20-F









Exhibit 4.2  








SHARE PURCHASE AGREEMENT



by and among



LSI LOGIC CORPORATION,



STOREAGE NETWORKING TECHNOLOGIES LTD.,



and



the shareholders of STOREAGE NETWORKING

TECHNOLOGIES LTD. specified on the signature pages hereto








Dated as of October 25, 2006













TABLE OF CONTENTS




		                        Page
	 	
		
		
		
	ARTICLE I
	DEFINITIONS
	 
	SECTION 1.01    Certain Defined Terms	1 
	SECTION 1.02    Definitions	6 
	SECTION 1.03    Interpretation and Rules of Construction	6 
	 
	ARTICLE II
	PURCHASE AND SALE
	 
	SECTION 2.01    Purchase and Sale of the Shares	7 
	SECTION 2.02    Purchase Price for the Shares	7 
	SECTION 2.03    Escrow Fund	8 
	SECTION 2.04    Treatment of Company Share Options	9 
	SECTION 2.05    Closing	9 
	SECTION 2.06    Closing Deliveries by each Seller	9 
	SECTION 2.07    Closing Deliveries by the Company	10 
	SECTION 2.08    Closing Deliveries by the Purchaser	10 
	 
	ARTICLE III
	REPRESENTATIONS AND WARRANTIES OF THE COMPANY
	 
	SECTION 3.01    Organization, Authority and Qualification of the Company	11 
	SECTION 3.02    Subsidiaries	11 
	SECTION 3.03    Capitalization	12 
	SECTION 3.04    Corporate Books and Records	14 
	SECTION 3.05    No Conflict	14 
	SECTION 3.06    Governmental Consents and Approvals	14 
	SECTION 3.07    Financial Information	14 
	SECTION 3.08    Absence of Undisclosed Liabilities	15 
	SECTION 3.09    Conduct in the Ordinary Course	15 
	SECTION 3.10    Litigation	17 
	SECTION 3.11    Compliance with Laws	17 
	SECTION 3.12    Material Contracts	18 
	SECTION 3.13    Intellectual Property	19 
	SECTION 3.14    Leased Real Property	21 
	SECTION 3.15    Environmental Matters	22 
	SECTION 3.16    Assets	22 
	SECTION 3.17    Employee Benefit Matters	22 
	SECTION 3.18    Labor Matters	24 
	SECTION 3.19    Certain Interests	25 
	SECTION 3.20    Taxes	26 
	SECTION 3.21    Customers	27 
	SECTION 3.22    Insurance	27 
	SECTION 3.23    CSO Funding	27 
	SECTION 3.24    Full Disclosure	27 
	SECTION 3.25    Brokers	28 






(ii)







		
	 	
		
		
		
	ARTICLE IV
	REPRESENTATIONS AND WARRANTIES OF THE SELLERS
	 
	SECTION 4.01    Authority of such Seller	28 
	SECTION 4.02    No Conflict	28 
	SECTION 4.03    Governmental Consents and Approvals	28 
	SECTION 4.04    Ownership of Ordinary Shares	29 
	SECTION 4.05    Litigation	29 
	SECTION 4.06    Brokers	29 
	SECTION 4.07    Right of First Refusal	29 
	 
	ARTICLE V
	REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
	 
	SECTION 5.01    Organization and Authority of the Purchaser	29 
	SECTION 5.02    No Conflict	30 
	SECTION 5.03    Governmental Consents and Approvals	30 
	SECTION 5.04    Investment Purpose	30 
	SECTION 5.05    Brokers	30 
	SECTION 5.06    No Success	30 
	SECTION 5.07    CSO	30 
	SECTION 5.08    Financial Capability	31 
	 
	ARTICLE VI
	ADDITIONAL AGREEMENTS
	 
	SECTION 6.01    Conduct of Business Prior to the Closing	31 
	SECTION 6.02    Access to Information	31 
	SECTION 6.03    Confidentiality	32 
	SECTION 6.04    Required Consents	32 
	SECTION 6.05    Notice of Developments	33 
	SECTION 6.06    No Shop	33 
	SECTION 6.07    Use of Intellectual Property	33 
	SECTION 6.08    [Intentionally omitted]	33 
	SECTION 6.09    Currency	33 
	SECTION 6.10    Further Action	33 
	 
	ARTICLE VII
	TAX MATTERS
	 
	SECTION 7.01    Taxes on Sale	34 
	SECTION 7.02    Miscellaneous	34 
	 
	ARTICLE VIII
	CONDITIONS TO CLOSING
	 
	SECTION 8.01    Conditions to Obligations of the Sellers	34 
	SECTION 8.02    Conditions to Obligations of the Purchaser	35 






(iii)








		
	 	
		
		
		
	ARTICLE IX
	INDEMNIFICATION
	 
	SECTION 9.01    Survival of Representations and Warranties	37 
	SECTION 9.02    Indemnification by the Sellers	38 
	SECTION 9.03    Indemnification by the Purchaser	38 
	SECTION 9.04    Third Party Claims	39 
	SECTION 9.05    Distributions from Escrow Fund	40 
	SECTION 9.06    Limits of Indemnification; Loss Threshold; Exclusive Remedy	40 
	SECTION 9.07    Sellers' Representatives	42 
	 
	ARTICLE X
	TERMINATION, AMENDMENT AND WAIVER
	 
	SECTION 10.01    Termination	43 
	SECTION 10.02    Effect of Termination	43 
	SECTION 10.03    Amendment	43 
	SECTION 10.04    Waiver	43 
	 
	ARTICLE XI
	GENERAL PROVISIONS
	 
	SECTION 11.01    Expenses	44 
	SECTION 11.02    Notices	44 
	SECTION 11.03    Public Announcements	45 
	SECTION 11.04    Severability	45 
	SECTION 11.05    Entire Agreement	46 
	SECTION 11.06    Assignment	46 
	SECTION 11.07    No Third Party Beneficiaries	46 
	SECTION 11.08    Governing Law	46 
	SECTION 11.09    Headings	46 
	SECTION 11.10    Counterparts	46 






(iv)









SHARE PURCHASE
AGREEMENT 



        SHARE
PURCHASE AGREEMENT (this “Agreement”), dated as of October 25, 2006, by
and among LSI LOGIC CORPORATION, a Delaware corporation (the
“Purchaser”), STOREAGE NETWORKING TECHNOLOGIES LTD., a company organized
and existing under the laws of Israel (the “Company”), and each of the
shareholders of the Company specified on the signature pages hereto (each a
“Seller” and collectively the “Sellers”). 



        WHEREAS,
each Seller owns the number of issued and outstanding ordinary shares, par value NIS 0.01
per share, of the Company (the “Ordinary Shares”) set forth opposite the
name of such Seller on Exhibit A attached hereto; 



        WHEREAS,
the Company owns all the issued and outstanding shares of capital stock of STOREAGE
NETWORKING TECHNOLOGIES, INC., a Delaware corporation (“StoreAge U.S.”); 



        WHEREAS,
the Company owns 40% of the outstanding capital stock of StoreAge (Beijing) Co., Ltd., a
limited liability company organized and existing under the laws of The People’s
Republic of China (“StoreAge China” and, together with StoreAge U.S., the
“Subsidiaries”); 



        WHEREAS,
the Company and the Subsidiaries are engaged in the business of designing, developing,
producing, marketing, selling and distributing enterprise SAN storage management systems
and data protection solutions (the “Business”); and 



        WHEREAS,
the Sellers wish to sell to the Purchaser, and the Purchaser wishes to purchase from the
Sellers, all of the Ordinary Shares owned by the Sellers, upon the terms and subject to
the conditions set forth herein. 



        NOW,
THEREFORE, in consideration of the promises and the mutual agreements and covenants
hereinafter set forth, the Purchaser, the Company and the Sellers hereby agree as follows: 




ARTICLE I



     SECTION 1.01        
Certain Defined Terms. For purposes of this Agreement:  



        “Action” means
any claim, action, suit, arbitration, inquiry, proceeding or investigation by or before
any Governmental Authority.  




        “Affiliate” means,
with respect to any specified Person, any other Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under common
control with, the specified Person.  




        “Business
Day” means any day that is not a Friday, a Saturday, a Sunday or other day on
which banks are required or authorized by Law to be closed in The City of San Francisco,
California or in Tel-Aviv, Israel.  













        “Claims” means
any and all administrative, regulatory or judicial actions, suits, petitions, appeals,
demands, claims, notices of noncompliance or violation, investigations, proceedings,
consent orders or consent agreements.  




        “Code”
means the Internal Revenue Code of 1986, as amended through the date hereof. 



        “Company
IP Agreements” means (a) licenses of Intellectual Property by the Company or any
Subsidiary to any third party, (b) licenses of Intellectual Property by any third party
to the Company or any Subsidiary, (c) agreements between the Company or any Subsidiary
and any third party relating to the development or use of Intellectual Property, the
development or transmission of data, or the use, modification, financing, linking,
advertisement, or other practices with respect to Internet web sites, and (d) consents,
settlements, decrees, orders, injunctions, judgments or rulings governing the use,
validity or enforceability of Owned Intellectual Property.  




        “Company
Software” means all Software designed, developed, produced, marketed, sold,
licensed or distributed by the Company or any Subsidiary.  




        “control” (including
the terms “controlled by” and “under common control with”) respect to
the relationship between or among two or more Persons, means the possession, directly or
indirectly or as trustee, personal representative or executor, of the power to direct or
cause the direction of the affairs or management of a Person, whether through the
ownership of voting securities, as trustee, personal representative or executor, by
contract, credit arrangement or otherwise.  




        “Disclosure
Schedule” means the Disclosure Schedule, dated as of the date hereof, delivered
by the Company to the Purchaser in connection with this Agreement.  




        “Encumbrance” means
any security interest, pledge, mortgage, lien, charge, lease, license, encumbrance,
easement, adverse claim, reversion, reverter, preferential arrangement, restrictive
covenant, condition or restriction of any kind, including, without limitation, any
restriction on the use, voting, transfer, receipt of income or other exercise of any
attributes of ownership.  




        “Environmental
Claims” means any Claims relating in any way to any Environmental Law or any
Environmental Permit, including, without limitation, (a) any Claims by Governmental
Authorities for enforcement, cleanup, remedial or other actions or damages pursuant to
any applicable Environmental Law and (b) any Claims by any Person seeking damages,
contribution, indemnification or injunctive relief arising from alleged injury or threat
of injury to health, safety or the environment.  




        “Environmental
Laws” means all Laws, now or hereafter in effect and as amended, relating to the
environment, health or safety.  




        “Environmental
Permits” means all permits, approvals, licenses and other authorizations
required under or issued pursuant to any applicable Environmental Law.  




2









        “Escrow
Fund” means the Escrow Amount deposited with the Escrow Agent as such sum may be
increased or decreased as provided in the Escrow Agreement.  




        “Foreign
Corrupt Practices Act” means the U.S. Foreign Corrupt Practices Act, 15 U.S.C.
78 dd-1 et seq., as amended.  




        “Foreign
Official” means (a) an officer or employee of any non-United States Governmental
Authority or any political subdivision, department, agency or instrumentality thereof;
(b) a Person acting in an official capacity for or on behalf of any such Governmental
Authority; (c) a member or official of any political party outside of the United States;
and (d) any other meanings or interpretation given to the term under the Foreign Corrupt
Practices Act as it applies to the Business.  




        “Governmental
Authority” means any United States or non-United States federal, national,
supranational, state, local, or similar governing, governmental, regulatory or
administrative authority, agency or commission or any court, tribunal, or judicial or
arbitral body.  




        “Governmental
Order” means any order, writ, judgment, injunction, decree, stipulation,
determination or award entered by or with any Governmental Authority.  




        “Hazardous
Materials” means any chemicals, materials or substances defined as or included
in the definition of “hazardous substances”, “hazardous wastes”,
“hazardous materials”, “toxic substances”, “contaminants” or
“pollutants” or words of similar import under any applicable Environmental Law,
and any other chemical, material or substance which is regulated by any Environmental
Law.  




        “Indebtedness” means,
with respect to any Person, (a) all indebtedness of such Person, whether or not
contingent, for borrowed money, (b) all obligations of such Person for the deferred
purchase price of property or services, (c) all obligations of such Person evidenced by
notes, bonds, debentures or other similar instruments, (d) all indebtedness created or
arising under any conditional sale or other title retention agreement with respect to
property acquired by such Person, (e) all obligations of such Person as lessee under
leases that have been or should be, in accordance with U.S. GAAP, recorded as
capital leases, (f) all obligations, contingent or otherwise, of such Person under
acceptance, letter of credit or similar facilities, (g) all obligations of such Person to
purchase, redeem, retire, defease or otherwise acquire for value any capital stock of
such Person or any warrants, rights or options to acquire such capital stock, (h) all
Indebtedness of others referred to in clauses (a) through (g) above guaranteed directly
or indirectly in any manner by such Person, and (i) all Indebtedness referred to in
clauses (a) through (g) above secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise to be secured by) any Encumbrance on
property owned by such Person.  




        “Indemnified
Party” means a Purchaser Indemnified Party or a Seller Indemnified Party, as the
case may be.  




        “Indemnifying
Party” means the Sellers and the other Company Securityholders pursuant to
Section 9.02 and the Purchaser pursuant to Section 9.03, as the case may be.  




3









        “Intellectual
Property” means (a) patents, patent applications, and statutory invention
registrations, (b) trademarks, service marks, domain names, trade dress, logos, trade
names, corporate names, and other identifiers of source or goodwill, including
registrations and applications for registration thereof, (c) mask works and copyrights,
including copyrights in computer software, and registrations and applications for
registration thereof, and (d) confidential and proprietary information, including trade
secrets, know-how and invention rights.  




        “IRS”
means the Internal Revenue Service of the United States. 



        “knowledge
of the Company” or “the Company’s knowledge” means the
actual knowledge of the following persons and such knowledge that could reasonably be
attributed to such persons: Eli Shapira, Bruno Keren, Nelson Nahum, and Mark Spowart.  




        “Laws” means
any United States or non-United States federal, national, supranational, state,
provincial, local or similar statute, law, ordinance, regulation, rule, code, order,
requirement or rule of law (including, without limitation, common law).  




        “Liabilities” means
any and all debts, liabilities and obligations, whether accrued or fixed, absolute or
contingent, matured or unmatured or determined or determinable, including, without
limitation, those arising under any Law, Action or Governmental Order and those arising
under any contract, agreement, arrangement, commitment or undertaking.  




        “Licensed
Intellectual Property” means Intellectual Property licensed to the Company or
any Subsidiary pursuant to the Company IP Agreements.  




        “Loan
Agreement” means the Loan Agreement, made as of March 26, 2006, by and among the
Company and the Lenders party thereto.  




        “Material
Adverse Effect” means any circumstance, change in or effect on the Company or
any Subsidiary that, individually or in the aggregate with all other circumstances,
changes in or effects on the Company or any Subsidiary, is or is reasonably likely to be
materially adverse to the business, prospects, results of operations or financial
condition of the Company and the Subsidiaries, taken as a whole; provided,
however, that “Material Adverse Effect” shall not include any event,
circumstance, change or effect arising out of (A) events, circumstances, changes or
effects that generally affect the industries in which the Company operates, (B) changes
in general economic conditions (provided that such changes do not affect such entity
disproportionately as compared to such entity’s competitors), or (C) an effect
(including the loss of customers, loss of suppliers or management personnel attrition)
resulting from the public announcement of the execution of this Agreement or the pendency
of the transactions contemplated by this Agreement.  




        “Owned
Intellectual Property” means Intellectual Property owned by the Company or any
Subsidiary.  




4









        “Permitted
Encumbrances” means such of the following as to which no enforcement,
collection, execution, levy or foreclosure proceeding shall have been commenced and as to
which neither the Company nor any Subsidiary is otherwise subject to civil or criminal
liability due to its existence: (a) liens for Taxes, assessments and governmental charges
or levies not yet due and payable; (b) Encumbrances imposed by Law, such as materialmen’s,
mechanics’, carriers’, workmen’s and repairmen’s liens and other
similar liens arising in the ordinary course of business; and (c) minor survey
exceptions, reciprocal easement agreements and other customary encumbrances on title to
real property that do not, individually or in the aggregate, materially adversely affect
the value of or the use of such property for its current and anticipated purposes.  




        “Person” means
any individual, partnership, firm, corporation, limited liability company, association,
trust, unincorporated organization or other entity, as well as any syndicate or group
that would be deemed to be a person under Section 13(d)(3)o f the Securities Exchange Act
of 1934, as amended.  




        “Regulations” means
the Treasury Regulations (including Temporary Regulations) promulgated by the United
States Department of Treasury with respect to the Code or other federal tax statutes.  




        “Software” means
computer software, programs and databases in any form, including source code, object
code, operating systems and specifications, data, databases, database management code,
utilities, graphical user interfaces, menus, images, icons, forms, methods of processing,
software engines, platforms, and data formats, all versions, updates, corrections,
enhancements and modifications thereof, and all related documentation, developer notes,
comments and annotation.  




