks and Copyrights
   
Schedule 5.19
List of Related Party Transactions
   
Schedule 5.20
List of Leases and the Rent Payments of each Lease
   
Schedule 5.21
List of insurance
   
Schedule 5.22
List of Directors and Key Officers
   
Schedule 5.30.1
Limitations on Liability
   
Schedule 6.5.2
Organizational Documents Star Night
   
Schedule 9.4.1
Form of Legal Opinion US Counsel Lapis
   

 
 
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Schedule 9.4.2
Form of Legal Opinion Counsel Star Night
   
Schedule 9.4.3
Fairness Opinion
   
Schedule 9.4.4.1
Consent Letter Bank Leumi
   
Schedule 9.4.4.2
Consent Letter Bank Hapoalim
   
Schedule 9.4.5
Employment agreement of Mr. Zvi Avni
   
Schedule 10.1.1
Copy of from of Consent of Shareholders Lapis
   
Schedule 11.4.1
Third Party Assurances
   
Schedule 15.5.1
Notice of Exercise
   
Schedule 15.6.1
Guarantee for Mund Option
   
Schedule 15.6.2
Escrow Agreement

 
 
 
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SCHEDULE 4.3
 
Closing Arrangements
 
Closing Obligations
 
Lapis’ Obligations
 

1.
At Closing, Lapis shall deliver or procure that there is delivered to the
Investor:

 

1.1.
the share certificates in respect of all the Issued Shares or such other
document evidencing the issue of the Issued Shares;

1.2.
a letter of resignation in the Agreed Form duly executed by each of the
directors of Lapis in respect of their directorships and/or any committee of
Lapis;

1.3.
a letter of resignation in the Agreed Form duly executed by the auditors of
Lapis in respect of their position as auditors of Lapis;

1.4.
a copy of a resolution of the board of directors of Lapis authorising the
execution of and the performance by Lapis of its obligations under this
Agreement and each of the Transaction Documents to be executed by it;

1.5.
documents evidencing release of the Third Party Assurances;

1.6.
a certificate that the Mund and Lapis Warranties are correct in all material
respects per the Date of Closing;

1.7.
a copy of the Yearly Financial Statements, as such term is defined in clause
5.2.2 of this Agreement; and

1.8.
a copy of the Trial Balance, as such term is defined in clause 5.2.2 of this
Agreement.

Investor’s Obligations
 

2.
At Closing, the Investor shall deliver or procure that there is delivered to
Lapis:

 

1.1.
the share transfer forms in respect of the transfer of Investor’s SN Shares to
Lapis;

1.2.
certified true copy of the register of members of Star Night evidencing the
transfer of the Investor’s SN Shares to Lapis; and

1.3.
the share certificates in respect of all the Investor’s SN Shares.

 

3.
At Closing, the Investor shall deliver or procure that there is delivered to
Mund:

 

1.1.
documents evidencing release of the Third Party Assurances;

1.2.
the instrument of security over assets of the Investor required for the purpose
of effecting the Mund Option; and

1.3.
the cheques and other matters required under the Escrow Agreement.

 
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General
 

4.
All documents and items delivered at Closing pursuant to this Schedule 4.3 shall
be held by the recipient to the order of the person delivering the same until
such time as Closing shall be deemed to have taken place in accordance with
clause 5 of this Schedule 4.3 below.

 

5.
Simultaneously with delivery of all documents and items required to be delivered
at Closing (or waiver of the delivery thereof by the person entitled to receive
the relevant document or item); the documents and items delivered in accordance
with this Schedule shall cease to be held to the order of the person delivering
the same and Closing shall be deemed to have taken place.

 

 
 
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SCHEDULE 11.4.1
 
Third Party Assurances
 
[To be updated prior to Closing]
 

 

 
§
Third Party Assurances Mund attached as separate documents

 
§
Third Party Assurances Avni attached as separate documents

 
§
Third Party Assurances Electronics attached as separate documents

 

 
 
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SCHEDULE 5.30.1
 
Limitations on Liability
 
 
1.
Time Limits

 
Mund and/or Lapis shall not be liable for any Claim unless Mund receives from
the Investor written notice (within thirty (30) days of the Investor becoming
aware of such Claim) containing reasonably specific details of the Claim: prior
to the end of a period of 20 months immediately following the Date of Closing.
 
2.
Thresholds for Claims

 
1.1.
Notwithstanding any other provision of this Agreement, Mund and/or Lapis shall
not be liable for any Claim unless the amount of the liability pursuant to the
aggregate of all Claims exceeds fifty thousand US Dollars (US$50,000) (in which
case the Investor shall be able to claim only for the excess over fifty thousand
US Dollars (US$50,000)).

