# FORMULA SYSTEMS (1985)
LTD.

# LETTER OF
INDEMNIFICATION_________, 2005

Dear _____________ [director, officer and/or employee]

This
Letter of Indemnification (this Letter) is written to you in
recognition that it is in the best interest of Formula Systems (1985) Ltd. (the
Company) to retain and attract as directors, officers and/or employees
the most capable persons available.

You
are or have been appointed a director, officer and/or employee of the Company, and in
order to enhance your service to the Company in an effective manner, the Company desires
to provide hereunder for your indemnification to the fullest extent permitted by law.

In
consideration of your continuing to serve the Company, the Company hereby agrees as
follows:

1.        The
Company hereby undertakes to indemnify you to the maximum extent permitted           by
applicable law in respect of the following in respect of any act or omission           (action)
taken or made by you in your capacity as a director,           officer and/or employee of
the Company:

| | anyfinancial
obligation imposed on, or incurred by you in favor of another person by a court judgment,
including a settlement or an arbitrators award approved by court,
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| | all
reasonable litigation expenses, including attorneys fees, expended by you as a
result of an investigation or proceeding instituted against you by a competent authority,
provided that such investigation or proceeding concluded without the filing of an
indictment against you and either (A) without the imposition of any financial liability
in lieu of criminal proceedings or (B) with the imposition of a financial liability in
lieu of criminal proceeding but relates to a criminal offense that does not require proof
of mens rea (criminal intent); and
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| | all
reasonable litigation expenses, including attorneys fees, expended by you or
imposed on you by a court in a proceeding instituted against you by any another person,
or in any criminal proceedings in which you are acquitted, or in any criminal proceedings
of a crime which does not require proof of mens rea (criminal intent) in which you
are convicted, all in respect of actions taken by you in your capacity as a director,
officer and/or employee of the Company.
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The
above indemnification will also apply to any action taken by you in your capacity as a
director, officer and/or employee of any other company controlled, directly or
indirectly, by the Company (a Subsidiary), or in your capacity as a
director, or observer at board of directors meetings of a company not controlled by
the Company but where your appointment as a director or observer results from the Companys
holdings in such company (Affiliate).

2.        The
Company will not indemnify you for any amount you may be obligated to pay in
          respect of:

| | a
breach of your duty of loyalty, except, to the extent permitted by law, for a breach of
your duty of loyalty to the Company, a Subsidiary or an Affiliate while acting in good
faith and having reasonable cause to assume that such act would not prejudice the
interests of the Company, Subsidiary or Affiliate, as applicable;
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| | a
willful breach of your duty of care or reckless disregard for the circumstances or to the
consequences of a breach of your duty of care, except if such breach of your duty of care
is solely due to negligence;
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| | an
action taken or not taken with the intent of unlawfully realizing personal gain;
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| | a
fine or penalty imposed upon you for an offense; and
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| | a
counterclaim made by the Company or in its name in connection with a claim against the
Company filed by you.
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3.        The
Company will make available all amounts needed in accordance with Section 1
          above on the date on which such amounts are first payable by you (Time of
          Indebtedness), and with respect to items referred to in Section 1.2
above,           even prior to a court decision. Advances given to cover legal expenses
in           criminal proceedings will be repaid by you to the Company if you are found
          guilty of a crime which requires proof of criminal intent. Other advances will
          be repaid by you to the Company if it is determined that you are not lawfully
          entitled to such indemnification.

| | As
part of the aforementioned undertaking, the Company will make available to you any
security or guarantee that you may be required to post in accordance with an interim
decision given by a court or an arbitrator, including for the purpose of substituting
liens imposed on your assets.
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4.        The
Company will indemnify you even if at the relevant Time of Indebtedness you           are
no longer a director, officer or employee of the Company or of a Subsidiary           or
a director or board observer of an Affiliate, as applicable, provided, that           the
obligations are in respect of actions taken by you while you were a           director,
officer, employee and/or board observer, as aforesaid, and in such           capacity,
including if taken prior to the above resolutions.