        “Tax” or
“Taxes” means any and all taxes, fees, levies, duties, tariffs, imposts,
and other charges of any kind (together with any and all interest, penalties, additions
to tax and additional amounts posed with respect thereto) imposed by any Governmental
Authority, including, without limitation, taxes or other charges on or with respect to
income, franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, national insurance, health, social security, workers’ compensation,
unemployment compensation, or net worth; taxes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value added, or gains taxes; license,
registration and documentation fees; and customs’ duties, tariffs, and similar
charges.  




        “U.S.
               GAAP” means United States generally accepted accounting
principles and                practices in effect from time to time applied consistently
throughout the                periods involved.  




5









    SECTION 1.02        
Definitions. The following terms have the meaning set forth in the Sections set
forth below:  




	 		
	 		
	 		
	 		
	 		
	 	Definition	Location
	 	"Agreement"	Preamble
	 	"Allocation"	7.02(b)
	 	"Business"	Recitals
	 	"Closing"	2.05
	 	"Closing Date"	2.05
	 	"Company"	Preamble
	 	"Company Employee Plans"	3.17(b)
	 	"Company Securityholder"	2.02
	 	"Company Share Options"	2.04
	 	"Company Share Option Plans"	2.04
	 	"Confidentiality Agreement"	6.03(b)
	 	"CSO"	3.06
	 	"Escrow Account"	2.03
	 	"Escrow Agent"	2.03
	 	"Escrow Agreement"	2.03
	 	"Escrow Amount"	2.03
	 	"Financial Statements"	3.07(a)
	 	"Interim Financial Statements"	3.07(a)
	 	"Investment Center"	3.06
	 	"Latest Balance Sheet"	3.08
	 	"Leased Real Property"	3.14(b)
	 	"Loss"	9.02(a)
	 	"Material Contracts"	3.12(a)
	 	"Ordinary Shares"	Recitals
	 	"Pay-Off Amount"	8.02(f)
	 	"Per Share Escrow Amount"	2.02(a)
	 	"Per Share Option Amount"	2.04
	 	"Per Share Purchase Price"	2.02(a)
	 	"Pro Rata Share"	2.03
	 	"Purchaser"	Preamble
	 	"Purchaser Indemnified Party"	9.02(a)
	 	"StoreAge China"	Recitals
	 	"StoreAge U.S."	Recitals
	 	"Seller"	Preamble
	 	"Seller Indemnified Party"	9.03(a)
	 	"Sellers' Representative"	9.08
	 	"Subsidiaries"	Recitals
	 	"Third Party Claims"	9.05(b)








    SECTION 1.03        Interpretation
and Rules of Construction. In this Agreement, except to the extent that the context
otherwise requires:  



		    (a)        when
a reference is made in this Agreement to an Article, Section, Exhibit or
               Schedule, such reference is to an Article or Section of, or a Schedule to,
this                Agreement unless otherwise indicated;  







		    (b)        the
table of contents and headings for this Agreement are for reference purposes
               only and do not affect in any way the meaning or interpretation of this
               Agreement;  







		    (c)        whenever
the words “include,” “includes” or                “including” are
in this Agreement, they are deemed to be followed by                the words “without
limitation”;  







		    (d)        the
words “hereof,” “herein” and “hereunder” and
               words of similar import. when used in this Agreement refer to this
Agreement as                a whole and not to any particular provision of this
Agreement;  







6









		    (e)        all
terms defined in this Agreement have the defined meanings when used in any
               certificate or other document made or delivered pursuant hereto, unless
               otherwise defined therein;  







		    (f)        the
definitions contained in this Agreement are applicable to the singular as
               well as the plural forms of such terms;  







		    (g)        any
Law defined or referred to herein or in any agreement or instrument that is
               referred to herein means such Law or statute as from time to time amended,
               modified or supplemented, including by succession of comparable successor
Laws;  







		    (h)        references
to a Person are also to its permitted successors and assigns; and  







		    (i)        the
use of “or” is not intended to be exclusive unless expressly
               indicated otherwise.  








ARTICLE II

PURCHASE AND SALE





    SECTION 2.01        Purchase
and Sale of the Shares. Upon the terms and subject to the conditions of this
Agreement, at the Closing, each Seller shall sell, on a several and not joint basis,
assign, transfer, convey and deliver, or cause to be sold, assigned, transferred,
conveyed and delivered, to the Purchaser or to an Affiliate of the Purchaser designated
by the Purchaser, the number of Ordinary Shares set forth opposite the name of such
Seller on Exhibit A attached hereto, and the Purchaser shall purchase or shall cause an
Affiliate of the Purchaser to purchase such number of shares from such Seller.  



    SECTION 2.02        Purchase
Price for the Shares. (a) Subject to (i) the withholding of the Per Share Escrow
Amount at the Closing in accordance with Section 2.03 and the Escrow Agreement and (ii)
Section 2.02(b), the purchase price for each Ordinary Share shall be the amount in cash
equal to the Per Share Purchase Price, with the aggregate of the Per Share Purchase
Prices to be paid to each Seller and the aggregate of the Per Share Escrow Amounts to be
deducted from each Seller to be rounded to the nearest whole cent. For purpose of this
Agreement:  



    “Per
Share Purchase Price” means $0.862. 



    “Per Share
Escrow Amount” means $0.112. 



7









		    (b)        The
          Purchaser shall be entitled to deduct and withhold from the consideration
          otherwise payable pursuant to this Agreement to any Seller or holder of Company
          Share Options (each a “Company Securityholder”) (including
          payments made by the Escrow Agent) such amounts as it is required to deduct and
          withhold under any provision of U.S. federal, state or local, or any foreign,
          tax law; provided, however, that the Purchaser shall not make such deductions
or           withholdings of U.S. taxes if such Company Securityholder provides duly
          completed and executed W-8 or W-9 forms, as applicable, and such deduction or
          withholding is not required under applicable law. In addition, the Purchaser
          shall make such payments only if such Company Securityholder provides an
          authorization from the Israeli Tax Authorities, to the Purchaser’s
          reasonable satisfaction, specifying the rate at which the Purchaser is to
          withhold Israeli tax in relation to the payment or exempting the Purchaser in
          the entirety from withholding such Israeli tax (and Purchaser shall withhold
          Israeli tax from any payment in accordance with the conditions of such
          authorization). In the event that any authorization or exemption is not
provided           for one or more Sellers, the Purchaser and the Sellers’          Representatives,
on behalf of such Sellers, shall enter into an appropriate           agreement to provide
for (i) the payment to each such Seller of the amount           equal to 70% of the
net amount (i.e. the difference per Ordinary Share           that results from the
subtraction of the Per Share Escrow Amount from the Per           Share Purchase Price)
that such Seller is otherwise entitled to receive in           respect such Seller’s
Ordinary Shares, and (ii) the deposit of the           remaining 30% of the net
amount that such Seller is otherwise entitled to           receive in respect of such
Seller’s Ordinary Shares into an escrow account           with an escrow agent to be
agreed by the parties. The pro rata portion of such           escrow account shall be
released promptly to each Seller for whom an           authorization or exemption from
the Israeli Tax Authorities is provided prior to           due date (including any
extension to such due date approved by the Israeli Tax           Authorities) for the
remittance to the Israeli Tax Authorities of withholding in           the absence of an
appropriate authorization or exemption. If no authorization or           exemption from
the Israeli Tax Authorities is provided prior to such due date           (including any
extension to such due date approved by the Israeli Tax           Authorities) with
respect to the amount payable to any Seller, the escrow agent           shall remit the
amount deposited into such escrow with respect to such Seller to           the Israeli
Tax Authorities. To the extent that amounts are so withheld or paid           over to or
deposited with the relevant Governmental Authority, such withheld           amounts shall
be treated for all purposes of this Agreement as having been paid           to the
Company Securityholder in respect of which such deduction and withholding           was
made by the Purchaser.  







    SECTION 2.03        Escrow
Fund. Prior to the Closing, the Sellers’ Representatives, on behalf of all of
the Company Securityholders, and the Purchaser shall enter into an Escrow Agreement (the
“Escrow Agreement”) with Citibank, N.A.(or if such Person
declines, such other U.S. commercial bank based in New York, New York selected by the
Purchaser and reasonably acceptable to the Sellers’ Representatives) (the “Escrow
Agent”) substantially in the form of Exhibit 2.03 attached hereto. Pursuant to
the terms of the Escrow Agreement, at the Closing the Purchaser shall deposit into the
escrow account (the “Escrow Account”) to be held by the Escrow Agent in
accordance with the terms of the Escrow Agreement the amount of cash equal to $6,464,427
(the “Escrow Amount”). The Escrow Amount shall be available to
compensate the Purchaser and other Purchaser Indemnified Parties for Losses in accordance
with the indemnification obligations of the Sellers under Article IX of this Agreement
and in accordance with the terms of the Escrow Agreement. The Purchaser shall be entitled
to deduct from any payments due to a Seller or a holder of Company Share Options at the
Closing pursuant to this Agreement the Per Share Escrow Amount in respect of each
Ordinary Share, with the aggregate amount to be deducted from each Seller or holder of
Company Share Options to be rounded to nearest whole cent. The portion of the Escrow
Amount contributed on behalf of each Company Securityholder shall be in proportion to the
number of Ordinary Shares held by such Company Securityholder immediately prior to the
Closing, assuming the exercise of all outstanding Company Share Options as of immediately
prior to the Closing (such proportion being such Company Securityholder’s “Pro
Rata Share”), and shall be deemed held in a separate escrow sub-account for the
benefit of such Company Securityholder. The portion thereof held in any Company
Securityholder’s individual sub-account shall only be available to compensate the
Purchaser and the other Purchaser Indemnified Parties for Losses for which such Company
Securityholder is obligated to indemnify the Purchaser Indemnified Parties hereunder, and
not for any Losses indemnifiable by any other Company Securityholder. Distributions from
the Escrow Account shall be governed by the terms and conditions of the Escrow Agreement.  



8









    SECTION 2.04        Treatment
of Company Share Options. The Company shall take all necessary action, including
using its best efforts to obtain the consent of the individual option holders required
pursuant to Section 8.02(n), to (i) effective as of the Closing terminate The 1999
Israeli Share Option Plan, the 2003 Israeli Share Option Plan and the 2001 U.S. Stock
Option Plan (the “Company Share Option Plans”), (ii) provide that each
outstanding option to purchase Ordinary Shares granted under the Company Share Option
Plans (each, a “Company Share Option”) that is outstanding and
unexercised immediately prior to the Closing, whether or not exercisable, shall become
fully vested and exercisable as of the Closing and (iii) cancel as of the Closing each
Company Share Option that is outstanding and unexercised as of the Closing. With respect
to each Company Share Option that is outstanding and unexercised as of the Closing and
that has an exercise price per Ordinary Share that is less than the Per Share Purchase
Price, in exchange for the cancellation of such Company Share Option, the Purchaser shall
pay to the holder of such Company Share Option at the Closing (or to the trustee of the
relevant Company Share Option Plan in the case of Company Share Options held by a
trustee) (subject to the provisions of Section 2.02(b), Section 2.03 and this Section
2.04, in each case mutatis mutandis), an amount in cash (the “Per Share
Option Amount”) equal to (x) the excess of the Per Share Purchase Price over the
per share exercise price of such Company Share Option, less (y) the Per Share Escrow
Amount. The Per Share Escrow Amount withheld with respect to each Company Share Option
shall be deposited in the Escrow Fund to secure the indemnification obligations of the
Company Securityholders pursuant to Section 9.02.  



    SECTION 2.05        Closing.
Subject to the terms and conditions of this Agreement, the sale and purchase of the
Ordinary Shares contemplated by this Agreement shall take place at a closing (the “Closing”)
to be held at the offices of the Company at 10:00 A.M. Israel time on the fifth Business
Day following the satisfaction or waiver of all conditions to the obligations of the
parties set forth in Sections 8.01 and Sections 8.02 (other than conditions that are to
be satisfied at the Closing, but subject to the satisfaction of such conditions at the
Closing) or at such other place or at such other time or on such other date as the
Sellers and the Purchaser may mutually agree upon in writing (the day on which the
Closing takes place being the “Closing Date”).  



    SECTION 2.06        Closing
Deliveries by each Seller. At the Closing, each Seller shall deliver or cause to be
delivered to the Purchaser:  



		    (a)        share
certificates evidencing the Ordinary Shares owned by such Seller, duly
               endorsed in blank or accompanied by share transfer deeds duly executed in
blank,                in form reasonably satisfactory to the Purchaser and with any
required (if                required) share transfer tax stamps affixed;  







		    (b)        a
counterpart of the Escrow Agreement executed by such Seller or on behalf of
               such Seller by the Sellers’ Representatives;  







		    (c)        the
certificate of such Seller required by Section 8.02(d)(ii);  







		    (d)        [intentionally
omitted]; and  







9









		    (e)        an
appropriate W-9 form for tax identification number certification or a W-8
               form for non-resident alien certification, and an appropriate
authorization from                the Israeli tax authorities.  







    SECTION 2.07        Closing
Deliveries by the Company. At the Closing, the Company shall deliver or cause to be
delivered to the Purchaser:  



		    (a)        (i)
a true and complete copy, certified by the Secretary or an Assistant
               Secretary of the Company, of the resolutions duly and validly adopted by
the                Board of Directors of the Company evidencing its authorization of the
execution                and delivery of this Agreement, and (ii) a letter of counsel to
the Company                certifying the names and signatures of the officers of the
Company authorized to                sign this Agreement and the other documents to be
delivered hereunder;  







		    (b)        a
copy of (i) the Memorandum of Association, as amended (or similar
               organizational documents), of the Company and of each Subsidiary,
certified by                the Registrar of Companies or the Secretary of State of the
jurisdiction in                which each such entity is incorporated or organized, as of
a date not earlier                than five Business Days prior to the Closing Date and
accompanied by a                certificate of the Secretary or Assistant Secretary of
each such entity, dated                as of the Closing Date, stating that no amendments
have been made to such                Memorandum of Association (or similar
organizational documents) since such date,                and (ii) the Articles of
Association (or similar organizational documents) of                the Company and of
each Subsidiary, certified by the Secretary or Assistant                Secretary of each
such entity:  







		    (c)        good
standing certificates for StoreAge U.S. from the Secretary of State of the
               jurisdiction in which such entity is incorporated or organized and from
the                Secretary of State in each other jurisdiction in which the properties
owned or                leased by any of the Company or any Subsidiary, or the operation
of its business                in such jurisdiction, requires the Company or any
Subsidiary to qualify to do                business as a foreign corporation, in each
case dated as of a date not earlier                than five Business Days prior to the
Closing Date;  







		    (d)        the
certificate of a duly authorized officer of the Company required by Section
               8.02(d)(i);  







		    (e)        the
resignations, effective as of the Closing, of all of the directors and
               officers of the Company and StoreAge U.S. and the resignations, effective
as of                the Closing, of all of the directors and officers of StoreAge China
appointed by                the Company, except for such persons as shall have been
designated in writing                prior to the Closing by the Purchaser to the
Company; and  







		    (f)        the
other opinions, certificates and other documents required to be delivered
               pursuant to Section 8.02.  







    SECTION 2.08        Closing
Deliveries by the Purchaser. (a) At the Closing, the Purchaser shall deliver to each
Seller:  



		    (i)        the
aggregate Per Share Purchase Price less the aggregate Per Share Escrow
               Amount that such Seller is entitled to receive in respect of its Ordinary
Shares                pursuant to Section 2.01, by check or wire transfer of immediately
available                funds to a bank account designated in writing by such Seller at
least two (2)                Business Days prior to the Closing;  







10









		    (ii)        a
counterpart of the Escrow Agreement executed by the Purchaser;  







		    (iii)        the
certificate of a duly authorized officer of the Purchaser required by
               Section 8.01(c); and  







		    (iv)        a
receipt for the Ordinary Shares that the Purchaser is entitled to receive from
               the Sellers at the Closing.  







		    (b)        At
the Closing, the Purchaser shall deliver to the Escrow Agent, in accordance
               with the Escrow Agreement, the Escrow Amount by wire transfer in
immediately                available funds to the accounts designated therefore in the
Escrow Agreement.  








ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY




        As
an inducement to the Purchaser to enter into this Agreement, the Company hereby represents
and warrants to the Purchaser as follows, except as set forth in the section of the
Disclosure Schedule corresponding to the related section number of the relevant
representation or warranty below: 



    SECTION 3.01        Organization,
Authority and Qualification of the Company. The Company is a corporation duly
organized and validly existing under the laws of Israel and has all necessary power and
authority to own, operate or lease the properties and assets now owned, operated or
leased by it and to carry on the Business as it has been and is currently conducted. The
Company is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of its
business makes such licensing or qualification necessary or desirable, except to the
extent that the failure to be so licensed or qualified and in good standing would not (x)
adversely affect the ability of the Sellers to carry out their obligations under, and to
consummate the transactions contemplated by, this Agreement and the Escrow Agreement, (y)
adversely affect the ability of the Company and the Subsidiaries to conduct the Business
or (z) otherwise have a Material Adverse Effect, and all such jurisdictions are set forth
in Section 3.01 of the Disclosure Schedule. All corporate actions taken by the Company
have been duly authorized, and the Company has not taken any action that in any respect
conflicts with, constitutes a default under or results in a violation of any provision of
its Memorandum or Articles of Association. True and correct copies of the Memorandum and
Articles of Association of the Company, each as in effect on the date hereof, have been
delivered by the Company to the Purchaser.  



