Exhibit 2.5

                          ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement, made as of this ___ day of July, 1998, by
and among LASER INDUSTRIES LTD., an Israeli company ("Purchaser"), ORZIV
(Z.K.Y.P.) LTD., an Israeli company (the "Seller"), YEHIAM PRIOR ("Prior")
and ZIV KARNI ("Karni"), individuals residing in the State of Israel and
shareholders of the Company. Prior and Karni shall sometimes collectively
be referred to herein as (the "Shareholders").

                                 WITNESSETH

WHEREAS, the parties hereto desire to enter into this Asset Purchase
Agreement pursuant to which Purchaser will purchase from the Seller all of
the assets of Seller and assume all of the obligations of the Seller
identified herein, upon the terms and subject to the conditions set forth
herein;

NOW THEREFORE, in consideration of the premises and the mutual promises,
representations, warranties and covenants hereinafter set forth, the
parties hereto agree as follows:

1.    DEFINITIONS

      As used herein, the following terms shall have the following meanings
      unless the context otherwise requires:

      1.1   "Agreement" shall mean this Asset Purchase Agreement.

      1.2   "Business" shall mean the production of laser processing
            systems for industrial purposes.

      1.3   "Closing Date" shall mean _______________, 1998.

      1.4   "1995, 1996 and 1997 Financial Statements" shall have the
            meaning set forth in Section 4.2.1.

      1.5   "Financial Statement Date" shall mean March 31, 1997.

      1.6   "Indemnified Party" shall have the meaning set forth in
            Section 9.3.1.

      1.7   "Indemnifying Party" shall have the meaning set forth in
            Section 9.3.1.

      1.8   "Proprietary Information" shall have the meaning set forth in
            Section 4.7.2.

      1.9   "Net Assets" shall mean the assets and liabilities  set forth in
            Section 2.1.

      1.10  "Purchase Price" shall have the meaning set forth in Section 3.

      1.11  "Non-Assumed Liabilities" shall mean the assets and liabilities
            of the Seller which are neither (i) set forth in Schedule 2.1
            and/or the 1997 Financial Statements or the Interim Financial
            Statements (as defined in Article 4.2.1) nor (ii) Non-Material
            Liabilities, nor (iii) liabilities relating to the premises of
            the Seller at 7 Hayetzira Street, Raanana (the "Seller
            Premises"), including any mortgages or liens in respect
            thereof.

      1.12  "Non-Material Liabilities" shall mean liabilities of the
            Company which, individually or in the aggregate, (i) are not
            material to the business or financial condition of the Company
            and (ii) do not exceed the amount of US$25,000.

2.    PURCHASE OF NET ASSETS

      2.1   Purchase and Sale of Net Assets. Seller shall sell, assign, and
            transfer to Purchaser and Purchaser shall purchase, as of the
            Closing Date, free and clear of all liens, pledges, or
            encumbrances of any kind, nature, or description all of
            Seller's assets and properties, including, but not limited to
            cash, notes, accounts receivable, including but not limited to
            VAT refunds, security interests, inventories, intangible and
            tangible assets including Proprietary Information, technology,
            ongoing research and development, all know-how relevant to the
            manufacture and/or sale of Seller's products, equipment,
            furniture and fixtures, automobiles, trademarks, trade names
            including Seller's corporate name, accrued interest, prepaid
            insurance, other prepaid expense, and deposits which Seller
            owns or to which it was entitled on the Closing Date (including
            but not limited to all such assets reflected on Seller's
            balance sheet as of the date of this Agreement).
            Notwithstanding anything to the contrary in this Agreement, it
            is expressly agreed that the Seller Premises, including any
            mortgages or obligations relating thereto, are expressly
            excluded from this Transaction, and shall remain with the
            Seller. Purchaser shall assume those obligations of Seller, and
            royalties payable that are (i) set forth in SCHEDULE 2.1 and/or
            in the 1997 Financial Statements or the Interim Financial
            Statements and (ii) Non Material Liabilities, other than
            Non-Assumed Liabilities. All operations in the ordinary and
            regular course of business carried on by Seller after the
            Closing Date, shall be deemed to have been carried on for the
            account of Buyer, which shall be entitled to all proceeds
            derived therefrom and bear all expenses and losses incurred
            thereby. Seller shall, following Closing, change its corporate
            name. Seller represents that since April 1, 1998, it has not
            assumed any liability except as disclosed in SCHEDULE 2.1 or
            Non- Material Liabilities (to the extent such Non-Material
            Liabilities, when aggregated with any other Non-Material
            Liabilities, do not exceed the amount of $25,000).

      2.2   Non-Assumed Liabilities. Non-Assumed Liabilities, if any, shall
            remain the property and liability of the Seller and the
            Shareholders. Seller and the Shareholders warrant and represent
            that any Non-Assumed Liabilities shall be paid in full.

3.    PURCHASE PRICE

      3.1   Net Asset Purchase Price.

            3.1.1 Purchaser, in full payment for the Net Assets, shall pay
                  to Seller an amount equal to US$3,450,000 (Three Million
                  Four Hundred Fifty Thousand U.S. Dollars), subject to
                  adjustment as hereafter set forth (the "Total Purchase
                  Price), which shall be payable in accordance with the
                  provisions of 3.1.2 below.

            3.1.2 The Total Purchase Price shall be payable in the following
                  manner:

                  (a)   $2,450,000, subject to adjustment as hereafter set
                        forth shall be paid to the Company on the Closing
                        Date (which amount will not be deemed to be an
                        asset of the Company for purposes of this
                        Agreement).

                  (b)   On the date which is 12 months after the Closing
                        Date, provided that the tasks specified in clauses
                        (c)(1), (2) and (3) below have been achieved on or
                        before the date indicated, the Purchaser shall pay:

                        (i)   US $500,000 to Prior or to a company controlled
                              by Prior, in accordance with written instructions
                              from Prior; and

                        (ii)  US$500,000 to K.H. Trustees Ltd. (the "Escrow
                              Agent"), as escrow agent, on behalf of and
                              for the account of Karni, in accordance with
                              an escrow agreement (the "Escrow Agreement")
                              to be entered into between the Escrow Agent,
                              Karni and the Purchaser. The form of the
                              Escrow Agreement shall be mutually agreed to
                              by the signatories thereto and payment under
                              this clause (ii) shall be conditional upon
                              signature thereon by all of the parties
                              thereto.

                  (c)   The aforementioned payments in clause (b) shall be
                        subject to the achievement of the following:

                        (1) Within 3 months after the Closing, the
                  development of the "reduced weight loss" improvement to
                  the Seller's diamond processing laser systems (Orziv 2001
                  and 2100), and the submission of a full technical report
                  on this development to the Purchaser shall have been
                  completed. The Purchaser will provide the support
                  required for this technical development.

                        (2) Within 9 months after the Closing, the
                  relocation of the Seller's activities from their present
                  address in Raanana to the plants of Laser Industries in
                  Atidim shall have been completed, provided the Purchaser
                  has decided to carry out such a relocation. The expenses
                  of such relocation shall be borne by Purchaser. Until
                  such time as the relocation is completed, Seller hereby
                  agrees to permit the Purchaser to occupy the Seller
                  Premises; and

                        (3) During the 12 month period immediately
                  following the Closing, Prior shall have cooperated with
                  and provided technical support to the Purchaser in
                  accordance with provisions of SCHEDULE 3.1.2 hereto. The
                  Purchaser agrees to pay to Prior a reasonable
                  compensation for his activities as described in SCHEDULE
                  3.1.2.