 
3.
Maximum limit for all Claims

 
1.2.
Notwithstanding any other provision of this Agreement, the aggregate maximum
amount of the liability of Mund for all Claims shall not exceed the sum of that
part of the Minimum Value (as adjusted from time to time) minus the sum the is
equal to the Purchase Price as such term is defined in the Systems SPA. The
indemnification for all Claims shall be by way of reduction of the Minimum
Value.

 
4.
Matters disclosed or taken into account in adjustments

 
1.3.
Mund and/or Lapis shall not be liable for any Claim for breach of the Mund and
Lapis Warranties if and to the extent that the fact, matter, event or
circumstance giving rise to such Claim:

 

 
1.1.1.
is disclosed in this Agreement or any other Transaction Document, the Disclosure
Letter or in any document disclosed in the Due Diligence Information;

 

 
1.1.2.
is allowed, provided or reserved for in the financial statements of Lapis and/or
its Subsidiaries and/or was disclosed in the financial due diligence conducted
in respect of Lapis and its Subsidiaries by the Investor and its advisors and
any documents and information provided within the framework thereof.

 
5.
Contingent liabilities

 
If any Claim for breach of the Mund and Lapis Warranties is based upon a
liability which is contingent only, Mund and/or Lapis shall not be liable to
make any payment unless and until such contingent liability gives rise to an
obligation to make a payment.
 
6.
No liability for Claims arising from acts or omissions of Investor

 
Mund and/or Lapis shall not be liable for any Claim which would not have arisen
but for any voluntary act, omission or transaction carried out after the date of
this Agreement by the Investor or its respective directors, employees or agents
or successors in title.
 
 
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7.
Nothing to restrict Investor’s duty to mitigate

 
Nothing in this Schedule 1.12.1 shall in any way restrict or limit the general
obligation of the Investor to mitigate any loss or damage which it may suffer in
consequence of any breach by Mund and/or Lapis of the terms of this Agreement or
any fact, matter, event or circumstance likely to give rise to a Claim.
 
8.
No double recovery

 
The Investor shall not be entitled to recover damages or obtain payment,
reimbursement, restitution or indemnity more than once in respect of any one
liability, loss, cost, shortfall, damage, deficiency, breach or other set of
circumstances which gives rise to more than one Claim.
 
9.
No recovery if compensation in another manner is available

 
1.4.
The Investor shall not be entitled to recover damages or obtain payment,
reimbursement, restitution or indemnity in respect of any one liability, loss,
cost, shortfall, damage, deficiency, breach or other set of circumstances which:

 

 
1.1.1.
is or can be recovered by the Investor under any policy of insurance maintained
or customary to be obtained in the field of activity of Lapis or from a third
party, or would have been so recoverable but for any change in the current terms
of insurance instigated by the Investor after Closing; and/or

 

 
1.1.2.
give rise to or result in a benefit accruing to the Investor out of the same,
including, but not limited to, any relief from taxation obtainable by the
Investor and/or its affiliates, and any amount by which any taxation for which
the Investor and/or its affiliates are accountable is reduced or extinguished.

 
10.
Investor’s knowledge

 
Mund and/or Lapis shall not be liable for any Claim for breach of the Mund and
Lapis Warranties if and to the extent that the Investor is aware at the date of
this Agreement of the fact, matter, event or circumstance which is the subject
matter of the Claim; and
 
11.
Opportunity to remedy breaches

 
A breach of the Mund and Lapis Warranties which is capable of remedy shall not
entitle the Investor to compensation unless Mund and/or Lapis are given written
notice of the breach by the Investor and such breach is not remedied within a
reasonable period of time after the date on which such notice is served on the
Seller. Without prejudice to its duty to mitigate any loss, the Investor shall
provide all reasonable assistance to the Seller to remedy any such breach.
 
 
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SCHEDULE 15.5.1
 
NOTICE OF EXERCISE

To:
Mordechai Solomon

11 Dganya St.
Ra’anana
Israel

By: fax and e-mail

Date: [ ] 2009/2010

The undersigned hereby elects to exercise the Mund Option in respect of [   ]
Common Shares of Lapis Technologies, Inc. (the “Company”) that are subject to
and pursuant to the terms of the Mund Option as set out in clause 15 of an
agreement for the issue and sale of shares in the Company and the transfer of
shares in Star Night Technologies Ltd. dated the [ ] day of [ ] 2008 (the “Lapis
SPA”), between the Company, the addressee and the undersigned, and requests
herewith payment of the sum of US$[ ] in accordance with clause 15 of the Lapis
SPA

Kind regards,

 
________________________
Harry Mund
 
 
60

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