    SECTION 3.02        Subsidiaries.
(a) Section 3.02(a) of the Disclosure Schedule sets forth a true and complete list of all
Subsidiaries, listing for each Subsidiary its name, type of entity, the jurisdiction and
date of its incorporation or organization, its authorized capital stock, partnership
capital or equivalent, the number and type of its issued and outstanding shares of
capital stock, partnership interests or similar ownership interests and the current
ownership of such shares, partnership interests or similar ownership interests.  



11









		    (b)        Other
than the Subsidiaries, there are no other corporations, partnerships,           joint
ventures, associations or other entities in which the Company or any           Subsidiary
owns, of record or beneficially, any direct or indirect equity or           other
interest or any right (contingent or otherwise) to acquire the same. Other           than
the Subsidiaries, neither the Company nor any Subsidiary is a member of           (nor is
any part of the Business conducted through) any partnership nor is the           Company
or any Subsidiary a participant in any joint venture or similar           arrangement.  







		    (c)        StoreAge
U.S. and, to the knowledge of the Company, StoreAge China, (i) is a           corporation
duly organized, validly existing and in good standing under the laws           of its
jurisdiction of incorporation, (ii) has all necessary power and authority           to
own, operate or lease the properties and assets owned, operated or leased by
          such Subsidiary and to carry on its business as it has been and is currently
          conducted by such Subsidiary and (iii) is duly licensed or qualified to do
          business and is in good standing in each jurisdiction in which the properties
          owned or leased by it or the operation of its business makes such licensing or
          qualification necessary or desirable, except to the extent that the failure to
          be so licensed or qualified and in good standing would not (x) adversely affect
          the ability of the Sellers to carry out their obligations under, and to
          consummate the transactions contemplated by, this Agreement and the Escrow
          Agreement, (y) adversely affect the ability of the Company and the Subsidiaries
          to conduct the Business or (z) otherwise have a Material Adverse Effect.  







		    (d)        All
corporate actions taken by StoreAge U.S. and, to the knowledge of the           Company,
all corporate actions taken by StoreAge China have been duly authorized           and no
Subsidiary has taken any action that in any respect conflicts with,           constitutes
a default under or results in a violation of any provision of its           Certificate
of Incorporation or By-laws (or similar organizational documents).           True and
complete copies of the certificate of incorporation and by-laws (or           similar
organizational documents), in each case as in effect on the date hereof,           of
each Subsidiary have been delivered by the Seller to the Purchaser.  







		    (e)        StoreAge
China is a joint venture entity, in which the Company owns 40% of the
          outstanding capital stock, and the remaining 60% of the outstanding capital
          stock is owned by Beijing Deep Thought Software Company Ltd. In view of the
          aforementioned, any representations regarding StoreAge China are made to the
          knowledge of the Company.  







    SECTION 3.03        Capitalization.
(a) The authorized share capital of the Company is NIS 1,000,000 divided into 100,000,000
Ordinary Shares. As of the date hereof, (i) 49,836,898 Ordinary Shares are issued and
outstanding, all of which are validly issued, fully paid and nonassessable, (ii) an
aggregate of 11,938,347 Ordinary Shares are reserved for issuance pursuant to incentive
stock options granted or to be granted pursuant to the Company Share Option Plans, of
which an aggregate of 7,881,202 Ordinary Shares are issuable upon the exercise of Company
Share Options outstanding on the date hereof. All of the outstanding Ordinary Shares and
Company Share Options were issued in compliance with all applicable securities and
corporate laws of Israel. None of the issued and outstanding Ordinary Shares was issued
in violation of any preemptive rights. Except for Company Share Options granted pursuant
to the Company Share Option Plans, there are no options, warrants, convertible securities
or other rights, agreements, arrangements or commitments of any character relating to
Ordinary Shares or obligating either of the Sellers or the Company to issue or sell any
Ordinary Shares, or any other interest in, the Company. There are no outstanding
contractual obligations of the Company to repurchase, redeem or otherwise acquire any
Ordinary Shares or to provide funds to, or make any investment (in the form of a loan,
capital contribution or otherwise) in, any other Person. The Ordinary Shares listed on
Exhibit A attached hereto constitute all of the issued and outstanding share capital of
the Company and, to the knowledge of the Company, are owned of record and beneficially by
the Sellers as listed on Exhibit A attached hereto, free and clear of all Encumbrances.
Upon consummation of the transactions contemplated by this Agreement and registration of
the Ordinary Shares in the name of the Purchaser in the share register of the Company,
the Purchaser, assuming it shall have purchased such shares for value in good faith and
without notice of any adverse claim, will own all the issued and outstanding share
capital and rights to acquire share capital of the Company free and clear of all
Encumbrances. Upon consummation of the transactions contemplated by this Agreement, the
Ordinary Shares to be sold to the Purchaser pursuant to this Agreement will be fully paid
and nonassessable. To the knowledge of the Company, there are no voting trusts,
shareholder agreements, proxies or other agreements or understandings in effect with
respect to the voting or transfer of any of the outstanding Ordinary Shares.  



12









		    (b)        The
share register of the Company accurately records: (i) the name and address           of
each Person owning Ordinary Shares and (ii) the certificate number of each
          certificate evidencing shares issued by the Company, the number of shares
          evidenced by each such certificate, the date of issuance thereof and, in the
          case of cancellation, the date of cancellation.  







		    (c)        Section
3.03(c) of the Disclosure Schedule sets forth the following information           with
respect to each Company Share Option outstanding as of the date of this
          Agreement: (i) the name of the option holder; (ii) the number of Ordinary
Shares           subject to such Company Share Option; (iii) the exercise price of such
Company           Share Option; (iv) the date on which such Company Share Option was
granted; (v)           the applicable vesting schedule; and (vi) the applicable Company
Share Option           Plan. The Company has made available to the Purchaser a complete
and correct           copy of the Company Share Option Plans and the form of all share
option           agreements evidencing Company Share Options in each case as in effect on
the           date of this Agreement. All Ordinary Shares subject to issuance as
previously           stated in this Section 3.03(c), upon issuance on the terms and
conditions           specified in the instruments pursuant to which they are issuable,
will be duly           authorized, validly issued, fully paid and nonassessable.  







		    (d)        All
the outstanding shares of capital stock of StoreAge U.S. are validly issued,
          fully paid, nonassessable and free of preemptive rights and are owned by the
          Company, whether directly or indirectly, free and clear of all Encumbrances.
          There are no options, warrants, convertible securities or other rights,
          agreements, arrangements or commitments of any character relating to the
capital           stock of StoreAge U.S. or obligating any Seller, the Company or
StoreAge U.S. to           issue or sell any shares of capital stock of, or any other
interest in StoreAge           U.S. To the knowledge of the Company, there are no voting
trusts, shareholder           agreements, proxies or other agreements or understandings
in effect with respect           to the voting or transfer of any shares of capital stock
of or any other           interests in StoreAge U.S. The stock register of StoreAge U.S.
accurately           records: (i) the name and address of each Person owning shares of
capital stock           of StoreAge U.S. and (ii) the certificate number of each
certificate evidencing           shares of capital stock issued by StoreAge U.S., the
number of shares evidenced           by each such certificate, the date of issuance
thereof and, in the case of           cancellation, the date of cancellation.  







13









    SECTION 3.04        Corporate
Books and Records. The minute books of the Company and StoreAge U.S. and, to the
knowledge of the Company, StoreAge China, contain accurate records of all meetings and
accurately reflect all other actions taken by the shareholders, Boards of Directors and
all committees of the Boards of Directors of such entity. The share register and the
register of directors of the Company and StoreAge U.S. and, to the knowledge of the
Company, such registers of StoreAge China, if applicable, completely and accurately set
forth the information required to be included therein. Complete and accurate copies of
all such minute books and of the share register of the Company and StoreAge U.S. have
been provided by the Company to the Purchaser.  



    SECTION 3.05        No
Conflict. Assuming that all consents, approvals, authorizations and other actions
described in Section 3.05 have been obtained, the execution, delivery and performance of
this Agreement by the Company do not and will not (a) violate, conflict with or result in
the breach of any provision of the Memorandum or Articles of Association (or similar
organizational documents) of the Company or any Subsidiary, (b) conflict with or violate
(or cause an event which could have a Material Adverse Effect as a result of) any Law or
Governmental Order applicable to the Company, any Subsidiary or any of their respective
assets, properties or businesses, or (c) except as set forth in Section 3.05(c) of the
Disclosure Schedule, conflict with, result in any breach of, constitute a default (or
event which with the giving of notice or lapse of time, or both, would become a default)
under, require any consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, or result in the creation of any
Encumbrance on any of the outstanding Ordinary Shares or any of the assets of the Company
or any Subsidiary pursuant to, any note, bond, mortgage or indenture, contract,
agreement, lease, sublease, license, permit, franchise or other instrument or arrangement
to which the Company or any Subsidiary is a party or by which any of the outstanding
Ordinary Shares or any of such assets is bound or affected.  



    SECTION 3.06        Governmental
Consents and Approvals. The execution, delivery and performance of this Agreement by
the Company do not and will not require any consent, approval, authorization or other
order of, action by, filing with or notification to, any Governmental Authority, except
(i) consent of the Office of the Chief Scientist of the Israeli Ministry of Industry,
Trade and Labor (“CSO”); and (ii) consent of the Investment Center of
the Israeli Ministry of Industry, Trade and Labor (the “Investment Center”).  



    SECTION 3.07        Financial
Information. (a) True and complete copies of (i) the audited consolidated balance
sheet of the Company for each of the two fiscal years ended as of December 31, 2004 and
2005, and the related audited consolidated statements of operations, statements of
changes in shareholders’ equity and statements of cash flows of the Company,
together with all related notes and schedules thereto, accompanied by the reports thereon
of the Company’s independent auditors (collectively referred to herein as the “Financial
Statements”) and (ii) the unaudited consolidated balance sheet of the Company as
of June 30, 2006, and the related consolidated statements of operations, statements of
changes in shareholders’ equity and statements of cash flows of the Company,
together with all related notes and schedules thereto (collectively referred to herein as
the “Interim Financial Statements”) have been delivered by the Seller to
the Purchaser.  



		    (b)        The
Financial Statements and the Interim Financial Statements (i) were prepared           in
accordance with the books of account and other financial records of the           Company
and StoreAge U.S., (ii) present fairly the consolidated financial           condition and
results of operations of the Company and StoreAge U.S. as of the           dates thereof
or for the periods covered thereby, (iii) have been prepared in           accordance with
U.S. GAAP applied on a basis consistent with the past practices           of the Company
and StoreAge U.S., (iv) include all adjustments (consisting only           of normal
recurring accruals) that are necessary for a fair presentation of the
          consolidated financial condition of the Company and StoreAge U.S. and the
          results of the operations of the Company and StoreAge U.S. as of the dates
          thereof or for the periods covered thereby, (v) the Interim Financial
Statements           are subject to year-end adjustments that may be required by the
Company’s           independent auditors, and (vi) the liabilities towards the CSO
are not reflected           on the Interim Financial Statements.  







14









		    (c)        The
books of account and other financial records of the Company and StoreAge           U.S.
(i) reflect all items of income and expense and all assets and Liabilities
          required to be reflected thereon in accordance with U.S. GAAP applied on a
basis           consistent with the past practices of the Company and StoreAge U.S.,
          respectively, (ii) are in all material respects complete and correct, and do
not           contain or reflect any material inaccuracies or discrepancies, and (iii)
have           been maintained in accordance with good business and accounting and
practices.  







    SECTION 3.08        Absence
of Undisclosed Liabilities. There are no Liabilities of the Company or StoreAge U.S.
and, to knowledge of the Company, there are no Liabilities of StoreAge China, other than
Liabilities (a) reflected or reserved against on the consolidated balance sheet of the
Company as of June 30, 2006 (the “Latest Balance Sheet”), (b) described
in Section 3.07(b)(vi) above, or (c) incurred since the date of the Latest Balance Sheet
in the ordinary course of business, consistent with past practice, of the Company and the
Subsidiaries and which individually and in the aggregate do not and could not reasonably
be expected to have a Material Adverse Effect. Except as provided above, reserves are
reflected on the Latest Balance Sheet against all Liabilities of the Company and StoreAge
U.S. in amounts that have been established on a basis consistent with the past practices
of the Company and StoreAge U.S. and in accordance with U.S. GAAP.  



    SECTION 3.09        Conduct
in the Ordinary Course. Since June 30, 2006, the Business has been conducted in the
ordinary course and consistent with past practice. As amplification and not limitation of
the foregoing, except as set forth in Section 3.09 of the Disclosure Schedule, since the
above date, none of the Company nor StoreAge U.S. nor, to the knowledge of the Company,
StoreAge China, has:  



		    (a)        amended
or restated the Memorandum or Articles of Association (or other
               organizational documents) of the Company or any Subsidiary;  







		    (b)        issued
or sold any share capital, notes, bonds or other securities, or any
               option, warrant or other right to acquire the same, of the Company or any
               Subsidiary;  







		    (c)        redeemed
any of the share capital or declared, made or paid any dividends or
               distributions (whether in cash, securities or other property) to the
holders of                share capital of the Company or any Subsidiary or otherwise;  







		    (d)        merged
with, entered into a consolidation with or acquired any interest of 5%or more in
any Person or acquired a substantial portion of the assets or                business of
any Person or any division or line of business thereof, or otherwise
               acquired any material assets other than in the ordinary course of business
               consistent with past practice;  







		    (e)        made
any capital expenditure or commitment for any capital expenditure in excess
               of $25,000 individually or $100,000 in the aggregate;  








15









		    (f)        sold,
leased, licensed or otherwise transferred any properties or assets, other
               than the sale of inventory or licenses in the ordinary course of business
               consistent with past practice;  







		    (g)        issued
any sales orders or otherwise agreed to make any purchases involving
               exchanges in value in excess of $25,000individually or $100,000in
the aggregate;  







		    (h)        incurred
any Indebtedness in excess of $25,000 individually or $100,000 in the
               aggregate;  







		    (i)        made
any loan to, guaranteed any Indebtedness of or otherwise incurred any
               Indebtedness on behalf of any Person;  







		    (j)        failed
to pay any creditor any amount owed to such creditor when due;  







		    (k)        (i)
granted any increase, or announced any increase, in the wages, salaries,
               compensation, bonuses, incentives, pension or other benefits payable by
the                Company or any Subsidiary to any of its employees, or (ii) established
or                increased or promised to increase any benefits under any Plan, in
either case                except as required by Law;  







		    (l)        entered
into any agreement, arrangement or transaction with any of its                directors,
officers, employees or shareholders (or with any relative,                beneficiary,
spouse or Affiliate of such Persons);  







		    (m)        made
any material changes in the customary methods of operations of the Company,
               any Subsidiary or the Business;  







		    (n)        permitted
or allowed any of its assets to be subjected to any Encumbrance;  







		    (o)        revalued
any of its assets other than in the ordinary course of business                consistent
with past practice and in accordance with U.S. GAAP;  







		    (p)        made
any change in any method of accounting or accounting practice or policy
               used by the Company or any Subsidiary, other than such changes required by
U.S.                GAAP and set forth in Section 3.09 of the Disclosure Schedule;  







		    (q)        amended,
terminated, cancelled or compromised any material claims of the Company                or
any Subsidiary or waived any other rights of substantial value to the Company
               or any Subsidiary;  







		    (r)        made
any express or deemed election or settled or compromised any liability with
               respect to Taxes of the Company or any Subsidiary;  







		    (s)        disclosed
any secret or confidential Intellectual Property (except by way of
               issuance of a patent and except in the ordinary course of business) or
permitted                to lapse or become abandoned any Intellectual Property (or any
registration or                grant thereof or any application relating thereto) to
which, or under which, the                Company or any Subsidiary has any right, title,
interest or license;  







16









		    (t)        amended,
modified or consented to the termination of any Material Contract or                the
Company’s or any Subsidiary’s rights thereunder;  







		    (u)        (i)
abandoned, sold, assigned, or granted any security interest in or to any
               item of the Owned Intellectual Property, Licensed Intellectual Property or
               Company IP Agreements, including, without limitation, failing to perform
or                cause to be performed all applicable filings, recordings and other
acts, and pay                or caused to be paid all required fees and taxes, to
maintain and protect its                interest in such Intellectual Property, (ii)
granted to any third party any                license with respect to any Owned
Intellectual Property or Licensed Intellectual                Property except in the
ordinary course of business, (iii) developed, created or                invented any
Intellectual Property jointly with any third party (other than such                joint
development, creation or invention with a third party that is in progress
               prior to the date of the Latest Balance Sheet), or (iv) disclosed, or
allow to                be disclosed, any confidential Intellectual Property, unless such
Intellectual                Property is subject to a confidentiality or non-disclosure
contract protecting                against disclosure thereof;  







		    (v)        suffered
any Material Adverse Effect; or  







		    (w)        agreed,
whether in writing or otherwise, to take any of the actions specified in
               this Section 3.09 or granted any options to purchase, rights of first
refusal,                rights of first offer or any other similar rights or commitments
with respect to                any of the actions specified in this Section 3.09, except
as expressly                contemplated by this Agreement.  