      3.2   Payments shall be made in New Israeli Shekels at the representative
            rate of exchange for the U.S. dollar last published by the
            Bank of Israel at the time of payment.

      3.3   The parties agree that the Total Purchase Price is based on a
            value of $ US 190,000 for the Seller's Premises which are
            excluded from the transaction. If an appraisal of the Seller's
            Premises, to be commissioned by Purchaser, reflects a value in
            excess of $190,000, the Total Purchase Price and the payment
            under 3.1.2(a) will be reduced by the excess amount.

4.    SELLER'S REPRESENTATIONS AND WARRANTIES

      The Seller and each of the Shareholders, jointly and severally,
      represent and warrant to Purchaser as follows:

      4.1   Organization, Standing and Authority

            4.1.1 Seller is a company duly organized, validly existing and
                  in good standing under the laws of Israel, and has the
                  full power and authority to carry on its business in the
                  places and as it is now being conducted and to own and
                  lease the properties and assets which it now owns or
                  leases.

            4.1.2 Seller is now, and will be at Closing, duly qualified
                  and/or licensed to transact business and in good standing
                  in the jurisdictions it carries out business. The
                  character of the property owned or leased by the Seller
                  and the nature of the business conducted by Seller does
                  not require qualification and/or licensing in any other
                  jurisdiction.

            4.1.3 Seller represents that, subject to receipt of the
                  approvals and permits specified in Section 4.8, it has
                  the capacity and authority to execute and deliver this
                  Agreement, to perform hereunder and to consummate the
                  transactions contemplated hereby without the necessity of
                  any act or consent of any other person whomsoever.

            4.1.4 The execution, delivery and performance by the Seller of
                  this Agreement and each and every agreement, document and
                  instrument provided for herein have been duly authorized
                  and approved by Seller's Board of Directors and, if
                  required by law or the Seller's Articles of
                  Association, the shareholders of the Seller. This
                  Agreement and each and every agreement, document and
                  instrument to be executed, delivered and performed by
                  the Seller or any Shareholder in connection herewith
                  constitute or will, when executed and delivered,
                  constitute the valid and legally binding obligations of
                  the Seller and the Shareholders, as the case may be,
                  enforceable against each of them in accordance with
                  their respective terms, except as enforceability may be
                  limited by applicable equitable principals or by
                  bankruptcy, insolvency, reorganization, moratorium, or
                  similar laws from time to time in effect, affecting the
                  enforcement of creditors' rights generally. Attached
                  hereto as EXHIBIT 4.1.4 are true, correct and complete
                  copies of the Memorandum and Articles of Association of
                  the Seller.

      4.2   Liabilities and Obligations of the Seller

            4.2.1 Attached hereto as EXHIBIT 4.2.1 are true, correct and
                  complete copies of Seller's audited year end financial
                  statements and reviewed quarterly statements as of
                  December 31, 1995, December 31, 1996, and December 31,
                  1997 (respectively, the "1995, 1996 and 1997 Financial
                  Statements"). Also attached hereto as EXHIBIT 4.2.2 are
                  true and complete copies of the unaudited reviewed
                  financial statements of Seller as of March 31, 1998 (the
                  "Financial Statement Date") (the "Interim Financial
                  Statements"). The 1995, 1996, and 1997 Financial
                  Statements and the Interim Financial Statements are
                  complete, have been prepared in accordance with generally
                  accepted accounting principles of Israel and the
                  provisions of Section 2.3, consistently applied, fairly
                  present the financial condition of the Seller as of the
                  respective dates thereof and disclose all liabilities of
                  the Seller, whether absolute, contingent, accrued or
                  otherwise, existing as of the date thereof which are of a
                  nature required to be reflected in financial statements
                  prepared in accordance with generally accepted accounting
                  principles of Israel.

            4.2.2 The Seller has no liability or obligation (whether
                  accrued, absolute, contingent or otherwise) which is of a
                  nature required to be reflected in financial statements
                  prepared in accordance with generally accepted accounting
                  principles of Israel, consistently applied, including
                  without limitation, any liability which might result
                  from an audit of its Tax Returns by any appropriate
                  authority, except for (a) the liabilities and
                  obligations of the Seller which are disclosed or
                  reserved against in the Interim Financial Statements or
                  EXHIBIT 4.2.2 hereto, to the extent and in the amounts
                  so disclosed or reserved against, and (b) liabilities
                  incurred or accrued in the ordinary course of business,
                  assets or operations of the Seller.

            4.2.3 Except as disclosed in the Interim Financial Statements
                  or EXHIBIT 4.2.2, the Seller is not in default with
                  respect to any material liabilities or obligations, and
                  all such liabilities or obligations shown or reflected in
                  the Interim Financial Statement or EXHIBIT 4.2.2 and such
                  liabilities incurred or accrued subsequent to the
                  Financial Statement Date, have been, or are being, paid
                  and discharged as they become due, and all such
                  liabilities and obligations were incurred in the ordinary
                  course of business except as indicated in EXHIBIT 4.2.2.

            4.2.4 There are no outstanding loans or advances that have been
                  made by the Seller or any entity controlled by it other
                  than as set forth in the Financial Statements and no
                  outstanding amounts due to the Seller from any
                  Shareholder, employee or any such controlled entity.

      4.3   Tax Returns and Tax Status. Unless otherwise specified in the
            Financial Statements, the Seller will within 30 days of the
            Closing, timely and accurately file all Tax Returns required to
            be filed by Seller prior to such dates and will by such time
            pay all taxes shown on such returns as owed for the periods of
            such returns, including (without limitation) all withholding or
            other payroll related taxes shown on such returns. Seller
            further undertakes to file 1997 tax returns on a timely basis.
            The tax basis of all assets of the Seller as reflected on its
            books and records is correct and accurate for use in tax
            periods ending after the Closing Date, (such tax basis shall be
            set forth on EXHIBIT 4.3 which shall include the value of all
            assets for tax purposes at the Closing Date, and detail the
            date of purchase, cost and accumulated depreciation for tax
            purposes), assuming that no change in applicable tax laws
            occurs subsequent to Closing. The Seller is not, nor will it
            become, subject to any additional taxes, interest, penalties or
            other similar charges as a result of the failure to file timely
            or accurately, as required by applicable law, any such Tax
            Return prior to the Closing Date or to pay timely any amount
            shown to be due thereon, including, without limitation, any
            such taxes, interest, penalties or charges resulting from
            the obtaining of an extension of time to file any return or
            to pay any tax. No assessments or notices of deficiency or
            other communications have been received by the Seller with
            respect to any such tax return which has not been paid,
            discharged or fully reserved in the Interim Financial
            Statements or EXHIBIT 4.3 hereto, and no amendments or
            applications for refund have been filed or are planned with
            respect to any such return.