5.        The
indemnification will be limited to the expenses mentioned in Section 1.2 and
          1.3 (pursuant and subject to Section 3 and insofar as indemnification with
          respect thereto is not restricted by law or by the provisions of Section 2
          above) and to the matters mentioned in Section 1.1 above, insofar as they
result           from your actions in the following matters or in connection therewith,
which the           Companys Board of Directors has resolved are foreseeable in
light of the           actual activities of the Company:

| | The
offering of securities by the Company and/or by a shareholder to the public and/or to
private investors or the offer by the Company to purchase securities from the public
and/or from private investors or other holders pursuant to a prospectus, agreements,
notices, reports, tenders and/or other proceedings;
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| | Occurrences
resulting from the Companys status as a public company, and/or from the fact that
the Companys securities were offered to the public and/or are traded on the
National Association of Securities Automated Quotation (NASDAQ) and on the Tel-Aviv stock
exchange;
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| | Occurrences
in connection with investments the Company and/or Subsidiaries and/or Affiliates make in
other corporations whether before and/or after the investment is made, entering into the
transaction, the execution, development and monitoring thereof, including actions taken
by you in the name of the Company and/or a Subsidiary and/or an Affiliate as a director,
officer, employee and/or board observer of the corporation the subject of the transaction
and the like;
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| | The
sale, purchase and holding of negotiable or non negotiable securities or other
investments for or in the name of the Company, a Subsidiary and/or an Affiliate;
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| | Actions
in connection with the merger of the Company, a Subsidiary and/or an Affiliate with or
into another entity;
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| | Actions
in connection with the sale of the operations and/or business, or part thereof, of the
Company, a Subsidiary and/or an Affiliate;
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| | Actions
taken in connection with the sale, purchase and/or holding of securities (whether
negotiable or not) and any other assets on behalf of or in the name of the Company;
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| | A
change of structure of the Company or the reorganization of the Company or any decision
pertaining to these issues, including, but not limited to, split, merger, a change in the
Companys capital, the establishment of subsidiaries and their liquidation or sale,
an allotment or Distribution (as defined in the Companies Law);
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| | An
announcement, a statement, including position taken, or an opinion made in good faith by
an officer, in the course of his duties and in conjunction with his duties, including
during a meeting of the Board of Directors of the Company or any committee thereof;
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| | Actions
taken in connection with labor relations and/or employment matters in the Company,
Subsidiaries and/or Affiliates and trade relations of the Company, Subsidiaries and/or
Affiliates, including with employees, independent contractors, customers, suppliers and
various service providers, including stock options granted or promised (or allegedly
promised) thereto or exchanges of such options with other securities;
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| | Actions
taken in connection with the intellectual property of the Company, Subsidiaries and/or
Affiliates, and its protection, including the registration or assertion of rights to
intellectual property and the defense of claims related to intellectual property;
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| | Actions
taken pursuant to or in accordance with the policies and procedures of the Company,
Subsidiaries and/or Affiliates, including but not limited to implementation relating to
the Sarbanes Oxley Act, whether or not such policies and procedures are published;
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| | Actions
taken in connection with the financial reporting of the Company or any of its
Subsidiaries or Affiliates, and in providing guidance to the public regarding future
performance thereof;
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| | Violations
of laws requiring the Company to obtain regulatory and governmental licenses, permits and
authorizations in any jurisdiction, including but not limited to antitrust authorizations
and/or exemptions;
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| | Actions
relating to the operations and management of the Company and/or any of its Subsidiaries
and/or Affiliates;
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| | Actions
relating to agreements and transactions of the Company and/or any of its Subsidiaries
and/or Affiliates with others, including, for example: customers, suppliers, contractors,
etc;
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| | Actions
concerning the approval of transactions of the Company and/or its Subsidiaries and/or
Affiliates with officers and/or directors and/or holders of controlling interests in the
Company and/or its Subsidiaries and/or Affiliates and/or the approval of corporate
actions, including the approval of acts of the Companys and/or its Subsidiaries
and/or Affiliates management, their guidance and their supervision; and
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| | Occurrences
in connection with the lenders or other creditors or for money borrowed by, or other
indebtedness of, the Company, including monetary liabilities to third parties relating to
the return of loans.
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6.        The
total amount of indemnification that the Company undertakes under Section 1
          above, towards all persons whom it has resolved to indemnify for the matters
and           in the circumstances described herein, jointly and in the aggregate, shall
not           exceed an amount equal to twenty-five percent (25%) of the Companys
total           shareholders equity according to the Companys most recent financial
          statements as of the time of for the actual payment of indemnification.

7.        Notwithstanding
anything contained herein to the contrary, the Company will not           indemnify you
for any liability with respect to which you have received payment           by virtue of
an insurance policy or another indemnification agreement other than           for amounts
which are in excess of the amounts actually paid to you pursuant to           any such
insurance policy or other indemnity agreement (including deductible           amounts not
covered by insurance policies), within the limits set forth in           Section 6 above.

8.        Subject
to the provisions of Sections 6 and 7 above, the indemnification           hereunder
will, in each case, cover all sums of money (100%) that you will be           obligated
to pay, in those circumstances for which indemnification is permitted           under the
law.

9.        The
Company will be entitled to any amount collected from a third party in
          connection with liabilities indemnified hereunder.