    SECTION 3.10        Litigation.
There are no Actions by or against the Company or StoreAge U.S. and, to the Knowledge of
the Company, there are no Actions by or against StoreAge China, or affecting any of the
assets or businesses of the Company or StoreAge U.S. or, to the Knowledge of the Company,
affecting any of the assets or businesses of StoreAge China, pending before any
Governmental Authority (or, to the knowledge of the Company, threatened to be brought by
or before any Governmental Authority). None of the Company, StoreAge U.S. or, to
knowledge of the Company, StoreAge China or any of their respective assets or properties
is subject to any Governmental Order (nor, to the knowledge of the Company, are there any
such Governmental Orders threatened to be imposed by any Governmental Authority) which
has or has had a Material Adverse Effect or could affect the legality, validity or
enforceability of this Agreement, the Escrow Agreement or the consummation of the
transactions contemplated by this Agreement.  



    SECTION 3.11        Compliance
with Laws. (a) The Company, StoreAge U.S. and, to the knowledge of the Company,
StoreAge China have each conducted and continue to conduct the Business in accordance
with all Laws and Governmental Orders applicable to the Company or any Subsidiary or any
of their properties or assets, and none of the Company or StoreAge U.S. or, to the
knowledge of the Company, StoreAge China, is in violation of any such Law or Governmental
Order.  



		    (b)        There
is no Governmental Order applicable specifically to the Company or any
          Subsidiary or any of their properties or assets, except extension orders
          (tzavei harchava) issued by the Minister of Labor relating to the
          software or electronics industry.  







17









		    (c)        None
of the Company, StoreAge U.S. or any officer, director, shareholder,           employee,
agent or representative of the Company or StoreAge U.S., or, to the           knowledge
of the Company, StoreAge China, or any of its officers, directors,
          shareholders, employees, agents or representatives (i) has taken any action
          which is or could be deemed to be a violation of the Foreign Corrupt Practices
          Act in respect of the Business; (ii) is aware of any action or conduct which
          could be deemed to be a violation of the Foreign Corrupt Practices Act in
          respect of the Business; or (iii) has offered, given, paid, authorized the
          payment of, or promised, directly or indirectly, any money, gift, promise or
          other thing of value to any Foreign Official (or to any Person while knowing it
          will be offered, given or promised to a Foreign Official) for any purpose
          including, by way of example, influencing any act or decision of such Person
          acting in their official capacity, inducing such Person to do or omit to do any
          action in violation of their lawful duty, inducing such Person to use their
          influence with any Governmental Authority to affect or influence any act or
          decision of such Governmental Authority, in order to assist the Company or any
          Subsidiary obtain or retain business for or with, or in directing business to,
          any Person.  







    SECTION 3.12        Material
Contracts. (a) Section 3.12(a) of the Disclosure Schedule lists each of the following
contracts and agreements (including, without limitation, oral agreements) of the Company
and the Subsidiaries (such contracts and agreements, together with all the leases
relating to the Leased Real Property listed in Section 3.14(b) of the Disclosure Schedule
and all Company IP Agreements listed or otherwise set forth in Section 3.13(a) of the
Disclosure Schedule), being “Material Contracts”):  



		    (i)        all
contracts and agreements under the terms of which the Company or any
               Subsidiary is likely to pay or receive consideration having a value of
more than                $100,000 in the aggregate over the remaining term of such
contract or other                arrangement;  







		    (ii)        all
joint venture, partnership, strategic alliance or similar agreements (other
               than (x) any non-exclusive reseller or distribution agreements
substantially in                the form of the Company’s standard forms, or (y)
confidentiality or                non-disclosure agreements);  







		    (iii)        all
shareholder agreements, investor rights’ agreements, registration
               rights agreements, right of first refusal agreements or similar
agreements;  







		    (iv)        (A)
all agreements pursuant to which the Company or any Subsidiary has sold or
               has agreed to sell any shares or material assets, and (B) all
agreements                pursuant to which the Company or any Subsidiary has sold or
licensed or has                agreed to sell or license any assets for aggregate
consideration greater than                $100,000 (other than any licensing of the
Company’s products or services to                end users in the ordinary course of
business);  







		    (v)        all
material agreements with resellers and distributors (other than (x) any
               non-exclusive reseller or distribution agreements substantially in the
form of                the Company’s standard forms, or (y) confidentiality or
non-disclosure                agreements);  







		    (vi)        all
contracts and agreements relating to any Indebtedness of the Company or any
               Subsidiary in excess of $50,000 individually;  







18









		    (vii)        all
contracts and agreements with any Governmental Authority to which the
               Company or any Subsidiary is a party;  







		    (viii)        all
contracts and agreements that limit or purport to limit the ability of the
               Company or any Subsidiary to compete in any line of business or with any
Person                or in any geographic area or during any period of time;  







		    (ix)        all
contracts and agreements between or among the Company or any Subsidiary, on
               one hand, and a Seller or any Affiliate of a Seller (other than the
Company or                any Subsidiary), on the other hand;  







		    (x)        all
material contracts and agreements providing for benefits under any Company
               Employee Plan; and  







		    (xii)        all
other contracts agreements that the Company deems material to its business.  







		    (b)        Each
Material Contract: (i) is valid and binding on the parties thereto and is
               in full force and effect; and (ii) upon consummation of the transactions
               contemplated by this Agreement and the Escrow Agreement, except to the
extent                that any consents set forth in Section 3.05(c) of the Disclosure
Schedule are                not obtained, shall continue in full force and effect without
penalty or other                adverse consequence. None of the Company nor any
Subsidiary is in breach of, or                default under, any Material Contract. To
the knowledge of the Company, no other                party to any Material Contract is
in breach thereof or default thereunder and                none of the Company or any
Subsidiary has received any notice of termination,                cancellation, breach or
default under any Material Contract. The Company has                made available to the
Purchaser true and complete copies of all Material                Contracts.  







    SECTION 3.13        Intellectual
Property. (a) Section 3.13(a) of the Disclosure Schedule sets forth a true and
complete list of (i) all patents and patent applications, registered trademarks and
trademark applications, registered copyrights and copyright applications, and domain
names included in the Owned Intellectual Property, (ii) all Company IP Agreements, other
than commercially available off-the-shelf computer software licensed pursuant to
shrink-wrap or click-wrap licenses that is not material to the Business and (iii) other
Owned Intellectual Property material to the Business.  



		    (b)        The
operation of the Business as currently conducted and the use of the Owned
          Intellectual Property and Licensed Intellectual Property in connection
therewith           do not conflict with, infringe, misappropriate or otherwise violate
the           Intellectual Property or other proprietary rights, including rights of
privacy,           publicity and endorsement, of any third party, and no Actions or
Claims are           pending or, to the knowledge of the Company, threatened against the
Company or           any Subsidiary alleging any of the foregoing.  







		    (c)        The
Company or a Subsidiary owns or has the legal right to use all Intellectual
          Property used by the Company and the Subsidiaries in the Business. With respect
          to Owned Intellectual Property, the Company or a Subsidiary is the exclusive
          owner of the entire and unencumbered right, title and interest in and to such
          Owned Intellectual Property, and the Company or a Subsidiary has a valid right
          to use the Owned Intellectual Property in the ordinary course of the Business
as           presently conducted. With respect to Licensed Intellectual Property, the
Company           or a Subsidiary has a valid right to use such Licensed Intellectual
Property in           the ordinary course of the Business as presently conducted pursuant
to valid and           effective license agreements.  







19









		    (d)        No
Owned Intellectual Property, or to the knowledge of the Company, any Licensed
          Intellectual Property, is subject to any outstanding decree, order, injunction,
          judgment, ruling or agreement restricting the use of such Intellectual Property
          or that would impair the validity or enforceability of such Intellectual
          Property. The Owned Intellectual Property and, to the knowledge of the Company,
          the Licensed Intellectual Property, are subsisting, valid and enforceable, and
          have not been adjudged invalid or unenforceable in whole or part.  







		    (e)        No
Actions or Claims have been asserted or are pending or, to the knowledge of           the
Company, threatened against the Company or any Subsidiary (i) based upon or
          challenging or seeking to deny or restrict the use by the Company or any
          Subsidiary of any of the Owned Intellectual Property or Licensed Intellectual
          Property, (ii) alleging that any services provided by, processes used by, or
          products manufactured or sold by the Company or any Subsidiary infringe or
          misappropriate any Intellectual Property right of any third party or (iii)
          alleging that the Licensed Intellectual Property is being licensed or
          sublicensed in conflict with the terms of any license or other agreement.  







		    (f)        To
the knowledge of the Company, no person is engaging in any activity that
          infringes the Owned Intellectual Property or Licensed Intellectual Property.
          Licensed Intellectual Property is not granted exclusively to the Company or any
          Subsidiary. Except in the ordinary course of business, neither the Company nor
          any Subsidiary has granted any license or other right to any third party with
          respect to the Owned Intellectual Property or Licensed Intellectual Property.
          The consummation of the transactions contemplated by this Agreement and the
          Escrow Agreement will not result in the termination or impairment of any of the
          Owned Intellectual Property or Licensed Intellectual Property.  







		    (g)        The
Company Software is free of all viruses, worms, trojan horses and other
          material known contaminants and does not contain any bugs, errors, or problems
          of a material nature that would disrupt its operation or have an adverse impact
          on the operation of other software programs or operating systems. Except as set
          forth in Section 3.13(g) of the Disclosure Schedule, the Company Software does
          not incorporate any GNU or “open” source code or object code under
          which the Company Software is subject to the GNU general public license, GNU
          lesser general public license and other “copyleft” license. The
          Company’s business as currently conducted and as proposed to be conducted
          does not involve the use or development of, or engaging in, encryption
          technology, or other technology whose development, commercialization or export
          is restricted under Israeli or applicable foreign law, and the Company’s
          business as currently conducted and as proposed to be conducted does not
require           the Company to obtain a license from the Israeli Ministry of Defense or
an           authorized body thereof pursuant to the Control of Products and Services
          Declaration (Engagement in Encryption), 1974, as amended, or other applicable
          laws regulating the development, commercialization or export of technology. No
          rights in the Company Software have been transferred to any third party except
          to the customers of the Business to whom the Company or a Subsidiary has
          licensed such Company Software in the ordinary course of business. Section
          3.13(g) of the Disclosure Schedule lists all agreements pursuant to which the
          Company or StoreAge U.S. has deposited source code or similar materials for the
          Company Software with or for the benefit of any Person. Each of the Company,
          StoreAge U.S. and, to the knowledge of the Company, StoreAge China, has the
          right to use all software development tools, library functions, compilers, and
          other third party software that are material to the Business or that are
          required to operate or modify the Company Software.  








20









		    (h)        The
Company and the Subsidiaries have taken reasonable steps in accordance with
          normal industry practice to maintain the confidentiality of the trade secrets
          and other confidential Intellectual Property used in connection with the
          Business. To the knowledge of the Company, (i) there has been no
          misappropriation of any material trade secrets or other material confidential
          Owned Intellectual Property used in connection with the Business by any person;
          (ii) no employee, independent contractor or agent of the Company or any
          Subsidiary has misappropriated any trade secrets of any other person in the
          course of performance as an employee, independent contractor or agent of the
          Business; and (iii) no employee, independent contractor or agent of the Company
          or any Subsidiary is in default or breach of any term of any employment
          agreement, nondisclosure agreement, assignment of invention agreement or
similar           agreement or contract relating in any way to the protection, ownership,
          development, use or transfer of Intellectual Property.  







     SECTION 3.14        Leased
Real Property. (a) None of the Company or any Subsidiary owns or has owned any real
property.  



		    (b)        Section
3.14(b) of the Disclosure Schedule lists: (i) the block and lot number,           and the
street address, of each parcel of real property leased or subleased by           the
Company or any Subsidiary (the “Leased Real Property”),           (ii)
the identity of the lessor, lessee and current occupant (if different from
          lessee) of each such parcel of Leased Real Property, (iii) all applicable lease
          agreements for each parcel of Leased Real Property and a summary of the terms
          and rental payment amounts pertaining to each such parcel of Leased Real
          Property, and (iv) the current use of each such parcel of Leased Real Property.  







		    (c)        The
Company has made available to the Purchaser true and complete copies of all
          lease agreements for each parcel of Leased Real Property, as listed in Section
          3.14(b) of the Disclosure Schedule. With respect to each lease listed in
Section           3.14(b) of the Disclosure Schedule, none of the Company nor any
Subsidiary has           exercised or given any notice of exercise of any option, right
of first offer or           right of first refusal contained in any such lease or
sublease.  









		    (d)        To
the knowledge of the Company, either the Company or a Subsidiary, as the case
          may be, is in peaceful and undisturbed possession of each parcel of Leased Real
          Property, and there are no contractual or legal restrictions that preclude or
          restrict the ability to use the Leased Real Property for the purposes for which
          it is currently being used. To the knowledge of the Company, there are no
          material latent defects or material adverse physical conditions affecting the
          Leased Real Property or any of the facilities, buildings, improvements, or
          fixtures attached to or located on any of the Leased Real Property. To the
          knowledge of the Company, neither the Company nor any Subsidiary has leased or
          subleased any parcel or any portion of any parcel of Leased Real Property to
any           other Person and no other Person has any rights to the use, occupancy or
          enjoyment thereof pursuant to any lease, sublease, license, occupancy or other
          agreement, nor has the Company or any Subsidiary assigned its interest under
any           lease or sublease listed in Section 3.14(b) of the Disclosure Schedule to
any           third party.  







21









    SECTION 3.15        Environmental
Matters. Each of the Company, StoreAge U.S. and, to the knowledge of the Company,
StoreAge China is in compliance with all applicable Environmental Laws and all
Environmental Permits. There has been no release or discharge of any Hazardous Material
on any of the Leased Real Property or, during the period of the Company’s or any
Subsidiary’s ownership, lease, use or occupancy thereof, on any property formerly
owned, leased, used or occupied by the Company or any Subsidiary. There are no
Environmental Claims pending or threatened against the Company, any Subsidiary or the
Leased Real Property, and to the Company’s knowledge there are no circumstances that
can reasonably be expected to form the basis of any such Environmental Claim. Neither the
Company, StoreAge U.S. or, to the knowledge of the Company, StoreAge China has any actual
or alleged liability, whether fixed or contingent, under any Environmental Law. Neither
the execution of this Agreement or the Escrow Agreement nor the consummation of the
transactions contemplated by this Agreement or thereby will require any cleanup or other
remedial action or notice to or consent of Governmental Authorities or third parties
pursuant to any applicable Environmental Law or Environmental Permit.  



    SECTION 3.16        Assets.
The Company or a Subsidiary, as the case may be, owns, leases or has the legal right to
use all the properties and assets used in the conduct of the Business or otherwise owned,
leased or used by the Company or any Subsidiary, and, with respect to contract rights, is
a party to and enjoys the right to the benefits of all contracts, agreements and other
arrangements used by the Company or any Subsidiary or in or relating to the conduct of
the Business. Except as set forth in Section 3.16 of the Disclosure Schedule, each of the
Company or a Subsidiary, as the case may be, has good and marketable title to, or, in the
case of leased or subleased assets, valid and subsisting leasehold interests in, all of
its assets, free and clear of all Encumbrances.  



    SECTION 3.17       Employment
Matters. (a) Employees. Section 3.17(a) of the Disclosure Schedule lists the
name, title, place of employment, date of hire, annual salary rate, annual bonus, and
other compensation or benefits paid or payable (in cash or otherwise) in 2005 and 2006 of
each current employee, officer, director, consultant or agent of the Company and StoreAge
U.S. Except as described in Section 3.17(a) of the Disclosure Schedule, each employee is
terminable “at will” subject to applicable notice periods as set forth by law
or in the employment agreement, but in any event not more than 60 days, and there are no
agreements or understandings between the Company or any Subsidiary and any of their
employees that their employment will be for any particular period. The Company is not
aware that any of officers or key employees of the Company or any Subsidiary intends to
terminate his or her employment with the Company or any Subsidiary.  



		    (b)        Employee
Benefit Plans. Section 3.17(b) of the Disclosure Schedule lists           (i) all
employment, termination, severance or other similar contracts or           arrangements
between the Company or any Subsidiary, on the one hand, and any           employee of the
Company or any Subsidiary, on the other hand, and (ii) all           employee benefit
plans and all bonus, stock option, share purchase, restricted           share, incentive,
deferred compensation, retiree medical or life insurance,           supplemental
retirement, severance or other benefit plans, programs or           arrangements to which
the Company or any Subsidiary is a party, with respect to           which the Company or
any Subsidiary has any obligation or which are maintained,           contributed to or
sponsored by the Company or any Subsidiary for the benefit of           any current or
former employee, officer or director of the Company or any           Subsidiary
(collectively, the “Company Employee Plans”).           Each
Company Employee Plan is in writing and the Company has furnished to the
          Purchaser a complete and accurate copy of each Company Employee Plan and a
          complete and accurate copy of each material document prepared in connection
with           each such Company Employee Plan. There are no other employee benefit
plans,           programs, arrangements or agreements, whether formal or informal,
whether in           writing or not, to which the Company or any Subsidiary is a party,
with respect           to which the Company or any Subsidiary has any obligation or which
are           maintained, contributed to or sponsored by the Company or any Subsidiary
for the           benefit of any current or former employee, officer or director of the
Company or           any Subsidiary. Except as provided in individual employment
agreements, labor           laws and regulations and extension orders (tzavei
harchava), neither the           Company nor any Subsidiary has any express or
implied commitment, whether           legally enforceable or not, to (i) create, incur
liability with respect to or           cause to exist any other employee benefit plan,
program or arrangement, (ii) to           enter into any contract or agreement to provide
compensation or benefits to any           individual, or (iii) to modify, change or
terminate any Company Employee Plan,           other than with respect to a modification,
change or termination required by           applicable Law.  