      4.4   Ownership of Assets and Leases. EXHIBIT 4.4 attached hereto is
            a complete and correct list and brief description as of the
            date of this Agreement of all material items of personal
            property, owned, leased or licensed by the Seller as of March
            31, 1998 included in Net Assets (such list identifying which of
            such properties are owned by the Seller and all of the leases,
            licenses or agreements under which the Seller is lessee or
            licensee or hold or operate any property, real or personal).
            The Seller has good and marketable title to all of those
            properties listed and described in EXHIBIT 4.4 as owned
            property and assets, in each case free and clear of any liens,
            security interests, claims, charges, options, rights of tenants
            or other encumbrances, except as disclosed or reserved against
            in EXHIBIT 4.4 (to the extent and in the amounts so disclosed
            or reserved against) and except for liens arising from current
            taxes not yet due and payable. Each of the leases, licenses and
            agreements described in EXHIBIT 4.4 is in full force and effect
            and constitutes a legal, valid and binding obligation of (i)
            the Seller and (ii) to the best of Seller's and the
            Shareholders' knowledge, the other respective parties thereto;
            and is enforceable in accordance with its terms, except as
            enforceability may be limited by applicable equitable
            principles or by bankruptcy, insolvency, reorganization,
            moratorium, or similar laws from time to time in effect
            effecting the enforcement of creditors' rights generally. There
            is not under any of such leases, licenses or agreements
            existing any material default (i) of the Seller, or (ii) to the
            best of Seller's and the Shareholders' knowledge, of any other
            parties thereto (or, with respect to (i) and (ii) above, event
            or condition which, with notice or lapse of time, or both,
            would constitute a default). The inventories of the Seller
            consist of items of a quality and quantity readily usable or
            readily salable, at prices equal to the values at which such
            items are reflected in the Seller 's books, in the normal
            course of its business and are valued so as to reflect the
            normal valuation policy of the Seller, all in accordance with
            generally accepted accounting principles, applied on a basis
            consistent with prior years, but not in excess of the lower of
            cost or net realizable market value. All of the accounts
            receivable of the Seller as of the Closing Date will reflect
            actual transactions, will have arisen in the ordinary course
            of business and will not be subject to offset or deduction.
            All of such accounts receivable will be collectible (without
            recourse to any judicial proceedings) within six (6) months
            of the Closing Date at the aggregate recorded amounts
            thereof, net of reserves for estimated doubtful accounts
            disclosed on the Interim Financial Statements. Except
            pursuant to this Agreement, neither the Seller nor any
            Shareholder is a party to any contract or obligation whereby
            there has been granted to anyone an absolute or contingent
            right to purchase, obtain or acquire any rights in any of
            the assets, properties or operations which are owned by the
            Seller or which are used in connection with the business of
            the Seller and are being acquired hereby, except as
            indicated in EXHIBIT 4.4.

      4.5   Agreement Does Not Violate Other Instruments. Except as listed
            in EXHIBIT 4.5 (i) the execution and delivery of this Agreement
            by the Seller and the Shareholders do not, and the consummation
            of the transactions contemplated hereby will not, violate any
            provision of the Memorandum and Articles of Association of the
            Seller or violate or constitute an occurrence of default under
            any provision of, or conflict with, or result in acceleration
            of any obligation under, or give rise to a right by any party
            to terminate its obligations under any mortgage, deed of trust,
            conveyance to secure debt, note, loan, lien, lease, agreement,
            instrument, or any order, judgment, decree or other arrangement
            to which the Seller or any Shareholder is a party or is bound
            or by which the Seller's assets are affected; and (ii) no
            consent, approval, order or authorization of, or registration,
            declaration or filing with any governmental entity is required
            to be obtained or made by or with respect to the Seller, any
            Shareholder or any assets, properties or operations of the
            Seller or any Shareholder, in connection with the execution and
            delivery by the Seller and the Shareholders of this Agreement
            or the consummation of the transactions contemplated hereby.

      4.6   Conduct of the Business of the Seller Prior to the Closing

            4.6.1 Except (i) with the prior consent in writing of the
                  Purchaser, (ii) as may be required to effect the
                  transactions contemplated by this Agreement, or (iii) as
                  provided otherwise in this Agreement, the Seller shall
                  conduct, between the date of this Agreement and the
                  Closing Date, its business in the ordinary course, and
                  shall (a) use its best efforts to preserve the
                  organization of the Seller intact and to preserve the
                  goodwill of customers and others having business
                  relations with the Seller; (b) maintain the properties of
                  the Seller in the same working order and condition as
                  such properties are in as of the date of this Agreement,
                  reasonable wear and tear excepted; (c) keep in force at
                  no less than their present limits all existing bonds and
                  policies of insurance insuring the Seller and its
                  property; (d) not enter into any contract, commitment,
                  arrangement or transaction not in the ordinary course of
                  business that cannot be terminated by the Seller within
                  30 days without payment of any amount for any reason
                  whatsoever, or suffer, permit or incur any of the
                  transactions or events described in Section 4.5 hereof to
                  the extent such events or transaction are within the
                  control of the Seller or; (e) not make or permit any
                  change in the Memorandum and Articles of Association of
                  the Seller, or in the Seller's authorized, issued or
                  outstanding securities; (f) not issue any securities, not
                  grant any stock option or right to purchase any security
                  of the Seller, issue any security convertible into such
                  securities, purchase redeem, retire or otherwise acquire
                  any of such securities, or agree to do any of the
                  foregoing or declare, set aside or pay any dividend or
                  other distribution in respect of such securities; (g) not
                  make any contribution to or distribution from any
                  employee benefit plan, pension plan, stock bonus plan or
                  profit sharing plan or similar employee benefit plan
                  recognized by the laws of Israel or any political
                  subdivision thereof (except for the payment of any
                  health, disability and life insurance premiums which may
                  become due and except for contributions or distribution
                  required to be made); (h) not pay or retire from the
                  assets of the Seller any loans, advances, or other like
                  amounts, including any interest due thereon, from any
                  Shareholder or any affiliate of any Shareholder to the
                  Seller; (i) promptly advise Purchaser in writing of any
                  matters arising or discovered after the date of this
                  Agreement which, if existing or known at the date hereof,
                  would be required to be set forth or described in this
                  Agreement or the Exhibits hereto; and (j) maintain
                  adequate insurance consistent with past practices for its
                  businesses and properties.

            4.6.2 Except after prior notification to, and with the prior
                  written consent of, Purchaser, the Seller will not make,
                  between the date of this Agreement and the Closing Date,
                  any change in their banking arrangements. A list of all
                  bank accounts of the Seller and of all persons authorized
                  to act with respect thereto is attached hereto as EXHIBIT
                  4.6.2.

            4.6.3 Except with the prior consent in writing of Purchaser,
                  the Seller will not make between the date of this
                  Agreement and the Closing Date, any material changes in
                  their accounting methods or practices.

      4.7   Examination of Property and Records

            4.7.1 Between the date of this Agreement and the Closing Date,
                  the Seller will allow Purchaser, its counsel and other
                  representatives full access to all books, records, files,
                  documents, assets, properties, contracts and agreements
                  of the Seller which may be reasonably requested, and
                  shall furnish Purchaser, its officers and representatives
                  during such period with all information concerning the
                  affairs of the Seller. Purchaser will conduct any
                  investigation in a manner which will not unreasonably
                  interfere with the business of the Seller. In the event
                  the Closing does not occur, Purchaser will as soon as is
                  practicable, return or destroy all material of the Seller
                  then in its possession and hereby covenants to keep
                  confidential all Proprietary Information (as defined in
                  Section 4.7.2 below); provided, however, that the
                  foregoing agreement to keep information confidential
                  shall not apply to any information (a) in the public
                  domain not as a result of the violation of Purchaser's
                  undertakings herein, (b) available to Purchaser on a
                  nonconfidential basis without regard to the disclosure by
                  the Seller to Purchaser, (c) available to Purchaser from
                  a source other than the Seller, provided that such source
                  in so acting is not, to Seller's or the Shareholders'
                  knowledge, violating any duty or agreement of
                  confidentiality or (d) required to be disclosed by any
                  law, rule or regulation.