10.        In
all indemnifiable circumstances indemnification will be subject to the
          following:

| | You
shall promptly notify the Company of any legal proceedings initiated against you and of
all possible or threatened legal proceedings without delay following your first becoming
aware thereof, and that you deliver to the Company, or to its designee, without delay all
documents you receive in connection with these proceedings.
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| | Similarly,
you must advise the Company on an ongoing and current basis concerning all events which
you suspect may give rise to the initiation of legal proceedings against you.
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| | Other
than with respect to proceedings that have been initiated against you by the Company or
in its name, the Company shall be entitled to undertake the conduct of your defense in
respect of such legal proceedings and/or to hand over the conduct thereof to any attorney
which the Company may choose for that purpose, except to an attorney who is not, upon
reasonable grounds, acceptable to you. The Company and/or the attorney as aforesaid shall
be entitled, within the context of the conduct as aforesaid, to conclude such
proceedings, all as it shall see fit, including by way of settlement. At the request of
the Company, you shall execute all documents required to enable the Company and/or its
attorney as aforesaid to conduct your defense in your name, and to represent you in all
matters connected therewith, in accordance with the aforesaid. For the avoidance of
doubt, in the case of criminal proceedings the Company and/or the attorneys as aforesaid
will not have the right to plead guilty in your name or to agree to a plea-bargain in
your name without your consent. Furthermore, in a civil proceeding (whether before a
court or as a part of a compromise arrangement), the Company and/or its attorneys will
not have the right to admit to any occurrences that are not indemnifiable pursuant to
this Letter and/or pursuant to law, without your consent. However, the aforesaid will not
prevent the Company and/or its attorneys as aforesaid, with the approval of the Company,
to come to a financial arrangement with a plaintiff in a civil proceeding without your
consent so long as such arrangement will not be an admittance of an occurrence not
indemnifiable pursuant to this Letter and/or pursuant to law.
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| | You
will fully cooperate with the Company and/or any attorney as aforesaid in every
reasonable way as may be required of you within the context of their conduct of such
legal proceedings, including but not limited to the execution of power(s) of attorney and
other documents, provided that the Company shall cover all costs incidental thereto such
that you will not be required to pay the same or to finance the same yourself.
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| | If,
in accordance with Section 10.3, the Company has taken upon itself the conduct of your
defense, the Company will have no liability or obligation pursuant to this Letter or the
above resolutions to indemnify you for any legal expenses, including any legal fees, that
you may expend in connection with your defense, except to which the Company in its
absolute discretion shall agree.
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| | The
Company will have no liability or obligation pursuant to this Letter or the above
resolutions to indemnify you for any amount expended by you pursuant to any compromise or
settlement agreement reached in any suit, demand or other proceeding as aforesaid without
the Companys consent to such compromise or settlement.
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| | That,
if required by law, the Companys authorized governing organs will consider the
request for indemnification and the amount thereof and will determine if you are entitled
to indemnification and the amount thereof.
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11.        If
for the validation of any of the undertakings in this Letter any act,
          resolution, approval or other procedure is required, the Company undertakes to
          cause them to be done or adopted in a manner which will enable the Company to
          fulfill all its undertakings as aforesaid.

12.        For
the avoidance of doubt, it is hereby clarified that nothing contained in           this
Letter or in the above resolutions derogate from the Companys right           to
indemnify you post factumfor any amounts which you may be obligated           to
pay as set forth in Section 1 above without the limitations set forth in
          Sections 5 and 6 above. The Company may, in its discretion, following receipt
of           necessary corporate approvals, and subject to applicable law, indemnify you
          retroactively for actions committed prior to the date of this Letter.

13.        If
any undertaking included in this Letter is held invalid or unenforceable,           such
invalidity or unenforceability will not affect any of the other           undertakings
which will remain in full force and effect. Furthermore, if such           invalid or
unenforceable undertaking may be modified or amended so as to be           valid and
enforceable as a matter of law, such undertakings will be deemed to           have been
modified or amended, and any competent court or arbitrator are hereby
          authorized to modify or amend such undertaking, so as to be valid and
          enforceable to the maximum extent permitted by law.

14.        This
Letter and the agreements contained herein shall be governed by and           construed
and enforced in accordance with the laws of the State of Israel.

This
Letter is being issued to you pursuant to the resolutions adopted by the Companys
Audit Committee on ____________, 2005, Board of Directors on ____________, 2005, and the
shareholders of the Company on ________ __, 2005.

Kindly
sign in the space provided below to acknowledge your agreement to the contents hereof, and
return this Letter to the Company.

| |  | Very truly yours,FORMULA SYSTEMS (1985) LTDBy: 
Name:Title:
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Agreed:
___________________
Name: _____________
Title: ______________
Date: ______________



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