22









		    (c)        Absence
of Retiree Benefit Plans. No Company Employee Plan or any           agreement with
any employee, officer or director of the Company or any           Subsidiary provides, or
reflects or represents any liability to provide           post-termination medical,
health, disability, insurance or other benefits to any           person for any reason,
and, to the knowledge of the Company, the Company has           never represented,
promised or contracted (whether in oral or written form) to           any employee,
officer or director (either individually or as a group) or any           other person
that such employee, officer or director or other person would be           provided with
post-termination life, health or other benefits, except for           employee
insurance plans and directors and officers insurance and           indemnification
agreements.  







		    (d)        Compliance
with Applicable Law. Each Company Employee Plan is now and           always has been
operated in all respects in accordance with the requirements of           all applicable
Law. The Company and each Subsidiary has performed all           obligations required to
be performed by it under, is not in any respect in           default under or in
violation of, and has no knowledge of any default or           violation by any party to,
any Company Employee Plan. No legal action, suit or           claim is pending or, to the
knowledge of the Company, threatened with respect to           any Company Employee Plan
(other than claims for benefits in the ordinary           course).  







		    (e)        Absence
of Consequences. Subject to any applicable law, the           execution of
this Agreement and the consummation of the transactions           contemplated hereby
will not (either alone or upon the occurrence of any           additional or subsequent
events) constitute an event under any Company Employee           Plan, employment
agreement, trust, loan or other agreement or arrangement that           will or might
result in any payment (whether of severance pay,           “gross-up,” or
indemnity or similar payment or otherwise),           acceleration, forgiveness of
indebtedness, vesting, distribution, increase in           benefits or obligation to fund
benefits with respect to any employee, officer or           director of the Company or
any Subsidiary, except for any payment that is fully           funded.  







		    (f)        No
ERISA Plans. Except for StoreAge U.S. which has an Employee Plan (US           401K)
which is subject to ERISA and secured by an ERISA Bond, none of the           Company
Employee Plans are subject to the U.S. Employee Retirement Income           Security Act
of 1974, as amended, or to any similar or corresponding statute of           any
jurisdiction outside of Israel.  







		    (g)        Plan
Contributions and Funding. All contributions, premiums or           payments required
to be made with respect to any Company Employee Plan have been           made on or
before their due dates. No Company Employee Plan has, or as of the           Closing will
have, unfunded liabilities that, as of the Closing will not be           fully funded or
insured against. With respect to the Company Employee Plans,           individually and
in the aggregate, there are no funded benefit obligations for           which
contributions have not been made or properly accrued and there are no           unfunded
benefit obligations which have not been accounted for by reserves, or           otherwise
properly footnoted, in accordance with GAAP on the Latest Balance           Sheet, except
for obligations incurred in the ordinary course of business           consistent with
past practice since the date of the Latest Balance Sheet.  







23









		    (h)        Israel
Employment Matters. The Company has complied with all legislative,
          regulatory and other binding provisions relating to employee of the Company in
          Israel and their terms and conditions of employment, and has made all
deductions           and payments to the Income Tax Authority and the National Insurance
Institute           required to be made by law or any other deductions or payments
required by law.           The severance pay due to the employees of the Company is fully
insured against           or funded. All other liabilities of the Company and the
Subsidiaries to the           employees of the Company and the Subsidiaries were properly
accrued in the           Latest Balance Sheet.  







		    (i)        Proprietary
Invention Agreements. All directors, officers, management           employees, and
technical and professional employees of the Company and each           Subsidiary are
under written obligation to the Company or such Subsidiary to           maintain in
confidence all confidential or proprietary information acquired by           them in the
course of their employment and to assign to the Company or such           Subsidiary all
inventions made by them within the scope of their employment           during such
employment.  







    SECTION 3.18        Labor
Matters. (a) None of the Company or any Subsidiary is bound by or subject to
collective bargaining agreement or any arrangement, written or oral, with any labor union
and is required (under any legal requirement, under any contract or otherwise) to provide
benefits or working conditions beyond the minimum benefits and working conditions
required by law to be provided pursuant to rules and regulation of the Histadrut (General
Federation of Labor), the Coordinating Bureau of Economic Organization and the
Industrialists’ Association. Neither the Company nor any Subsidiary has recognized
or received a demand for recognition from any collective bargaining representative with
respect to any of its employees. Except to the extent applicable to employers and
employees generally or in a certain field in Israel, neither the Company nor any
Subsidiary has or is subject to, and no employee of Company or any Subsidiary benefits
from, any extension order (tzavei harchava) or any contract or arrangement with
respect to employment or termination thereof.  



		    (b)        There
are no controversies, strikes, slowdowns or work stoppages pending or, to           the
knowledge of the Company, threatened between the Company or any Subsidiary           and
any of their respective employees, and neither the Company nor any           Subsidiary
has experienced any such controversy, strike, slowdown or work           stoppage within
the past three years.  







		    (c)        The
Company and each Subsidiary are in compliance in all material respects with           all
applicable Laws respecting employment, employment practices, terms and
          conditions of employment, employee safety and wages and hours, including the
          Advance Notice for Dismissal and Resignation Law, 5761-2001, the Notification
to           an Employee (Terms of Employment) Law, 5762-2002, the Prevention of Sexual
          Harassment Law, 5758-1998, the Hours of Work and Rest Law, 5711-1951 and the
          Employment by Human Resources Contractors Law, 5756-1996. The Company has
          provided or made available to Purchaser all licenses or permits held by the
          Company and the Subsidiaries that enable them to employ foreign employees or
          employees from territories currently administered by Israel.  







24









		    (d)        The
obligations of the Company to provide statutory severance pay to its           employees
pursuant to the Severance Pay Law, 5723-1963 is fully insured against           or
funded. The Company uses the provisions of Section 14 of the Severance           Pay
Law, 5723-1963 with respect to such statutory severance pay.  







		    (e)        All
amounts that the Company and the Subsidiaries are legally or contractually
          required either (x) to deduct from their employees’ salaries or to
          transfer to such employees’ pension or provident, life insurance,
          incapacity insurance, continuing education fund or other similar funds or
          (y) to withhold from their employees’ salaries and benefits and to
pay           to any Governmental Authority as required by the Ordinance and National
          Insurance Law [Consolidated Version], 5755-1995, the National Health Insurance
          Law, 5754-1994 or otherwise have, in each case, been duly deducted,
transferred,           withheld and paid in all material respects.  







		    (f)        None
of the Company or any Subsidiary has engaged any employee whose employment
          would require special licenses or permits. None of the Company or any
Subsidiary           has engaged any consultants, sub-contractors or freelancers who,
according to           Israeli law, would be entitled to the rights of an employee vis-à-vis
the           Company or a Subsidiary, including rights to severance pay, vacation,
          recuperation pay (“dmei havra’a”) and other
          employee-related statutory benefits.  







		    (g)        There
are no unwritten policies or customs concerning the payment of statutory
          severance pay when it is not legally required that, by extension, could entitle
          employees of the Company or any Subsidiary to severance benefits in addition to
          those to which they are entitled pursuant to the applicable Laws, other than
          those included in the Company Employee Plans.  







		    (h)        The
Company and each Subsidiary has paid in full to all their respective           employees
or adequately accrued for in accordance with U.S. GAAP all wages,           salaries,
commissions, bonuses, benefits and other compensation due to or on           behalf of
such employees. There is no claim with respect to payment of wages,           salary or
overtime pay that has been asserted or is now pending or threatened           before any
Governmental Authority with respect to any Persons currently or           formerly
employed by the Company or any Subsidiary.  







		    (i)        There
are no unfair labor practice complaints pending against the Company or any
          Subsidiary before any Governmental Authority. Neither the Company nor any
          Subsidiary is a party to, or otherwise bound by, any consent decree with, or
          citation by, any Governmental Authority relating to employees or employment
          practices. There is no charge of discrimination in employment or employment
          practices, for any reason, including, without limitation, age, gender, race,
          religion or other legally protected category, which has been asserted or is now
          pending or threatened before any Governmental Authority in any jurisdiction in
          which the Company or any Subsidiary has employed or currently employs any
          Person.  







    SECTION 3.19        Certain
Interests. (a) To the knowledge of the Company, no shareholder, officer or director
of the Company or any Subsidiary and no relative or spouse (or relative of such spouse)
who resides with, or is, a dependent of, any such shareholder, officer or director:  



25









		    (i)        owns,
directly or indirectly, in whole or in part, or has any other interest in
               any tangible or intangible property which the Company or any Subsidiary
uses in                the conduct of the Business or otherwise; or  







		    (ii)        has
outstanding any Indebtedness to the Company or any Subsidiary.  







		    (b)        Except
as described in Section 3.19(b) of the Disclosure Schedule, neither the
               Company nor any Subsidiary has any Liability or any other obligation of
any                nature whatsoever to any officer, director or shareholder of the
Company or any                Subsidiary or to any relative or spouse (or relative of
such spouse) who resides                with, or is a dependent of, any such officer,
director or shareholder.  







    SECTION 3.20        Taxes.
(a) The Company and the Subsidiaries have paid all Taxes (including advances required by
law on Taxes) that were due prior to the date hereof. As of the Closing, the Company and
the Subsidiaries (i) will have paid all Taxes that they are required to pay prior to
the Closing, and (ii) will have withheld all Taxes required to be withheld. There
are no liens for Taxes upon any property or assets of the Company or any Subsidiary
except for liens for Taxes not yet due.  



		    (b)        The
Company and the Subsidiaries have prepared and timely filed all Israeli,           local
and foreign returns, estimates, information statements and reports           (“Returns”)
required to be filed with any taxing authority at           or prior to the Closing
relating to any and all Taxes concerning or attributable           to the Company or any
Subsidiary or to their operations, and such Returns are           true and correct in all
material respects and have been completed in all           material respects in
accordance with applicable law. Section 3.20(b) of the           Disclosure Schedule
lists all Returns filed with respect to each of the Company           and the
Subsidiaries for taxable periods ended on or after December 31, 2003.           The
Company has made available to Purchaser copies of all Returns filed for all
          periods since its inception.  







		    (c)        There
is no Tax deficiency outstanding, proposed or assessed against the Company           or
any Subsidiary that is not reflected as a liability on the Latest Balance           Sheet
nor has the Company or any Subsidiary executed any waiver of any statute           of
limitations on or extending the period for the assessment or collection of           any
Tax. The Company and the Subsidiaries do not have any liabilities for unpaid
          Israeli, local or foreign Taxes that have not been accrued for or reserved on
          the Latest Balance Sheet, whether asserted or unasserted, contingent or
          otherwise (other than Taxes that have accrued subsequent to the date of the
          Latest Balance Sheet in the ordinary course of business consistent with past
          practice).  







		    (d)        None
of the Company nor any of the Subsidiaries is a party to any income           tax-sharing
agreement or similar arrangement with any other party, has assumed           or agreed to
pay any Tax obligations of, or with respect to any transaction           relating to, any
other person or agreed to indemnify any other person with           respect to any Tax,
or has any liability for the Taxes of any person, as a           transferee or successor,
by contract or otherwise.  







		    (e)        The
Company has received final assessments of its tax returns (“shumot
          sofiot”) through and including the 2001 tax year. No Returns of the
          Company or any Subsidiary have been audited by a government or taxing authority
          during the three years preceding the date of this Agreement, nor is any such
          audit in process or pending, and neither the Company nor any Subsidiary has
been           notified of any request for such an audit or other examination.  







26









		    (f)        None
of the Company or any Subsidiary is a party to any joint venture,           partnership
or other agreement that the Company has reason to believe could be           treated as a
partnership for Tax purposes.  







		    (g)        None
of the Company or any Subsidiary has received any notice from any taxing
          authority in a jurisdiction where the Company or any Subsidiary has not filed
          Returns that the Company or a Subsidiary may be subject to taxation in such
          jurisdiction.  







		    (h)        Neither
the Company nor any Affiliate is a party to any agreement or arrangement           that
would result, separately or in the aggregate, in the actual or deemed           payment
by the Company or a Subsidiary of any “excess parachute           payments” within
the meaning of section 280G of the Code (without regard to           Section 280G(b)(4)
of the Code).  







		    (i)        None
of the Company or Subsidiaries has been a United States real property           holding
corporation within the meaning of Section 897(c)(2) of the Code during           the
applicable period specified in Section 897(c)(l)(A)(ii) of the Code.  







    SECTION 3.21        Customers.
Section 3.21 of the Disclosure Schedule lists the names of the ten most significant
customers (by revenue) of the Business for each of the year ended December 31, 2005 and
the nine-month period ended September 30, 2006, and the amount that each such customer
was invoiced during each such period. None of the Company or any Subsidiary has received
any notice or has any reason to believe that any significant customer of the Business has
ceased, or will cease, to use the products or services of the Company or any Subsidiary
or has substantially reduced, or will substantially reduce, the use of such products or
services at any time.  



    SECTION 3.22        Insurance.
All material assets, properties and risks of the Company and each Subsidiary are, and for
the past five years have been, covered by valid and, except for insurance policies that
have expired under their terms in the ordinary course, currently effective insurance
policies or binders of insurance (including, without limitation, general liability
insurance, property insurance and workers’ compensation insurance) issued in favor
of the Company or a Subsidiary, as the case may be, in each case with responsible
insurance companies, in such types and amounts and covering such risks as are consistent
with customary practices and standards of companies engaged in businesses and operations
similar to those of the Company or such Subsidiary, as the case may be. Section 3.22 of
the Disclosure Schedule lists all insurance policies currently maintained by the Company
and the Subsidiaries.  



    SECTION 3.23        CSO
Funding. Section 3.23 of the Disclosure Schedule (i) describes all approvals received
by the Company from the Investment Center and all funds provided by the CSO to the
Company or any Subsidiary and all amounts repaid by the Company or any Subsidiary to the
CSO and (ii) lists all agreements and other material documents and correspondence with
the Investment Center and the CSO regarding such approvals and funding.  



    SECTION 3.24        Full
Disclosure. (a) The Company is not aware of any facts pertaining to the Company, any
Subsidiary or the Business which could reasonably be expected to materially adversely
affect the Company, any Subsidiary or the Business and which have not been disclosed in
this Agreement or otherwise disclosed to the Purchaser by the Company or any Seller
except for risks inherent in high-tech company in a competitive market, including any
promise or guarantee as to financial or commercial success of the Company.  



27









		    (b)        To
the knowledge of the Company, no representation or warranty of the Company in
          this Agreement, nor any statement or certificate furnished or to be furnished
to           the Purchaser pursuant to this Agreement, or in connection with the
transactions           contemplated by this Agreement, contains any untrue statement of a
material           fact, or omits to state a material fact necessary to make the
statements           contained herein or therein not misleading.  









    SECTION 3.25        Brokers.
No broker, finder or investment banker is entitled to any brokerage, finder’s or
other fee or commission in connection with the transactions contemplated by this
Agreement or the Escrow Agreement based upon arrangements made by or on behalf of the
Company.  




ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE SELLERS




        As
an inducement to the Purchaser to enter into this Agreement, each Seller hereby represents
and warrants to the Purchaser, with respect to such Seller only, as follows: 



    SECTION 4.01        Authority
of such Seller. The execution and delivery of this Agreement and the Escrow Agreement
by such Seller, the performance by such Seller of its obligations hereunder and
thereunder and the consummation by such Seller of the transactions contemplated by this
Agreement and thereby have been duly authorized by all requisite action on the part of
such Seller. This Agreement has been, and upon their execution the Escrow Agreement shall
have been, duly executed and delivered by such Seller, and (assuming due authorization,
execution and delivery by the Purchaser) this Agreement constitutes, and upon its
execution the Escrow Agreement shall constitute, legal, valid and binding obligations of
such Seller, enforceable against such Seller in accordance with their respective terms.  



    SECTION 4.02        No
Conflict. Assuming that all consents, approvals, authorizations and other actions
described in Section 3.06 have been obtained, the execution, delivery and performance of
this Agreement and the Escrow Agreement by such Seller do not and will not (a) violate,
conflict with or result in the breach of any provision of the certificate of
incorporation or by-laws (or similar organizational documents) of such Seller, (b)
conflict with or violate any Law or Governmental Order applicable to such Seller, or (c)
conflict with, result in any breach of, constitute a default (or event which with the
giving of notice or lapse of time, or both, would become a default) under, require any
consent under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of any contract to which such Seller is a party or
by which any of the properties of such Seller may be bound, except for violations,
breaches or defaults which, individually and in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on such Seller, or result in the creation of
any Encumbrance on any of the outstanding Ordinary Shares owned by such Seller.  