            4.7.2 Purchaser acknowledges that in accordance with this
                  Section 4.7.2, the Seller may disclose to Purchaser
                  certain commercially valuable, proprietary and
                  confidential information and trade secrets with respect
                  to the Seller's business, including without limitation,
                  information which may relate to their proprietary
                  products, technology, processes, drawings,
                  specifications, programs, models, financial information
                  and projections, formulae, data, know-how, methods,
                  developments, designs, improvements, inventions,
                  software programs, products, marketing plans and
                  strategies, customer and supplier lists and other
                  valuable business information and opportunities
                  (collectively, "Proprietary Information").

      4.8   Consents and Approvals. Prior to the Closing, the Seller shall
            obtain those waivers, consents and approvals set forth on
            EXHIBIT 4.8 and shall use their best efforts to obtain the
            waiver, consent and approval of all persons whose waiver,
            consent or approval (i) is required in order to consummate the
            transactions contemplated by this Agreement or (ii) is required
            by any agreement, lease, instrument, arrangement, judgment,
            decree, order or license to which the Seller is a party or
            subject on the Closing Date and (a) which would prohibit, or
            require the waiver, consent or approval of any person to such
            transactions or (b) under which, without such waiver, consent
            or approval, such transactions would constitute an occurrence
            of default under the provisions thereof, result in the
            acceleration of any obligation thereunder or give result in the
            acceleration of any obligation thereunder or give rise to a
            right of any party thereto to terminate its obligations
            thereunder.

      4.9   Absence of Changes. Since March 31, 1998, the Seller has not
            (except as disclosed on EXHIBIT 4.9 attached hereto or except
            as required or contemplated by this Agreement):

            4.9.1 Transferred, assigned, conveyed or liquidated into
                  current assets or any of the Purchased Assets or business
                  or entered into any transaction or incurred any liability
                  or obligation, other than in the ordinary course of its
                  business;

            4.9.2 Suffered any adverse change in its business, operations,
                  or financial condition or become aware of any event or
                  state of facts which may result in any such adverse
                  change;

            4.9.3 Suffered any destruction, damage or loss, whether or not
                  covered by insurance;

            4.9.4 Suffered, permitted or incurred the imposition of any
                  lien, charge, encumbrance (which as used herein includes,
                  without limitation, any mortgage, deed of trust,
                  conveyance to secure debt or security interest) or claim
                  upon any of the Net Assets.

            4.9.5 Committed, suffered, permitted or incurred any default in any
                  liability or obligation;

            4.9.6 Made or agreed to any material adverse change in the terms of
                  any contract or instrument to which it is a party;

            4.9.7 Waived, canceled, sold or otherwise disposed of, for less
                  than the face amount thereof, any claim or right which it
                  has against others;

            4.9.8 Paid, agreed to pay or incurred any obligation for any
                  payment of any indebtedness except current liabilities
                  incurred in the ordinary course of business.

            4.9.9 Delayed or postponed the payment of any liabilities,
                  whether current or long term, or failed to pay in the
                  ordinary course of business any liability on a timely
                  basis consistent with prior practice.

      4.10  Litigation. There is no suit, action, proceeding, claim or
            investigation pending, threatened against or affecting the
            Seller and, to the best of Seller's and the Shareholders'
            knowledge, there exists no basis or grounds for any such suit,
            action, proceeding, claim or investigation.

      4.11  Licenses and Permits; Compliance with Law. The Seller hereby
            transfers and assigns, effective upon the Closing Date, free of
            liens or any interests of third parties, all contracts,
            licenses, certificates, permits, franchises and rights from all
            appropriate public authorities of Israel or other nation
            necessary for the sale and utilization by Purchaser of the Net
            Assets. Except as noted in EXHIBIT 4.11, the Seller, to the
            best of its and the Shareholders' knowledge, is presently
            conducting its business so as to comply in all respects with
            all applicable statutes, ordinances, rules, regulations and
            orders of any governmental authority. Further, the Seller has
            not been presently charged with, or under governmental
            investigation with respect to, any actual or alleged violation
            of any statute, ordinance, rule or regulation, nor presently
            the subject of any pending or threatened adverse proceeding
            by any regulatory authority having jurisdiction over any of
            its business, properties or operations. Neither the
            execution and delivery of this Agreement nor the
            consummation of the transactions contemplated hereby will,
            to the best of Seller's and the Shareholders' knowledge,
            result in the termination of any license, certificate,
            permit, franchise or right held by the Seller, and all such
            licenses, certificates, permits, franchises and rights will
            inure to the benefit of the Purchaser upon consummation of
            the transactions contemplated by this Agreement.

      4.12  Contracts, Etc. EXHIBIT 4.12 hereto consists of a true and
            complete list of all contracts, agreements and other
            instruments which relate to or in any way affect the Net Assets
            and which are assigned pursuant to Section 4.11 above. All of
            the contracts, agreements, policies of insurance or instruments
            described in EXHIBIT 4.12 immediately prior to the Closing Date
            hereto are valid and binding upon (i) the Seller, and (ii) to
            the best of Seller's and the Shareholders' knowledge, the other
            parties thereto; said contracts, agreements, policies of
            insurance and instruments are in full force and effect and
            enforceable in accordance with their terms, and neither the
            Seller nor any other party to any such contract, commitment or
            arrangement has breached any material provision of, or is in
            default under, the terms thereof; and there are no existing
            facts or circumstances known to the Seller or Shareholders,
            which would prevent the work in process of the Seller or its
            contracts and agreements from maturing in due course into fully
            collectible accounts receivable.

      4.13  Intellectual Property

            4.13.1 Licenses, Patents, Trademarks. For purposes of this
                   Agreement, "Intellectual Property" means the following
                   items of intangible and tangible property:

                        (i)   patents, whether in the form of utility patents or
                              design patents and all pending applications for
                              such patents ("Patents");

                        (ii)  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
                              ("Trademarks");

                        (iii) copyrights, whether or not registered, and all
                              pending applications for registration thereof
                              ("Copyrights");

                        (iv)  inventions, research records, trade secrets,
                              confidential information, product designs,
                              engineering specifications and drawings,
                              technical information, formulae, customer
                              lists, supplier lists and market analyses
                              ("Technical Information");

                        (v)   computer programs, including, without
                              limitation, computer programs embodied in
                              semiconductor chips ("Firmware") or otherwise
                              embodied, and related flow-charts, programmer
                              notes, updates and data, whether in object or
                              source code form ("Software").

            4.13.2  EXHIBIT 4.13.2 hereto sets forth a complete and correct
                    list and summary description of all Patents,
                    Trademarks, Copyrights, Technical Information, Firmware
                    and Software, registrations thereof and applications
                    therefor, applicable to the Net Assets, together with a
                    complete list of all licenses granted by or to the
                    Seller with respect to any of the above.

            4.13.3  The Seller, to the best of its and the Shareholders'
                    knowledge, possesses all of the necessary Intellectual
                    Property necessary to enable the operation of the
                    business of the Seller as now being conducted.

            4.13.4  The Seller will together with the sale of the Net
                    Assets grant to Purchaser good, valid, subsisting,
                    unexpired and enforceable title to, free and clear of
                    all Security Interests, and exclusive rights to use,
                    all of the Intellectual Property necessary to enable
                    operation of the Net Assets by the Purchaser and to the
                    best of the Seller's knowledge, information and belief,
                    except as set forth in EXHIBIT 4.13.4. no other
                    Intellectual Property is necessary to permit the
                    Purchaser to utilize the Net Assets as currently
                    utilized by Seller without the payment of any fee or
                    royalty. No employee, director or Shareholder of the
                    Seller or employer of any such employee of the Seller
                    has any rights to processes, systems and techniques
                    used or contemplated to be used by the Seller.

            4.13.5  To the best of the Seller's knowledge, information and
                    belief, no Intellectual Property related to the Net
                    Assets, has infringed, is infringing or will infringe
                    upon any intellectual property rights of others and the
                    use of such Intellectual Property, will not constitute
                    an infringement, misappropriation or misuse of any
                    third party's intellectual property. To the best of the
                    Seller's knowledge, information and belief, no person
                    (including Shareholders, officers and employees) has
                    asserted or has the right to assert any claim regarding
                    the use of, or challenging or questioning the Seller's
                    right or title in, any of the Intellectual Property.

            4.13.6  The Seller and, to the best knowledge of Seller and the
                    Shareholders, all other parties to any licensing,
                    leasing or similar arrangements under which either the
                    Seller is the licenser, lessor or has otherwise granted
                    the right to use Seller's Intellectual Property are in
                    full material compliance therewith and are not in
                    breach of their obligations with respect thereto. The
                    Seller is not a party to any license, installation
                    agreement, maintenance agreement, data processing
                    agreement, service agreement or other agreement
                    pursuant to which either of them is committed to
                    perform installation, modifications, enhancements or
                    services without payment or for payments which, in the
                    aggregate, are less than the cost to perform such
                    installation, modifications, enhancements or services
                    other than pursuant to warranty obligations incurred in
                    the ordinary course of business. Except for licenses
                    listed on EXHIBIT 4.13.6, the Seller has not granted
                    any licenses, leases or other rights and has no
                    obligations to grant licenses, leases or other rights
                    with respect to the Seller's Intellectual Property. The
                    Seller has complied in all respects with its
                    obligations to its customers, licensees and lessees in
                    respect of the Seller's Intellectual Property.

      4.14  Labor Matters.  Except as disclosed in the Financial Statements,
            Seller has made all deductions required to be made by law
            from the salaries of its employees in respect of tax,
            National Insurance contributions or otherwise, and has paid
            all such amounts so deducted to the appropriate authorities.
            To secure the severance pay due to all employees of Seller,
            sufficient provision has been made in accordance with
            generally accepted accounting practice among Israel's major
            accounting firms, to recognized provident funds, pension
            funds, severance pay funds and/or insurance companies under
            "Managers Insurance Policies."

      4.15  Exhibits. All Exhibits attached hereto are true, correct and
            complete as of the date of this Agreement and will be true,
            correct and complete as of the Closing.

      4.16  Disclosure and Absence of Undisclosed Liabilities. This
            Agreement and the Exhibits hereto disclose all facts material
            to the assets, business or operations of the Seller. No
            statement contained herein or in any certificate, schedule,
            list, exhibit or other instrument furnished to Purchaser
            pursuant to the provisions hereof contains or will contain any
            untrue statement of any material fact or omits or will omit to
            state a material fact necessary in order to make the statements
            contained herein or therein not misleading.

5.    REPRESENTATIONS AND WARRANTIES OF PURCHASER

      Purchaser represents and warrants to the Seller and the Shareholders
as follows:

      5.1   Organization and Standing. Purchaser is a duly organized and
            validly existing corporation in good standing under the laws of
            the State of Israel.

      5.2   Corporate Power and Authority. Purchaser has the capacity and
            authority to execute and deliver this Agreement, to perform
            hereunder and to consummate the transactions contemplated
            hereby without the necessity of any act or consent of any other
            person whomsoever. The execution, delivery and performance by
            Purchaser of this Agreement and each and every agreement,
            document and instrument provided for herein have been duly
            authorized and approved by its Board of Directors. This
            Agreement, and each and every other agreement, document and
            instrument to be executed, delivered and performed by Purchaser
            in connection herewith, constitute or will, when executed and
            delivered, constitute the valid and legally binding obligation
            of Purchaser enforceable against it in accordance with their
            respective terms, except as enforceability may be limited by
            applicable equitable principles, or by bankruptcy, insolvency,
            reorganization, moratorium, or similar laws from time to time in
            effect affecting the enforcement of creditors' rights generally.

      5.3   Agreement Does Not Violate Other Instruments. The execution and
            delivery of this Agreement by Purchaser do not, and the
            consummation of the transaction contemplated hereby will not,
            violate any provisions of the Memorandum and Articles of
            Association of Purchaser.

      5.4   Sophisticated Investor

            Purchaser is a sophisticated investor, with knowledge and
            experience in business and financial matters, including the
            transaction and matter at hand.

      5.5   Due Diligence

            Purchaser has conducted a due diligence investigation of the
            business of the Company, including the Net Assets. Purchaser
            believes it has received all materials, information and
            documentation that it requested. Furthermore, Purchaser
            represents that it has relied solely on its own evaluation of
            the materials, information and documentation received from the
            Company.

      5.6   High Technology Risk

            Purchaser acknowledges that the Seller's products are based on
            high-risk technology and no assurance may be given as to the
            commercial success of the Seller's products into the market.

6.    CONDITIONS  PRECEDENT  TO  OBLIGATIONS  OF  PURCHASER

      All of the obligations of Purchaser to consummate the transaction
      contemplated by this Agreement shall be contingent upon and subject
      to the satisfaction, on or before the Closing Date, of each and every
      one of the following conditions, all or any of which may be waived,
      in whole or in part, by Purchaser for purposes of consummating such
      transactions, but without prejudice (except as provided in the next
      sentence) to any other right or remedy which Purchaser may have
      hereunder as a result of any misrepresentation by, or breach of any
      covenant or warranty of, the Seller or the Shareholders contained in
      this Agreement or any other certificate or instrument furnished by
      the Seller or any Shareholder hereunder. Notwithstanding the
      foregoing, in the event that the Seller notify Purchaser in writing at
      least two (2) business days prior to the Closing Date of a
      misrepresentation or breach of a covenant that will not be cured by
      Closing, and such notice contains sufficient detail to enable
      Purchaser to make an informed decision (which detail shall include,
      without limitation, a good faith estimate of the maximum dollar amount
      of damages that the Purchaser would suffer as a result of such
      misrepresentation or breach), closing of the transactions by Purchaser
      shall be deemed a waiver solely of such matter, but only to the extent
      of the dollar amount of damages described in such notice.

      6.1   Representations True at Closing. The representations and
            warranties made by the Seller and the Shareholders to Purchaser
            in this Agreement, the Exhibits hereto or any document or
            instrument delivered to Purchaser or its representatives
            hereunder shall be materially true and correct on the Closing
            Date with the same force and effect as though such
            representations and warranties had been made on and as of such
            time, except for changes contemplated by this Agreement.

      6.2   Covenants of the Seller and the Shareholders. The Seller and
            the Shareholders shall have duly performed all of the
            covenants, acts and undertakings to be performed by them on or
            prior to the Closing Date, and the President of the Seller and
            the Shareholders shall each deliver to Purchaser a certificate
            dated as of the Closing Date certifying the fulfillment of this
            condition and the condition set forth in Section 6.1 hereof.

      6.3   No Injunction, Etc. No action, proceeding, investigation,
            regulation or legislation shall have been instituted,
            threatened or proposed before any court, governmental agency or
            legislative body to enjoin, restrain, prohibit or obtain
            substantial damages in respect of, or which is related to, or
            arises out of, this agreement or the consummation of the
            transactions contemplated hereby, or which is related to or
            arises out of the business of the Seller, if such action,
            proceeding, investigation, regulation or legislation, in the
            reasonable judgment of Purchaser would make it inadvisable to
            consummate such transactions.