    SECTION 4.03        Governmental
Consents and Approvals. The execution, delivery and performance of this Agreement and
the Escrow Agreement by such Seller does not and will not require any consent, approval,
authorization or other order of, action by, filing with or notification to, any
Governmental Authority, except as described in Section 3.06 of this Agreement.  



28









    SECTION 4.04        Ownership
of Ordinary Shares. Such Seller owns of record and beneficially, free and clear of
all Encumbrances (other than Encumbrances under securities laws and any Encumbrances that
will be discharged and released at or prior to the Closing) the number of Ordinary Shares
set forth opposite the name of such Seller on Exhibit A attached hereto and does not own,
beneficially or otherwise, any other securities of the Company or any of its
Subsidiaries. At the Closing, the Purchaser will acquire from such Seller such Ordinary
Shares free and clear of all Encumbrances other than Encumbrances under securities laws
or Encumbrances created by or on account of the Purchaser. Upon the transfer of such
Seller’s shares to the Purchaser, in accordance to the terms herein, the Purchaser
will own all such Seller’s shares of the Company free and clear of all Encumbrances
and will be fully paid and nonassessable. Such Seller is not a party to any voting
trusts, shareholder agreements, proxies or other agreements or understandings in effect
with respect to the voting or transfer of any of the outstanding Ordinary Shares of such
Seller.  



    SECTION 4.05        Litigation.
No Action by or against such Seller is pending or, to the knowledge of such Seller,
threatened, which could reasonably be expected to affect in any material respect the
legality, validity or enforceability of this Agreement or the Escrow Agreement or the
consummation of the transactions contemplated hereby or thereby.  



    SECTION 4.06        Brokers.
No broker, finder or investment banker is entitled to any brokerage, finder’s or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of such Seller.  



    SECTION 4.07        Right
of First Refusal. Such Seller irrevocably waives his right of first refusal with
regard to the sale of shares by all other shareholders.  




ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER




        As
an inducement to the Sellers to enter into this Agreement, the Purchaser hereby represents
and warrants to the Sellers as follows: 



    SECTION 5.01        Organization
and Authority of the Purchaser. The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all necessary corporate power and authority to enter into this
Agreement and the Escrow Agreement, to carry out its obligations hereunder and thereunder
and to consummate the transactions contemplated by this Agreement and thereby. The
execution and delivery by the Purchaser of this Agreement and the Escrow Agreement, the
performance by the Purchaser of its obligations hereunder and thereunder and the
consummation by the Purchaser of the transactions contemplated by this Agreement and
thereby have been duly authorized by all requisite corporate action on the part of the
Purchaser. This Agreement has been, and upon its execution the Escrow Agreement shall
have been, duly executed and delivered by the Purchaser, and (assuming due authorization,
execution and delivery by the Seller) this Agreement constitutes, and upon its execution
the Escrow Agreement shall constitute, legal, valid and binding obligations of the
Purchaser, enforceable against the Purchaser in accordance with their respective terms.  



29









    SECTION 5.02        No
Conflict. Assuming the making and obtaining of all filings, notifications, consents,
approvals, authorizations and other actions referenced to in Section 5.03, except as may
result from any facts or circumstances relating solely to the Company or the Sellers, the
execution, delivery and performance by the Purchaser of this Agreement and the Escrow
Agreement do not and will not (a) violate, conflict with or result in the breach of any
provision of the Certificate of Incorporation or By-laws of the Purchaser, (b) conflict
with or violate any Law or Governmental Order applicable to the Purchaser or (c) conflict
with, or result in any breach of, constitute a default (or event which with the giving of
notice or lapse of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, any note, bond, mortgage or indenture, contract,
agreement, lease, sublease, license, permit, franchise or other instrument or arrangement
to which the Purchaser is a party, which would adversely affect the ability of the
Purchaser to carry out its obligations under and to consummate the transactions
contemplated by, this Agreement or by the Escrow Agreement.  



    SECTION 5.03        Governmental
Consents and Approvals. The execution, delivery and performance by the Purchaser of
this Agreement and the Escrow Agreement do not and will not require any consent,
approval, authorization or other order of, action by, filing with, or notification to any
Governmental Authority, except as described in Section 3.06 of this Agreement.  



    SECTION 5.04        Investment
Purpose. The Purchaser is acquiring the Ordinary Shares solely for the purpose of
investment and not with a view to, or for offer or sale in connection with, any
distribution thereof.  



    SECTION 5.05        Brokers.
No broker, finder or investment banker is entitled to any brokerage, finder’s or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Purchaser.  



    SECTION 5.06        No
Success. The Purchaser is an experienced investor with such business and investment
expertise as to be able to evaluate the risks involved in an investment in a high-tech
company in a competitive market. Without derogating from the express representations and
warranties made by the Company and the Sellers in this Agreement, the Purchaser is aware
that (i) there is no promise or guarantee as to the financial or commercial success of
the Company and (ii) there is no assurance or guarantee that forward-looking plans or
projections, or planned products, will materialize or achieve the projected or expected
results.  



    SECTION 5.07        CSO.
The Purchaser is aware that the transaction contemplated by this Agreement is subject to
the approval of the CSO in accordance with the Encouragement of Research and Development
in Industry Act of 1984 and any regulations promulgated thereunder (the “ERDI Law”)
and the Purchaser is aware that: (i) the Company is subject to the payment of royalties
to the CSO from sale of products supported by the CSO up to a sum equal to the grant
amount, and (ii) the ERDI Law places strict constraints on the transfer of specified
know-how and/or production rights, making such transfers subject to the absolute
discretion of the CSO, acting in accordance with the aims of the ERDI Law, and requiring
that any such transfer receive the prior written approval of the CSO. The Purchaser
agrees to use its reasonable best efforts to obtain the consent of the CSO required to
complete the transactions contemplated by this Agreement; provided, however, that the
Purchaser shall not be required to pay any consideration or to agree to any restrictions
or undertakings in connection with seeking such consent, except for the execution of an
undertaking to the CSO substantially in the form of Exhibit 5.07.  



30









    SECTION 5.08        Financial
Capability. The Purchaser has sufficient funds to fulfill its obligations pursuant to
this Agreement.  




ARTICLE VI

ADDITIONAL AGREEMENTS




    SECTION 6.01        Conduct
of Business Prior to the Closing. (a) The Company covenants and agrees that, except
as described in Section 6.01(a) of the Disclosure Schedule, between the date hereof and
the time of the Closing, neither the Company nor any Subsidiary shall conduct its
business other than in the ordinary course and consistent with the Company’s and
such Subsidiary’s prior practice. Without limiting the generality of the foregoing,
except as described in Section 6.01(a) of the Disclosure Schedule, the Company shall, and
shall cause each Subsidiary to (i) use their reasonable best efforts to (A) preserve
intact their business organizations and the business organization of the Business, (B)
keep available to the Purchaser the services of the employees of the Company and each
Subsidiary, and (C) preserve their current relationships with their customers, suppliers
and other persons with which they have had significant business relationships; (ii) not
issue or grant any shares or options or any rights to acquire shares or options; and
(iii) not engage in any practice, take any action, fail to take any action or enter into
any transactions which could cause any representation or warranty of the Company to be
untrue or result in a breach of any covenant made by the Company in this Agreement.  



		    (b)        Except
as described in Section 6.01(b) of the Disclosure Schedule, the Company
          covenants and agrees that, between the date hereof and the time of the Closing,
          without the prior written consent of the Purchaser, neither the Company nor any
          Subsidiary will do any of the things enumerated in the second sentence of
          Section 3.09 (including, without limitation, clauses (a) through (w) thereof).  







    SECTION 6.02        Access
to Information. From the date hereof until the Closing, upon reasonable notice, the
Company shall cause its officers, directors, employees, agents, representatives,
accountants and counsel and shall cause the Subsidiaries and each of the Subsidiaries’ officers,
directors, employees, agents, representatives, accountants and counsel to: (i) afford the
officers, employees, agents, accountants, counsel and representatives of the Purchaser
reasonable access, during normal business hours, to the offices, properties, plants,
other facilities, books and records of the Company and each Subsidiary and to those
officers, directors, employees, agents, accountants and counsel of the Company and of
each Subsidiary who have any knowledge relating to the Company, any Subsidiary or the
Business and (ii) furnish to the officers, employees, agents, accountants, counsel and
representatives of the Purchaser such additional financial and operating data and other
information regarding the assets, properties, liabilities and goodwill of the Company,
the Subsidiaries and the Business (or legible copies thereof) as the Purchaser may from
time to time reasonably request.  



31









    SECTION 6.03        Confidentiality.
(a) Each Seller agrees to, and shall cause its agents, representatives, Affiliates,
employees, officers and directors to: (a) treat and hold as confidential (and not
disclose or provide access to any Person to) all information relating to the Company’s
and each Subsidiary’s trade secrets, processes, patent and trademark applications,
product development, price, customer and supplier lists, pricing and marketing plans,
policies and strategies, details of client and consultant contracts, operations methods,
product development techniques, business acquisition plans, new personnel acquisition
plans and all other confidential or proprietary information with respect to the Business,
the Company and each Subsidiary (the “Company Information”), (b) in the
event that such Seller or any such agent, representative, Affiliate, employee, officer or
director becomes legally compelled to disclose any such information, provide the
Purchaser with prompt written notice of such requirement so that the Purchaser, the
Company or any Subsidiary may seek a protective order or other remedy or waive compliance
with this Section 6.03, and (c) in the event that such protective order or other remedy
is not obtained, or the Purchaser waives compliance with this Section 6.03, furnish only
that portion of such confidential information which is legally required to be provided
and exercise its reasonable best efforts to obtain assurances that confidential treatment
will be accorded such information; provided, however, that this section shall not
apply to any information that (i)  is or becomes subsequently available publicly and
was not disclosed in breach of this Agreement by such Seller, its agents,
representatives, Affiliates, employees, officers or directors, (ii) corresponds in
substance to information that was received in good faith by such Seller from a third
party having a right to disclose such information; or (iii) was independently developed
by or on behalf of such Seller subsequent to the receipt of such disclosure without
resort to the information disclosed by the Company or any Subsidiary. The Seller agrees
and acknowledges that remedies at law for any breach of its obligations under this
Section 6.03 are inadequate and that in addition thereto the Purchaser shall be entitled
to seek equitable relief, including injunction and specific performance, in the event of
any such breach.  



		    (b)        The
Purchaser and the Company agree that if this Agreement is terminated in
          accordance with its terms without Closing, the Purchaser and the Company will
          continue to be bound by the terms of the Mutual Nondisclosure Agreement, dated
          as of August 17, 2006, by and between the Purchaser and the Company (the
          “Confidentiality Agreement”).  







    SECTION 6.04        Required
Consents. (a) The Company shall use its reasonable best efforts to obtain (or cause
the Subsidiaries to obtain) all authorizations, consents, orders and approvals of all
Governmental Authorities that may be or become necessary for its execution and delivery
of, and the performance of its obligations pursuant to, this Agreement and the Escrow
Agreement and will cooperate fully with the Purchaser in promptly seeking to obtain all
such authorizations, consents, orders and approvals.  



		    (b)        The
Company and the Subsidiaries shall give promptly such notices to third           parties
and use their reasonable best efforts to obtain such third party           consents and
estoppel certificates as the Purchaser may in its sole discretion           deem
necessary or desirable in connection with the transactions contemplated by           this
Agreement.  







		    (c)        The
Purchaser shall cooperate and use all reasonable efforts to assist the           Company
in giving such notices and obtaining such consents and estoppel           certificates;
provided, however, that the Purchaser shall have no           obligation to
give any guarantee or other consideration of any nature in           connection with any
such notice, consent or estoppel certificate or to consent           to any change inthe
terms of any agreement or arrangement which the           Purchaser in its sole
discretion may deem adverse to the interests of the           Purchaser, the Company, any
Subsidiary or the Business.  







32









		    (d)        The
Company knows of no reason why all the consents, approvals and           authorizations
necessary for the consummation of the transactions contemplated           by this
Agreement will not be received.  







    SECTION 6.05        Notice
of Developments. Prior to the Closing, the Company shall promptly notify the
Purchaser in writing of (a) all events, circumstances, facts and occurrences arising
subsequent to the date of this Agreement which could result in any breach of a
representation or warranty or covenant of the Company or the Sellers in this Agreement or
which could have the effect of making any representation or warranty of the Company or
the Sellers in this Agreement untrue or incorrect in any respect and (b) all other
material developments affecting the assets, liabilities, business, financial condition,
operations, results of operations, customer or supplier relations, employee relations,
projections or prospects of the Company, any Subsidiary or the Business.  



    SECTION 6.06         No
Shop. Each Seller and the Company agrees that between the date of this Agreement and
the earlier of (a) the Closing and (b) the termination of this Agreement, none of such
Seller, the Company or any of their respective officers, directors, representatives or
agents will (i) solicit, initiate, knowingly encourage or accept any other proposals or
offers from any Person relating to any acquisition of any Ordinary Shares or assets of
the Company or any Subsidiary (other than products or services to be sold or licensed in
the ordinary course of business consistent with past practice) or (ii) participate in any
discussions or negotiations with any Person (other than the Purchaser) regarding, or
furnish to any Person (other than the Purchaser) any information with respect to, any of
the foregoing. Each of the Company and each Seller immediately shall cease any existing
discussions or negotiations conducted by such person with respect to any of the
foregoing.  



    SECTION 6.07        Use
of Intellectual Property. From and after the Closing, none of the Sellers nor any of
their Affiliates shall use any of the Owned Intellectual Property except pursuant to
commercial arrangements between the Sellers (or their Affiliates) and the Company or as
permitted pursuant to Section 6.03.  



    SECTION 6.08        [Intentionally
omitted].  



    SECTION 6.09        Currency.
Unless otherwise specified in this Agreement, all references to currency, monetary values
and dollars set forth herein shall mean United States (U.S.) dollars and all payments
hereunder shall be made in United States dollars.  



    SECTION 6.10        Further
Action. Each of the parties hereto shall use all reasonable efforts to take, or cause
to be taken, all appropriate action, do or cause to be done all things necessary, proper
or advisable under applicable Law, and to execute and deliver such documents and other
papers, as may be required to carry out the provisions of this Agreement and consummate
and make effective the transactions contemplated by this Agreement.  




33











ARTICLE VII

CERTAIN TAX MATTERS



    SECTION 7.01       
Taxes on Sale. Each Seller shall be liable for and shall hold the Purchaser
harmless against any capital gains, ordinary income, company, National Insurance, health
tax or any other Taxes applicable to such Seller which become payable in connection with
the sale of shares hereunder by such Seller.  



    SECTION 7.02       
Miscellaneous. The Sellers and the Purchaser agree to treat all payments made by
either of them to or for the benefit of the other (including any payments to the Company
or any Subsidiary) under any indemnity provisions of this Agreement and for any
misrepresentations or breaches of warranties or covenants as adjustments to the purchase
price or as capital contributions for tax purposes and that such treatment shall govern
for purposes hereof except to the extent that the laws of a particular jurisdiction
provide otherwise.  




ARTICLE VIII

CONDITIONS TO CLOSING



    SECTION 8.01       
Conditions to Obligations of the Sellers. The obligations of each Seller to
consummate the transactions contemplated by this Agreement shall be subject to the
fulfillment or written waiver, at or prior to the Closing, of each of the following
conditions:  



		    (a)        Accuracy
of Representations and Warranties. The representations and                warranties
of the Purchaser contained in this Agreement that are qualified by
               materiality or Material Adverse Effect shall have been true and correct,
and the                representations and warranties that are not so qualified shall
have been true                and correct in all material respects, when made and as of
the Closing, as though                made on and as of the Closing, except to the extent
such representations and                warranties are expressly made as of earlier date,
in which case, as of such                earlier date;  







		    (b)        Compliance
with Agreements. The Purchaser shall have performed or                complied with
in all material respects all covenants and agreements required by                this
Agreement to be performed or complied with by the Purchaser on or prior to
               the Closing;  







		    (c)        Officer
Certificate. The Purchaser shall have delivered to the Seller or                a
representative of the Sellers a certificate, dated the date of the Closing,
               signed by a duly authorized officer of the Purchaser, certifying as to the
               satisfaction of the conditions specified in Sections 8.01(a) and 8.01(b);  







		    (d)        No
Proceeding or Litigation. No Action shall have been commenced by or
               before any Governmental Authority against such Seller, any other Seller or
the                Purchaser, seeking to restrain or materially and adversely alter the
               transactions contemplated by this Agreement which, in the reasonable, good
faith                determination of such Seller, is likely to render it impossible or
unlawful to                consummate such transactions; provided, however,
that the                provisions of this Section 8.01(d) shall not apply if such Seller
has directly                or indirectly solicited or encouraged any such Action; and  







34











		    (e)        Escrow
Agreement. The Purchaser shall have executed and delivered to the
               Sellers or a representative of the Sellers the Escrow Agreement.  