      6.4   Opinions of Counsel. A favorable opinion of Cohen - Khayat Law
            Offices, counsel for the Seller and the Shareholders, shall
            have been delivered to Purchaser dated as of the Closing Date,
            substantially in form and substance of the opinions attached
            hereto as EXHIBIT 6.4.

      6.5   Consents, Approvals and Waivers. Purchaser shall have received
            a true and correct copy of each and every consent, approval and
            waiver (a) referred to in SCHEDULE 4.8 hereof. Seller shall use
            its best efforts to obtain all consents, approvals and waivers
            otherwise required for the execution of this Agreement and the
            consummation of the transactions contemplated hereby.

      6.6   Legal Approvals. The execution and the delivery of this
            Agreement and the consummation of the transactions contemplated
            hereby shall have been approved by all regulatory authorities
            whose approvals are required by law or necessary to preserve
            the rights and benefits currently enjoyed by the Seller after
            the Closing. Without limiting the generality of the foregoing,
            such approvals shall include the obtaining of the approval from
            the Chief Scientist.

      6.7   Execution by Third Parties.   All agreements and documents
            attached as Exhibits hereto shall have been executed by all the
            parties thereto.

      6.8   Amendment of Employment Agreement. On or prior to the Closing,
            the Company and Karni shall have executed an extension of the
            term of Karni's employment agreement with the Company through
            June 30, 2002.

      6.9   Removal of Floating Charge on Company Asset. On or prior to the
            Closing, the Purchaser shall have received written confirmation
            from Bank Discount (the "Bank") that, upon the deposit by
            Purchaser of an amount not to exceed US$____________ in an
            account of Purchaser at a local branch of the Bank, as security
            for the obligations of the Company to the Bank, the Bank shall
            take all necessary steps to remove the floating charge on the
            Company's assets and releasing any other liens or charges the
            Bank may have on the Company or the Company's assets and
            releasing any other liens the bank may have on the Company or
            the Company's assets. The form and content of such confirmation
            shall be reasonably acceptable to the Purchaser. The Purchaser
            undertakes to deposit such amount with the Bank not later than
            the Closing.

      6.10  Signature Rights. All existing signature rights over the
            Company's bank account at the Rehovot branch of Discount Bank
            shall be terminated and exclusive signature rights over such
            account shall be granted to a designee of the Purchaser.

      6.11  Transfer of Assets. At the Closing, the Company shall deliver
            to the Purchaser the documents specified in SCHEDULE 6.11 and
            the Purchaser shall deliver a commitment to pay rental fees due
            on the premises of the Company up to Relocation Date. Following
            the Closing, the Company and the Shareholders will use their
            best efforts to provide such other documentation as Purchaser
            may reasonably request to effect the transfer of the Company's
            assets to the Purchaser.

7.    CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
      SELLER AND THE SHAREHOLDERS TO CLOSE

      All of the obligations of the Seller and the Shareholders to
      consummate the transactions contemplated by this Agreement shall be
      contingent upon and subject to the satisfaction, on or before the
      Closing Date, of each and every one of the following conditions, all
      or any of which may be waived on whole or in part, by the Seller and
      the Shareholders for purposes of consummating such transactions, but
      without prejudice (except as provided in the next sentence) to any
      other right or remedy which they may have hereunder as a result of
      any misrepresentation by, or breach of any covenant or warranty of
      Purchaser contained in this Agreement, or any certificate or
      instrument furnished by it hereunder. Notwithstanding the foregoing,
      in the event that the Purchaser notifies the Seller in writing at
      least two (2) business days prior to the Closing Date of a
      misrepresentation or breach of covenant that will not be cured by
      Closing, and such notice contains sufficient detail to enable the
      Seller to make an informed decision (which detail shall include,
      without limitation, a good faith estimate of the maximum dollar
      amount of damages that the Seller would suffer as a result of such
      misrepresentation or breach), closing of the transactions by the
      Seller shall be deemed a waiver solely of such matter, but only to
      the extent of the dollar amount of damages described in such notice.

      7.1   Representations True at Closing. The representations and
            warranties made by Purchaser in this Agreement to the Seller or
            any document or instrument delivered to the Seller, shall be
            materially true and correct on the Closing Date with the same
            force and effect as though such representations and warranties
            had been made on and as of such date, except for changes
            contemplated by this Agreement.

      7.2   Covenants of Purchaser.   Purchaser shall have duly performed all
            of the covenants, acts and undertakings to be performed by
            it on or prior to the Closing Date, and a duly authorized
            officer of Purchaser shall deliver a certificate dated as of
            the Closing Date certifying to the fulfillment of this
            condition and the condition set forth under Section 7.1
            above.

      7.3   No Injunction, Etc. No action, proceeding, investigation,
            regulation or legislation shall have been instituted,
            threatened or proposed before any court, governmental agency or
            legislative body to enjoin, restrain, prohibit or obtain
            substantial damages in respect of, or which is related to or
            arises out of, this Agreement or the consummation of the
            transactions contemplated hereby, or which is related to or
            arises out of, the business of Purchaser, if such action,
            proceedings, investigation, regulation or legislation, in the
            reasonable judgment of the Seller or the Shareholders would
            make it inadvisable to consummate same.

      7.4   Approvals. The execution and the delivery of this Agreement and
            the consummation of the transactions contemplated hereby shall
            have been approved by all regulatory authorities whose
            approvals are required by law.

8.    CLOSING

      8.1   Time and Place of Closing. Subject to the satisfaction of the
            conditions set forth in Section 6 and 7 hereof, the Closing
            shall occur at a mutually acceptable location on _____________,
            1998, or as soon thereafter as practicable when such conditions
            have been met, unless another place or date is agreed to in
            writing by the Seller, and Purchaser, but in no event will the
            Closing be held later than _____________, 1998. If for any
            reason the Closing has not occurred by such date, Purchaser may
            at any time thereafter terminate this Agreement without
            obligation to the Seller by delivery of written notice of
            termination to Seller.

      8.2   Transactions at Closing.   At the Closing, each of the following
            transactions shall occur:

            8.2.1   At the Closing, the Seller and the Shareholders shall
                    deliver to Purchaser the following:

                  (a)   the certificates of the Shareholders and of the
                        President of the Seller described   in Section 6.2;

                  (b)   copies of the consents and waivers described in Section
                        4.8 and Section 6.6;

                  (c)   opinion of counsel described in Section 6.4;

                  (d)   satisfactory evidences of the approvals described in
                        Section 6.5 and 6.6;

                  (e)   copies of resolutions of the Board of Directors, and
                        the Shareholders of the Seller;

                  (f)   the documents specified in SCHEDULE 6.11; and

                  (g)   such other evidence of the performance of all
                        covenants and satisfaction of all conditions
                        required of the Seller and the Shareholders by this
                        Agreement, at or prior to the Closing, as Purchaser
                        or its counsel may reasonably require.


            8.2.2   At the Closing, Purchaser shall deliver to the Seller
                    the following:

                  (a)   Payment of the amount of US$2,450,000, as set forth in
                        Section 3.1(a), subject to the adjustments set forth in
                        section 3.3;

                  (b)   the certificate of the authorized officer described in
                        Section 7.2;

                  (c)   satisfactory evidence of the approvals described in
                        Section 7.4;

                  (d)   copy of resolutions of the Board of Directors of
                        Purchaser approving the transactions set forth in this
                        Agreement;  and

                  (e)   such other evidence of the performance of all the
                        covenants and satisfaction of all of the conditions
                        required of Purchaser by this Agreement at or
                        before the Closing as the Seller, the Shareholders
                        or their counsel may reasonably require.

9.    SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND
      INDEMNIFICATION

      9.1   Survival of Representations and Warranties of the Seller and
            the Shareholders. All representations, warranties, agreements,
            covenants and obligations made or undertaken by the Seller and
            any of the Shareholders in this Agreement or in any document or
            instrument executed and delivered pursuant hereto are material,
            have been relied upon by Purchaser, shall survive the Closing
            hereunder and shall not merge in the performance of any
            obligation by any party hereto. The Seller and the Shareholders
            agree to indemnify and hold Purchaser harmless from and against
            all liability, loss, damage or injury and all reasonable costs
            and expenses, including reasonable counsel fees and costs of
            any suit related thereto ("Losses") suffered or incurred by
            Purchaser arising from (i) any misrepresentation by, or breach
            of any covenant or warranty of, either of the Seller or any
            Shareholder contained in this Agreement or any certificate or
            other instrument furnished or to be furnished by the Seller or
            any Shareholder hereunder, or any claim by a third party
            (regardless of whether the claimant is ultimately successful)
            which if true would be such a misrepresentation or breach or
            (ii) any suit, action, proceeding, claim or investigation
            (whether or not currently pending or threatened) against
            Purchaser, its officers, directors or shareholders arising from
            or related to this Agreement and/or the acquisition utilization
            or ownership of the Net Assets. Any examination, inspection or
            audit of the properties, financial condition or other matters
            of the Seller and their businesses conducted by Purchaser
            pursuant to this Agreement shall in no way limit, affect or
            impair the ability of Purchaser to rely upon the
            representations, warranties, covenants and obligations of the
            Seller and Shareholders set forth herein.

      9.2   Survival of Representations and Warranties of Purchaser. All
            representations, warranties, agreements, covenants and
            obligations made or undertaken by Purchaser in this Agreement
            or in any document or instrument executed and delivered
            pursuant hereto are material, have been relied upon by the
            Seller, shall survive the Closing hereunder and shall not merge
            in the performance of any obligation by any party hereto.
            Purchaser agrees to indemnify and hold the Seller harmless from
            and against all liability, loss, damage or injury and all
            reasonable costs and expenses (including reasonable counsel
            fees and costs of any suit related thereto) suffered or
            incurred by the Seller or the Shareholders arising
            from any misrepresentation by, or breach of any covenant or
            warranty of, Purchaser contained in this Agreement or any
            certificate or instrument furnished or to be furnished by
            Purchaser hereunder, or any claim by a third party (regardless
            of whether the claimant is ultimately successful) which if true
            would be such a misrepresentation or breach.

      9.3   Notification of Claim.

            9.3.1 Whenever any claim shall arise for indemnification
                  hereunder, the party seeking indemnification hereunder
                  (the "Indemnified Party") shall promptly notify the party
                  or parties from whom indemnification is sought
                  (collectively, the "Indemnifying Party") of the claim
                  and, when known, the facts constituting the basis for
                  such claim. In the event of any such claim for
                  indemnification hereunder resulting from or in connection
                  with any claim or legal proceeding by a third party, the
                  notice to the Indemnifying Party shall specify, if known,
                  the amount of damages asserted by such third party.

            9.3.2 Upon receipt of any such notice from the Indemnified
                  Party, the Indemnifying Party shall be entitled to
                  participate in the defense of such claim, and may assume
                  the defense of such claim if and only if: (i) the
                  Indemnifying Party confirms in writing its obligations to
                  indemnify the Indemnified Party with respect to such
                  claim and the Indemnifying Party posts a bond reasonably
                  acceptable to the Indemnified Party in all respects
                  sufficient to insure payment of all amounts which are
                  indemnifiable hereunder (ii) the Indemnified Party in its
                  good faith discretion does not notify the Indemnifying
                  Party that it has determined a conflict of interest makes
                  separate representation by the Indemnified Party's own
                  counsel advisable, (iii) the claim does not involve a
                  claim for injunctive or other similar equitable relief
                  against the Indemnified Party, and (iv) the claim does
                  not involve any criminal law claim against the
                  Indemnified Party or its directors, officers, employees
                  or agents. The parties acknowledge and agree that in the
                  event the Indemnifying Party has properly assumed the
                  defense of such claim as provided herein, the Indemnified
                  Party shall be entitled to retain its own counsel to
                  participate in the defense of such claim at its own cost
                  and expense. No claim shall be settled or compromised
                  without the written consent of the other party if such
                  settlement or compromise requires such other party to make
                  any payment or to take or refrain from taking any action or
                  enjoins such other party or subjects it to other equitable
                  relief or subjects it to any potential criminal law claim or
                  liability.

      9.4   Survival Period for Claims. A claim for indemnification
            hereunder Purchaser shall be forever barred unless made by
            notifying the Indemnifying Party in writing in reasonable
            detail within three (3) years from the Closing Date with
            respect to a breach of the representations and warranties set
            forth in Article 4.13 ("Intellectual Property"), and twelve
            months following the Closing Date with respect to any other
            representations and warranties.

      9.5   Limitations on Liability.

            Notwithstanding any other provision of this Section 9 to the
            contrary, (a) no claim for indemnification under Section 9.1 or
            9.2 shall be made unless and until the Indemnified Party shall
            have incurred losses in excess of $100,000 in the aggregate and
            (b) the maximum aggregate liability of either party to the
            other under this Section 9 shall be an amount equal to the
            aggregate payment by Purchaser prior to the date of
            indemnification, plus interest at a rate of 8% per annum from
            the date of payment until the date of indemnification.

10.   TERMINATION

      10.1  Method of Termination. This Agreement constitutes the binding
            and irrevocable agreement of the parties to consummate the
            transactions contemplated hereby, the consideration for which
            is (a) the covenants set forth in Section 6.2 hereof, and (b)
            expenditures and obligations incurred and to be incurred by
            Purchaser, on the one hand, and by the Seller and the
            Shareholders, on the other hand, in respect of this Agreement,
            and this Agreement may be terminated or abandoned only as
            follows:

            10.1.1  by the mutual consent of the Seller, the Purchaser and
                    the Shareholders;

            10.1.2  by the Seller if (i) any of the conditions set forth in
                    7 hereof, to which their obligations are subject, have
                    not been fulfilled or waived, unless such fulfillment
                    has been frustrated or made impossible by any act or
                    failure to act of any of them; or (ii) any of the
                    representations or warrants set forth in Section 5 are
                    proven to be materially inaccurate: or

            10.1.3  by Purchaser if (i) any of the conditions set forth in
                    6 hereof, to which the obligations of Purchaser are
                    subject, have not been fulfilled or waived, unless such
                    fulfillment has been frustrated or made impossible by
                    any act or failure to act as Purchaser; or (ii) any of
                    the representations or warrants set forth in Section 4
                    are proven to be materially inaccurate .