    SECTION 8.02       
Conditions to Obligations of the Purchaser. The obligations of the Purchaser to
consummate the transactions contemplated by this Agreement shall be subject to the
fulfillment or written waiver, at or prior to the Closing, of each of the following
conditions:  



		    (a)        Representations
and Warranties of the Company. The representations and                warranties of
the Company contained in this Agreement that are qualified by                “materiality” or
“Material Adverse Effect” shall have been                true and correct, and
the representations and warranties that are not so                qualified shall have
been true and correct in all material respects, when made                and as of the
Closing as though made on and as of the Closing, except to the                extent that
any such representations and warranties are expressly made as of an
               earlier date, in which case, such representations and warranties shall be
true                and correct as of such earlier date;  







		    (b)        Representations
and Warranties of the Sellers. The representations and                warranties of
the Sellers contained in this Agreement that are qualified by                “materiality” or
“Material Adverse Effect” shall have been                true and correct, and
the representations and warranties that are not so                qualified shall have
been true and correct in all material respects, when made                and as of the
Closing as though made on and as of the Closing, except to the                extent that
any such representations and warranties are expressly made as of an
               earlier date, in which case, such representations and warranties shall be
true                and correct as of such earlier date;  







		    (c)        Compliance
with Agreement. (i) The Company shall have performed or                complied with
in all material respects all covenants and agreements required by                this
Agreement to be performed or complied with by the Company on or prior to
               the Closing; and (ii) each Seller shall have performed or complied with in
all                material respects all covenants and agreements required by this
Agreement to be                performed or complied with by such Seller on or prior to
the Closing;  







		    (d)        Officer
Certificate. (i) The Company shall have delivered to the                Purchaser a
certificate, dated the date of the Closing, signed by a duly                authorized
officer of the Company, certifying as to the satisfaction of the
               conditions specified in Sections 8.02(a) and 8.02(c)(i); and (ii) each
Seller                shall have delivered to the Purchaser a certificate, dated the date
of the                Closing, signed by a duly authorized officer of the Seller,
certifying as to the                satisfaction of the conditions specified in Sections
8.02(b) and 8.02(c)(ii);  







		    (e)        No
Proceeding or Litigation. No Action shall have been commenced or
               threatened by or before any Governmental Authority against any Seller or
the                Purchaser, seeking to restrain or materially and adversely alter the
               transactions contemplated by this Agreement which, in the reasonable, good
faith                determination of the Purchaser, is likely to render it impossible or
unlawful to                consummate such transactions or which could have a Material
Adverse Effect;  








35











		    (f)        Loan
Agreement. (i) The Lenders under the Loan Agreement shall have
               delivered to the Purchaser a “pay-off” letter duly executed by
the                Lenders, in form and substance reasonably acceptable to the Purchaser,
               certifying as to the aggregate amount owed by the Company and the
Subsidiaries                under the Loan Agreement as of immediately prior to the
Closing (which amount                shall not be greater than $4,000,000 plus the amount
of interest accrued and                unpaid since October 1, 2006) (the “Pay-off
Amount”) and agreeing                that, among other things, upon the payment of
such Pay-Off Amount to the Lenders                at the Closing in accordance with the
“pay-off” letter, (A) all                obligations under the Loan Agreement
will be satisfied in full and neither the                Company nor any of the
Subsidiaries will have any outstanding liabilities or                obligations
whatsoever to any of the Lenders under, in connection with or                pursuant to
the Loan Agreement or other Transaction Documents (as defined in the                Loan
Agreement) and (B) all Encumbrances granted in favor of the Lenders under
               the Loan Agreement and other Transaction Documents (as defined in the Loan
               Agreement) shall be released; and (ii) the Lenders shall have delivered to
the                Company for filing, or authorized the filing by the Company of, UCC 3
               Termination Statements and such other documents and forms as the Purchaser
deems                reasonably necessary to validly terminate or release all
Encumbrances granted by                the Company or any of its Subsidiaries in favor of
the Lenders upon recordation                thereof, in each case, in form and substance
reasonably satisfactory to the                Purchaser. It is agreed that the Purchaser
shall, at the Closing, pay the                Pay-off Amount to or as directed by the
Lenders in accordance with a                “pay-off” letter delivered to the
Purchaser complying with the                requirements of this Section 8.02(f), and
this will not reduce the Per Share                Purchase Price.  







		    (g)        Required
Consents and Approvals. The Purchaser and the Company shall have
               received, each in form and substance reasonably satisfactory to the
Purchaser,                the authorizations, consents, orders and approvals of
Governmental Authorities                and third parties set forth on Exhibit 8.02(g)
attached hereto, which shall not                require any payments or impose any
restrictions except such as the Purchaser                shall approve in its sole
discretion;  







		    (h)        Acceptance
of Employment Offers. (i) All of the employees listed as Tier                I
Employees on Exhibit 8.02(h) shall remain employed with the Company or a
               Subsidiary as of the Closing and shall have accepted an offer of
continuing                employment made by the Purchaser or an Affiliate of the
Purchaser; and (ii) at                least 80% of all other employees of the Company and
StoreAge U.S. shall remain                employed with the Company or StoreAge U.S. as
of the Closing and shall have                accepted an offer of continuing employment
made by the Purchaser or an Affiliate                of the Purchaser;  







		    (i)        [Intentionally
omitted];  







		    (j)        Resignations.
All of the directors and officers of the Company and                StoreAge U.S. and all
of the directors and officers of StoreAge China appointed                by the Company
shall have executed and delivered to the Purchaser written                resignations
effective as of the Closing, except for such persons as shall have
               designated in writing by the Purchaser to the Company prior to the
Closing;  







		    (k)        Escrow
Agreement. Each of the Sellers and the Escrow Agent shall have
               delivered to the Purchaser an executed counterpart of the Escrow
Agreement;  







36











		    (l)        Legal
Opinion. The Purchaser shall have received from Primes, Shiloh,                Givon,
Meir Law Firm, counsel to the Company, a legal opinion, addressed to the
               Purchaser and dated the Closing Date, addressing the matters set forth in
               Exhibit 8.02(l);  







		    (m)        No
Material Adverse Effect. No event or events shall have occurred which,
               individually or in the aggregate, have had or could reasonably be expected
to                have a Material Adverse Effect;  







		    (n)        Company
Share Option Plans. (i) The Company shall have taken all action
               necessary to terminate the Company Share Option Plans as of the Closing
and (ii)                all holders of Company Share Options shall have agreed, in
writing in form and                substance reasonably satisfactory to the Purchaser, to
the treatment of                cancellation of the Company Share Options in accordance
with Section 2.04, to                the other terms of this Agreement applicable to
holders of Company Share Options                (including the indemnification provisions
of Article IX), and to the appointment                of the Sellers’ Representatives
to act on behalf of such holders for                certain purposes pursuant to and in
accordance with Section 9.07;  







		    (o)        No
Other Shareholders. The Company shall not have issued any Ordinary
               Shares, Company Share Options or any other equity interests or rights to
acquire                equity interests in the Company and no other Person other than the
Sellers shall                have acquired or shall own, of record or beneficially, any
shares of the Company                or any Subsidiary, whether by exercise of Company
Share Options or otherwise,                and the Purchaser shall acquire at the Closing
all of the outstanding Ordinary                Shares;  







		    (p)        Termination
of 401(k) Plan. The Board of Directors of the Company shall                have taken
all action necessary, in form and substance reasonably satisfactory                to the
Purchaser, to terminate the Company’s 401(k) plan as of immediately
               prior to the Closing; and  







		    (q)        Delivery
of September 30 2006 Interim Financial Statements. The Company                shall
have delivered to the Purchaser interim financial statements as of and for
               the nine month period ended September 30, 2006 in substantially the same
form as                the Interim Financial Statements.  








ARTICLE IX

INDEMNIFICATION



    SECTION 9.01       
Survival of Representations and Warranties. (a) The representations and warranties
of the Company and the Sellers contained in this Agreement shall survive the Closing
until the date that is 18 months after the date of this Agreement; provided, however,
that (i) the representations and warranties made pursuant to Sections 3.03 and 4.04 shall
survive indefinitely, and (ii) the representations and warranties made pursuant to
Section 3.20 shall survive until the expiration of the applicable statute of limitations
with respect to the liabilities in question. Neither the period of survival nor the
liability of the Sellers with respect to the representations and warranties of the
Company and the Sellers shall be reduced by any investigation made at any time by or on
behalf of the Purchaser. If written notice of a claim describing the basis for such claim
in reasonable detail has been given prior to the expiration of the applicable
representations and warranties by the Purchaser to the Sellers’Representative, then
the indemnification obligation with respect to such item as to which a claim has been
given shall survive, until such claim has been finally resolved.  



37











         (b)       
          The representations and warranties of the Purchaser contained in this Agreement
          and the Escrow Agreement shall survive the Closing until the date that is 18
          months after the date of this Agreement; provided, however, that
          the representations and warranties made pursuant to Section 5.05 shall survive
          indefinitely. Neither the period of survival nor the liability of the Purchaser
          with respect to the Purchaser’s representations and warranties shall be
          reduced by any investigation made at any time by or on behalf of the Sellers. If
          written notice of a claim describing the basis for such claim in reasonable
          detail has been given prior to the expiration of the applicable representations
          and warranties by the Sellers’ Representative to the Purchaser, then the
          indemnification obligation with respect to such item as to which a claim has
          been given shall survive as to such claim, until such claim has been finally
          resolved. 



    SECTION 9.02       
Indemnification by the Sellers. The Purchaser and its Affiliates, officers,
directors, employees, agents, successors and assigns (each a “Purchaser
Indemnified Party”) shall be indemnified and held harmless by the Sellers and
the other Company Securityholders, severally and not jointly, for and against any and all
Liabilities, losses, diminution in value, damages, claims, costs and expenses, interest,
awards, judgments and penalties (including, without limitation, reasonable attorneys’fees
and expenses) actually suffered or incurred by them (hereinafter a “‘Loss”),
arising out of or resulting from:  



		    (a)        the
breach of any representation or warranty made by (i) the Company or (ii)
               such Seller in this Agreement as of the date of this Agreement or as if
such                representation and warranty was made on and as of the Closing (it
being                understood that such representations and warranties shall be
interpreted without                giving effect to any limitations or qualifications as
to “materiality”               (including the word “material”) or
“Material Adverse Effect”               set forth therein); or  







		    (b)        the
breach of any covenant or agreement made by (i) the Company or (ii) such
               Seller in this Agreement.  







The indemnification obligations of a
Seller pursuant to Section 9.02(a)(ii) and Section 9.02(b)(ii) shall relate solely to any
such breach of a representation, warranty, claim or agreement made by such Seller in this
Agreement. 



The indemnification obligations of
the Sellers set forth in this Section 9.02 are subject to the limitations and provisions
of Section 9.06 below. 



    SECTION 9.03       
Indemnification by the Purchaser. Each Seller and its Affiliates, officers,
directors, employees, agents, successors and assigns (each a “Seller Indemnified
Party”) shall be indemnified and held harmless by the Purchaser for and against
any and all Losses, arising out of or resulting from:  



		    (a)        the
breach of any representation or warranty made by the Purchaser contained in
               this Agreement as of the date of this Agreement or as if such
representation and                warranty was made on and as of the Closing (it being
understood that such                representations and warranties shall be interpreted
without giving effect to any                limitations or qualifications as to “materiality” (including
the word                “material”) or “material adverse effect” set
forth therein);                or  







38











		    (b)        ;the
breach of any covenant or agreement by the Purchaser contained in this
               Agreement.  







    SECTION 9.04       
Third Party Claims. (a) An Indemnified Party shall give the Indemnifying Party
notice of any matter that an Indemnified Party has determined has given or could give
rise to a right of indemnification under this Agreement, within 60 days of such
determination, stating the amount of the Loss, if known, and method of computation
thereof, and containing a reference to the provisions of this Agreement in respect of
which such right of indemnification is claimed or arises.  



		    (b)        The
obligations and Liabilities of an Indemnifying Party under this Article IX with
respect to Losses arising from claims of any third party which are subject to
the indemnification provided for in this Article IX (“Third Party Claims”)
shall be governed by and be contingent upon the following additional terms and
conditions: if an Indemnified Party shall receive notice of any Third Party
Claim, the Indemnified Party shall give the Indemnifying Party written notice
of such Third Party Claim promptly after receipt by the Indemnified Party of
such notice; provided, however, that any failure to provide such notice
shall not release the Indemnifying Party from any of its obligations under this
Article IX except to the extent that the Indemnifying Party is materially
prejudiced by such failure and shall not relieve the Indemnifying Party from
any other obligation or Liability that it may have to any Indemnified Party
otherwise than under this Article IX except to the extent that the Indemnifying
Party is materially prejudiced by such failure. If the Indemnifying Party
acknowledges in writing its obligation to indemnify the Indemnified Party
hereunder against any Losses that may result from such Third Party Claim, then
the Indemnifying Party shall be entitled to assume and control the defense of
such Third Party Claim at its expense and through counsel of its choice if it
gives notice of its intention to do so to the Indemnified Party within ten
business days of the receipt of such notice from the Indemnified Party; provided
that such counsel is not reasonably objected to by the Indemnified Party;
and provided, further, that if there is reasonably likely to exist a
conflict of interest that would make it inappropriate in the judgment of the
Indemnified Party in its reasonable discretion for the same counsel to
represent both the Indemnified Party and the Indemnifying Party, then the
Indemnified Party shall be entitled to retain its own counsel in each
jurisdiction for which the Indemnified Party reasonably determines counsel is
required, at the expense of the Indemnifying Party. In the event that the
Indemnifying Party exercises the right to undertake any such defense against
any such Third Party Claim as provided above, the Indemnified Party shall agree
to any judgment, settlement, compromise or discharge of such Third-Party Claim
that the Indemnifying Party may recommend that by its terms obligates the
Indemnifying Party to pay the full amount of the liability in connection with
such Third-Party Claim (or the full amount will be paid from the Escrow Fund),
which releases the Indemnified Party completely in connection with such
Third-Party Claim and that would not otherwise materially adversely affect the
Indemnified Party. In the event that the Indemnifying Party exercises the right
to undertake any such defense against any such Third Party Claim as provided
above, the Indemnified Party shall cooperate with the Indemnifying Party in
such defense and make available to the Indemnifying Party, at the Indemnifying
Party’s expense, all witnesses, pertinent records, materials and
information in the Indemnified Party’s possession or under the Indemnified
Party’s control relating thereto as is reasonably required by the
Indemnifying Party. Similarly, in the event that the Indemnified Party is,
directly or indirectly, conducting the defense against any such Third Party
Claim, the Indemnifying Party shall cooperate with the Indemnified Party in
such defense and make available to the Indemnified Party, at the Indemnifying
Party’s expense, all such witnesses, records, materials and information in
the Indemnifying Party’s possession or under the Indemnifying Party’s
control relating thereto as is reasonably required by the Indemnified Party. No
such Third Party Claim may be settled by the Indemnified Party without the
prior written consent of the Indemnifying Party (not to be unreasonably
withheld).  







39











    SECTION 9.05       
Distributions from Escrow Fund. In the event that (a) the Sellers’Representatives
shall not have objected to the amount claimed by the Purchaser for indemnification with
respect to any Loss in accordance with the procedures set forth in the Escrow Agreement
or (b) the Sellers’ Representatives shall have delivered notice of their
disagreement as to the amount of any indemnification requested by the Purchaser and
either (i) the Sellers’ Representatives and the Purchaser shall have, subsequent to
the giving of such notice, mutually agreed that the Sellers are obligated to indemnify
the Purchaser for a specified amount and shall have so jointly notified the Escrow Agent
or (ii) a final nonappealable judgment shall have been rendered by the court having
jurisdiction over the matters relating to such claim by the Purchaser for indemnification
from the Sellers and the Escrow Agent shall have received, in the case of clause (i)
above, written instructions from the Sellers’ Representatives and the Purchaser, or,
in the case of clause (ii) above, a copy of the final nonappealable judgment of the
court, the Escrow Agent shall deliver to the Purchaser from the Escrow Fund any amount
(subject to the other terms of this Agreement and the Escrow Agreement) determined to be
owed to the Purchaser under this Article IX in accordance with the Escrow Agreement.  



    SECTION 9.06       
Limits of Indemnification; Loss Threshold and Exclusive Remedy. (a) The maximum
aggregate amount of indemnifiable Losses that may be recovered from any Seller under this
Agreement shall be equal to such Seller’s Pro Rata Share of the Escrow Fund; provided,
however, that the maximum aggregate amount of indemnifiable Losses (together with
any amount of Losses indemnified under this Agreement) that may be recovered from any
Seller in the case of fraud or breaches of representations and warranties in Sections
3.03, 3.20 or 4.04 shall be equal to the aggregate consideration actually received by
such Seller for such Seller’s Ordinary Shares pursuant to this Agreement.  