11.   GENERAL PROVISIONS

      11.1  Notices. All notices, request, demands and other communications
            hereunder shall be in writing and shall be delivered by hand or
            mailed by certified mail, return receipt requested, first class
            postage prepaid, or overnight delivery service with receipt
            acknowledged or by facsimile addressed as follows:

            11.1.1  If to the Seller or the Shareholders:

                  Orziv (Z.K.Y.P.) Ltd.
                  8 Vulkany Avenue
                  Rehovot, Israel
                  Fax: (08) 947-2507

                  and in each case with a copy to:

                  Avi Cohen, Adv.
                  38 David Hamelech Street
                  Herzliya, Israel
                  Fax: (03) 613-1088

            11.1.2  If to Purchaser:

                  c/o E.S.C. Medical Systems Ltd.
                  P.O. Box 240
                  Yokneam 20692
                  Attention: Karen Sarid
                  Fax: (04) 959-9050

                  and to:

                  Kleinhendler & Halevy
                  Law Offices
                  30 Kalisher Street
                  Tel Aviv 65257
                  Israel
                  Fax: (03) 510-7528

            11.1.3  If delivered personally, the date on which a notice,
                    request, instruction or document is delivered shall be
                    the date on which such delivery is made and, if
                    delivered by mail or by overnight delivery service, the
                    date on which such notice, request, instruction or
                    document is received shall be the date of delivery. In
                    the event any such notice, request, instruction or
                    document is mailed or shipped by overnight delivery
                    service to a party in accordance with this Section
                    11.1.3 and is returned to the sender as nondeliverable,
                    then such notice, request, instruction or document
                    shall be deemed to have been delivered or received on
                    the fifth day following the deposit of such notice,
                    request, instruction or document in the United States
                    mails or the delivery to the overnight delivery
                    service.

            11.1.4  Any party hereto may change its address specified for
                    notices herein by designating a new address by notice
                    in accordance with this Section 10.1

      11.2  Further Assurances. Each party covenants that at any time, and
            from time to time, after the Closing Date, it will execute such
            additional instruments and take such actions as may be
            reasonably requested by the other parties to confirm or perfect
            or otherwise to carry out the intent and purposes of this
            Agreement.

      11.3  Waiver. Any failure on the part of any party hereto to comply
            with any of its obligations, agreements or conditions hereunder
            may be waived by any other party to whom such compliance is
            owed. No waiver of any provision of this Agreement shall be
            deemed, or shall constitute, a waiver of any other provision,
            whether or not similar, nor shall any waiver constitute a
            continuing waiver.

      11.4  Expenses. All expenses incurred by the parties hereto in
            connection with or related to the authorization, preparation
            and execution of this Agreement and the Closing of the
            transactions contemplated hereby, including, without limitation
            of the generality of the foregoing, all fees and expenses of
            agents, representatives, counsel and accountants employed by
            any such party, shall be borne solely and entirely by the party
            which has incurred the same. All such fees and expenses of the
            Seller shall be borne by the Shareholders. In no event shall
            any assets of the Seller be utilized for or reduced by the
            payment of any such fees or expenses. The Seller and the
            Shareholders hereby, jointly and severally, represent and
            warrant that no such fees or expenses have been paid by the
            Seller from their assets prior to the date of this Agreement,
            and hereby, jointly and severally, covenant that the Seller
            will not so pay any such fees or expenses prior to the Closing.

      11.5  Binding Effect. This Agreement shall be binding upon and inure
            to the benefit of the parties hereto and their respective
            heirs, legal representatives, executors, administrators,
            successors and assigns, including, without limitation, any
            corporation with which the Purchaser may be merged or by which
            it may be acquired.

      11.6  Headings. This section and other headings in this Agreement are
            inserted solely as a matter of convenience and for reference,
            and are not a part of this Agreement.

      11.7  Entire Agreement; Amendments.   This Agreement constitutes the
            entire agreement among the parties hereto and supersedes and
            cancels any prior agreements, representations, warranties,
            or communications, whether oral or written, among the
            parties hereto relating to the transactions contemplated
            hereby or the subject matter herein. Neither this Agreement
            nor any provision hereof may be changed, waived, discharged
            or terminated orally, but only by an agreement in writing
            signed by the party against whom or which the enforcement of
            such change, waiver, discharge or termination is sought.

      11.8  Knowledge. "To the extent of," "aware of," and similar phrases
            shall mean such level of knowledge or awareness as would be
            obtained by a reasonably prudent business person under the
            circumstances then existing of the matter with respect to which
            such phrase is used (which circumstances shall be deemed to
            include the position of the person with Seller who is charged
            with such knowledge or awareness), and shall include, without
            limitation, such knowledge or awareness as would be obtained
            from appropriate discussions with such personnel of Seller who
            may reasonably be believed to have actual knowledge of the
            relevant matter. Whenever the Seller is charged with knowledge
            or awareness herein, such knowledge or awareness shall be
            deemed to be that of the officers of such company.

      11.9  Governing Law.   This Agreement shall be governed by and construed
            in accordance with the laws of the State of Israel.

      11.10 Counterparts. This Agreement may be executed in two or more
            counterparts, each of which shall be deemed an original, but
            all of which together shall constitute one and the same
            instrument.

      11.11 Exhibits Incorporated. All Exhibits attached hereto are
            incorporated herein by reference, and all blanks in such
            Exhibits, if any, will be filled in as required in order to
            consummate the transactions contemplated herein and in
            accordance with this Agreement.

      11.12 Time of Essence.  Time is of the essence in this Agreement.


LASER INDUSTRIES LTD.                ORZIV (Z.K.Y.P.) LTD.

By:  _________________________       By:  ________________________
                  /title                              /title


----------------------------         --------------------------------
YEHIAM PRI-OR                        ZIV KARNI



                           SCHEDULE 3.1.2


(a)  Prior shall cooperate with the Purchaser and provide technical and
     other support, as reasonably requested, to help the Purchaser in
     understanding and integrating the Seller's activities into the
     Purchaser's business.

(b)  Prior shall continue to be reasonably available for active involvement
     (should the Purchaser so desire) in the activities of the Purchaser
     relating to assets of the Seller in a manner similar to his
     involvement before Closing, including all technical, commercial and
     financial aspects. In particular, (i) he will be reasonably available
     for active involvement in the world-wide marketing of the diamond
     processing machines (including but not limited to marketing and sales
     activities in India) and the orderly transfer of these activities to
     people appointed to this function by the Purchaser, (ii) he will be
     reasonably available to the Purchaser for consultation relating to
     other activities of the Purchaser (should the Purchaser so desire),
     whether these relate to industrial or medical laser developments,
     (iii) he will be reasonably available for participation (should the
     Purchaser so desire) in other activities of Purchaser including the
     planning of the new "Industrial Division", assessment of various
     activities within the Purchaser's organization, participation in the
     preparation and writing of research programs (internal or to be
     submitted to external organizations), participation in meetings on
     behalf of the Purchaser, and similar activities.


                       LIST OF SCHEDULES AND EXHIBITS

EXHIBITS

4.1.4   Memorandum and Articles of Association of Orziv Ltd.

4.2.1   Audited Year End Financial Statements

4.2.2   Interim Financial Statements.

4.3     Tax basis of all of Orziv's assets.

4.4     List of material Personal Property as of March 31, 1998.

4.5     Violation of instruments.

4.6.2   Bank Accounts and Authorized Personnel with respect thereto.

4.8     Consents and Waivers.

4.9     Material changes since March 31, 1998.

4.11    Non-compliance with law.

4.12    Contracts, Agreements and other Instruments relating to or affecting
        Assets.

4.13.2  Intellectual Property.

4.13.4  Intellectual Property for the use of which payment or royalty is
        required.

4.13.6  Software licenses, leases and other rights or obligations related
        thereto.

6.4     Opinion of Counsel for Orziv Ltd.


SCHEDULES

2.1     Liabilities of Seller.

3.1.2   Consulting Services to be rendered by Prior

6.11    Transfer Documents