		    (b)        In
calculating the amount of any Losses claimed by the Purchaser (or its
Affiliates, officers, directors, employees, agents, successors and assigns)
under this Article IX, there shall be deducted: (i) the amount of any reserve
or provision included in the Financial Statements for Losses to which such
claim relates, and (ii) the amount of any indemnification or other
recoveries (including insurance proceeds) actually received by the Purchaser or
the Company (or its Affiliates, officers, directors, employees, agents,
successors and assigns) from any third party with respect to such Losses (it
being agreed that the Purchaser or its Affiliates, officers, directors,
employees, agents, successors and assigns shall be entitled to claim, but shall
not be entitled to recover for, Losses with respect to an amount whose
collection by the Purchaser or the Company from a third party is reasonably
certain, but which has not actually been received; provided, however,
that (A) if such amount is not actually received by the Purchaser or its
Affiliates, officers, directors, employees, agents, successors and assigns
within 90 days of the making of the claim, despite good faith efforts to
collect such amount, they shall be entitled to be indemnified for such claim,
and (B) the indemnification obligation with respect to such claim shall
continue until 120 days following the making of the claim); further provided,
however, that if the Purchaser is indemnified pursuant to the foregoing
proviso because an amount is not collected within 90 days of the making of the
claim, and the Purchaser subsequently collects such amount from the third
party, the Purchaser shall promptly refund the amount of the indemnification to
the Escrow Agent.  







40











		    (c)        Notwithstanding
anything contained herein to the contrary, the Purchaser           Indemnified Parties
shall not be entitled to indemnification pursuant to Section           9.02(a), and the
Sellers shall not have any obligation to indemnify the           Purchaser Indemnified
Parties pursuant to Section 9.02(a), from and against any           Losses in respect of
claims under Section 9.02(a) until the aggregate amount of           all Losses for which
Purchaser Indemnified Parties are seeking indemnification           equals or exceeds
$500,000 (the “Threshold”), whereupon the           Purchaser
Indemnified Parties shall be entitled to indemnification with respect           to all
such Losses including the amount of the Threshold; provided, however, that
(i) the threshold with respect to Losses arising from           or resulting from
breaches of the representations and warranties set forth in           Section 3.20 shall
be $50,000, with any such Losses to be aggregated for the           purpose of
calculating the Threshold, and (ii) the Threshold shall not           apply with
respect to Losses arising from or resulting from breaches of the
          representations and warranties set forth in Section 4.04.  







		    (d)        Sellers
and the Company shall have no liability to the Purchaser for Losses           which arise
as a direct result of: (i) any act or omission of the Purchaser           (and its
Affiliates, officers, directors, employees, agents, successors and           assigns)
having as its purpose the precipitation of a claim for indemnification
          hereunder, (ii) any changes in accounting methods or policies after the
          Closing, (iii) the granting of any extensions or waivers with respect to
          any statute of limitations applicable to claims which might be made against the
          Purchaser (and its Affiliates, officers, directors, employees, agents,
          successors and assigns), unless the Purchaser has consulted with the
          Sellers’ Representative with respect to such extension or waiver, or
          (iv) the passing of, or any change in, after the Closing, any law or
          administrative practice of any governmental authority in any such case not
          actually in force at the date of the Closing (even if retroactive in effect),
          including, but not limited, to any increase in the tax rates in effect on the
          date of the Closing or imposition of any tax not in effect on the date of the
          Closing.  







		    (e)        Except
in the case of fraud and except with respect to claims for non-cash           equitable
remedies, the indemnification provisions set forth in this Article IX           and the
Escrow Agreement shall be the sole and exclusive remedy of the           Indemnified
Party for any cause of action, right, demand, charge or claim such           Indemnified
Party may have resulting from, arising out of, based upon or           relating to any
Losses and any inaccuracy in, or breach of, any representation,           warranty, claim
or agreement of the Company or the Sellers.  







41











    SECTION 9.07       
Sellers’ Representatives. Each Company Securityholder hereby appoints,
authorizes and empowers Robi Hartman and Genesis Partners II LDC, acting together (such
persons and any successor or successors to such persons in such capacity being the “Sellers’ Representatives”),
to act as representatives and as the exclusive agents and attorneys in fact of such
Company Securityholder, and the Sellers’ Representatives are hereby authorized and
empowered to act on behalf of such Company Securityholder, to execute the Escrow
Agreement on behalf of such Company Securityholder and to take any and all actions
required or permitted to be taken by the Sellers’ Representatives under this
Agreement or the Escrow Agreement, with respect to any claims made by the Purchaser or
the Sellers for indemnification pursuant to this Article IX of this Agreement and with
respect to any actions to be taken by the Sellers’ Representatives pursuant to the
terms of the Escrow Agreement, including, without limitation, to: (i) execute the
Escrow Agreement on behalf of such Company Securityholder; (ii) execute any
agreement or instrument required to be executed and delivered by the Sellers’ Representative
under this Agreement or the Escrow Agreement, (iii) authorize delivery to any
Purchaser Indemnified Parties of the Indemnity Escrow Fund, or any portion thereof, in
satisfaction of indemnification claims under this Article IX, (iv) agree to,
negotiate, enter into settlements and compromises of and comply with orders of courts and
awards of arbitrators with respect to such indemnification claims, (v) resolve any
indemnification claims under this Article IX, and (vi) take all actions necessary in
the sole discretion of the Sellers’ Representative for the accomplishment of the
foregoing and all of the other terms, conditions and limitations of this Agreement or the
Escrow Agreement. The Sellers’ Representatives shall at all times act in their
capacity as Sellers’Representatives in a manner that the Sellers’ Representatives
believe in good faith to be in the best interests of the Company Securityholders. Neither
the Sellers’Representatives nor any of their directors, officers, employees or
agents shall be liable to any Person for any error of judgment, or any action taken,
suffered or omitted to be taken, under this Agreement or the Escrow Agreement, except in
the case of its gross negligence, bad faith or willful misconduct. The Sellers’ Representatives
may in their discretion consult with legal counsel, independent public accountants and
other experts selected by it and shall not be liable for any action taken or omitted to
be taken in good faith by it in accordance with the advice of such counsel, accountants
or experts or failure to seek advice. The Sellers’ Representatives shall not have
any duty to ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions of this Agreement or the Escrow Agreement. As to any
matters not expressly provided for in this Agreement or the Escrow Agreement, the Sellers’ Representatives
shall not be required to exercise any discretion or take any action. The Sellers shall,
severally and not jointly, on a pro rata basis based on their Pro Rata Share, indemnify,
defend and hold the Sellers’ Representatives harmless against any liabilities,
losses, damages, claims, costs or expenses that may be incurred as such liabilities,
losses, damages, claims, costs or expenses are incurred by the Sellers’Representatives
and arising out of or in connection with the acceptance or administration of the Sellers’ Representatives’ duties
hereunder, including, but not limited, the legal costs and expenses of defending such
Sellers’ Representatives against any claim or liability (and all actions, claims,
proceedings and investigations in respect thereof), in connection with, caused by or
arising out of, directly or indirectly, the performance of the Sellers’ Representatives’ duties
(except for bad faith or willful misconduct). The Sellers shall be responsible for and
shall reimburse the Sellers’ Representatives on a pro rata basis upon demand for all
reasonable expenses, disbursements and advances incurred or made by the Sellers’ Representatives
in accordance with any of the provisions of this Agreement, the Escrow Agreement or any
other documents executed in connection herewith or therewith, including, without
limitation, the costs and expenses of receiving advice of counsel according to this
Agreement and the Escrow Agreement. The indemnification and reimbursement of costs and
expenses obligations of the Sellers vis-à-vis the Sellers’ Representatives
pursuant to this Section 9.08 shall remain in full force and effect following the
appointment of a new Sellers’ Representative or termination of this Agreement for
any reason. Notwithstanding anything to contrary herein or in the Escrow agreement, (a)
the Sellers’ Representatives are not authorized to, and shall not, accept on behalf
of any Seller any purchase price consideration to which such Seller is entitled under
this Agreement and (b) the Sellers’ Representatives shall not in any manner
exercise, or seek to exercise, any voting power whatsoever with respect to shares of the
Company now or hereafter owned of record or beneficially by a Seller unless the Sellers’Representatives
are expressly authorized to do so in a writing signed by such Seller. At any time during
the term of the Escrow Agreement, holders of a majority in interest of the Escrow Fund
can appoint a new Sellers’ Representative by a written consent signed by such
holders, a copy of which shall be provided to the Purchaser and the Escrow Agent. The
Purchaser shall be entitled to rely exclusively on all statements, representatives and
decisions of the Sellers’ Representatives as statements, representations and
decisions of the Sellers.  



42










ARTICLE X

TERMINATION, AMENDMENT AND WAIVER



     SECTION 10.01       
Termination. This Agreement may be terminated at any time prior to the Closing:  



		    (a)        by
the Purchaser if, between the date hereof and the Closing, (i) an event or
               condition occurs that has resulted in a Material Adverse Effect, (ii) the
               Company or the Sellers shall not have complied in all material respects
with the                covenants or agreements contained in this Agreement to be
complied with by it or                (iii) any Seller, the Company or any Subsidiary
makes a general assignment for                the benefit of creditors, or any proceeding
shall be instituted by or against                any Seller, the Company or any
Subsidiary seeking to adjudicate any of them a                bankrupt or insolvent, or
seeking liquidation, winding up or reorganization,                arrangement,
adjustment, protection, relief or composition of its debts under                any Law
relating to bankruptcy, insolvency or reorganization;  







		    (b)        by
either the Sellers’ Representative or the Purchaser if the Closing shall
               not have occurred by January 31, 2007; provided, however,
               that the right to terminate this Agreement under this Section 10.01 (b)
shall                not be available to any party whose failure to fulfill any
obligation under this                Agreement shall have been the cause of, or shall
have resulted in, the failure                of the Closing to occur on or prior to such
date;  







		    (c)        by
either the Purchaser or the Sellers’ Representative in the event that
               any Governmental Authority shall have issued an order, decree or ruling or
taken                any other action restraining, enjoining or otherwise prohibiting the
               transactions contemplated by this Agreement and such order, decree, ruling
or                other action shall have become final and nonappealable; or  







		    (d)        by
the mutual written consent of the Sellers’ Representative and the
               Purchaser.  







    SECTION 10.02       
Effect of Termination. In the event of termination of this Agreement as provided
in Section 10.01, this Agreement shall forthwith become void and there shall be no
liability on the part of either party hereto except (a) as set forth in Sections 6.03(b)
and 11.01 and (b) that nothing herein shall relieve any party from liability for any
breach of this Agreement.  



    SECTION 10.03       
Amendment. This Agreement may not be amended or modified except (a) by an
instrument in writing signed by, or on behalf of, the Sellers and the Purchaser or (b) by
a waiver in accordance with Section 10.04.  



    SECTION 10.04       
Waiver. Any party to this Agreement may (a) extend the time for the performance of
any of the obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other parties contained herein or in any
document delivered by the other parties pursuant hereto or (c) waive compliance with any
of the agreements of the other parties or conditions to such party’s obligations
contained herein. Any such extension or waiver shall be valid only if set forth in an
instrument in writing signed by the party to be bound thereby. Any waiver of any term or
condition shall not be construed as a waiver of any subsequent breach or a subsequent
waiver of the same term or condition, or a waiver of any other term or condition of this
Agreement. The failure of any party to assert any of its rights hereunder shall not
constitute a waiver of any of such rights. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise
available.  



43










ARTICLE XI

GENERAL PROVISIONS



    SECTION 11.01       
Expenses. Except as otherwise specified in this Agreement, all costs and expenses,
including, without limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions contemplated
by this Agreement shall be paid by the party incurring such costs and expenses.  



    SECTION 11.02       
Notices. All notices, requests, claims, demands and other communications hereunder
shall be in writing and shall be given or made (and shall be deemed to have been duly
given or made upon receipt) by delivery in person, by an internationally recognized
overnight courier service, by telecopy or registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses (or at
such other address for a party as shall be specified in a notice given in accordance with
this Section 11.02):  



	 	         (a) 	if
to the Company:



StoreAge Networking Technologies Ltd.

63 Bar Yehuda Road

Nesher 36651, Israel

Fax Number: +(972-4) 820-3748



with a copy to:



Yesha Primes

Primes, Shiloh, Givon, Meir Law Firm

16 Derech Hayam St., Haifa 34741, Israel

Fax Number: +(972-4) 838-1401








	 	         (b) 	if
to the Purchaser:


LSI Logic Corporation

1621 Barber Lane

Milpitas, CA 95035

Attention: General Counsel

Fax Number: +(1-408) 433-6896






44










	 	
with
a copy to:



Aaron M. Lampert

Naschitz, Brandes & Co.

5 Tuval Street

Tel-Aviv 67897, Israel

Fax Number: +(972-3) 623-5051 






	 	         (c) 	if
to a Seller, to the address for such Seller set forth below the signature block
                  for such Seller on the signature pages hereto


with a copy to:



L.R (Robi) Hartman

c/o West End Technology Investments Ltd.

Twin Towers Building One

33 Jabotinsky Street

Ramat Gan 52511, Israel

Fax Number: (+972-3) 612-3994



Genesis Partners II L.D.C.

11 HaMenofim Street

Ackerstein Towers, Building B

4th Floor

Herzliya Pituach, Israel

Attention: Eddy Shalev

Fax Number: (+972-9) 972-9001



with a copy to:

Ian Rostowsky

Efrati Galili Lahat & Co.

6 Wissotsky Street

Tel-Aviv 62338

Fax Number: (+972-3) 604-0111













    SECTION 11.03       
Public Announcements. No party to this Agreement shall make, or cause to be made,
any press release or public announcement in respect of this Agreement or the transactions
contemplated by this Agreement or otherwise communicate with any news media without the
prior written consent of the other party, and the parties shall cooperate as to the
timing and contents of any such press release or public announcement.  



    SECTION 11.04       
Severability. If any term or other provision of this Agreement is invalid, illegal
or incapable of being enforced by any Law or public policy, all other terms and
provisions of this Agreement shall nevertheless remain in full force and effect for so
long as the economic or legal substance of the transactions contemplated by this
Agreement is not affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated by this Agreement are consummated as
originally contemplated to the greatest extent possible.  



45











    SECTION 11.05       
Entire Agreement. This Agreement, the Escrow Agreement, the Confidentiality
Agreement and the other agreements contemplated hereby constitute the entire agreement of
the parties hereto with respect to the subject matter hereof and thereof and supersede
all prior agreements and undertakings, both written and oral, between the Sellers and the
Purchaser with respect to the subject matter hereof and thereof.  



    SECTION 11.06       
Assignment. This Agreement may not be assigned by operation of law or otherwise
without the express written consent of the Sellers and the Purchaser (which consent may
be granted or withheld in the sole discretion of the Sellers or the Purchaser); provided,
however, that the Purchaser may assign this Agreement or any of its rights and
obligations hereunder to one or more Affiliates of the Purchaser without the consent of
the Seller; provided, however, that no such assignment shall release the Purchaser from
any of its obligations under this Agreement to pay consideration to the Sellers or the
holders of Company Share Options at the Closing.  



    SECTION 11.07       
No Third Party Beneficiaries. Except for the provisions of Article IX relating to
indemnified parties, this Agreement shall be binding upon and inure solely to the benefit
of the parties hereto and their permitted assigns and nothing herein, express or implied
is intended to or shall confer upon any other Person, including, without limitation, any
union or any employee or former employee of the Company or any Subsidiary, any legal or
equitable right, benefit or remedy of any nature whatsoever, including, without
limitation, any rights of employment for any specified period, under or by reason of this
Agreement.  



    SECTION 11.08       
Governing Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York applicable to contracts executed in and to be
performed in that State. All actions and proceedings arising out of or relating to this
Agreement shall be heard and determined exclusively in any U.S. federal or state court
sitting in the city of New York. The parties hereto hereby (a) submit to the exclusive
jurisdiction of any court sitting in the city of New York for the purpose of any Action
arising out of or relating to this Agreement brought by any party hereto, and (b)
irrevocably waive, and agree not to assert by way of notion, defense, or otherwise, in
any such Action, any claim that it is not subject personally to the jurisdiction of the
above-named courts, that its property is exempt or immune from attachment or execution,
that the Action is brought in an inconvenient forum, that the venue of the Action is
improper, or that this Agreement or the transactions contemplated by this Agreement may
not be enforced in or by any of the above-named courts.  



    SECTION 11.09       
Headings. The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.  



    SECTION 11.10       
Counterparts. This Agreement may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be an original, but
all of which taken together shall constitute one and the same agreement.  



[Intentionally
left blank – next page the first signature page] 



46










        IN
WITNESS WHEREOF, the Purchaser, the Company and each of the Sellers have caused this
Agreement to be executed as of the date first written above by their respective officers
thereunto duly authorized. 





			LSI LOGIC CORPORATION



By:
——————————————

Name:
Title:









			STOREAGE NETWORKING TECHNOLOGIES LTD.



By:
——————————————

Name: Mr. Eli Shapira
Title:   CEO







			IIS INTELLIGENT INFORMATION SYSTEMS LTD.



By:
——————————————

Name:
Title:
Address:
Fax Number:






47











			GENESIS PARTNERS II L.D.C.



By:
——————————————

Name:
Title:
Address:
 Fax Number:











			GENESIS PARTNERS II (ISRAEL) L.P.



By:
——————————————

Name:
Title:
Address:
 Fax Number:









48














			OPHIRTECH LTD.



By:
——————————————

Name:
Title:
Address:
 Fax Number:











			KOONRAS TECHNOLOGIES LTD. 



By:
——————————————

Name:
Title:
Address:
 Fax Number:











			 CISCO SYSTEMS INTERNATIONAL B.V. 



By:
——————————————

Name:
Title:
Address:
 Fax Number:






49










			 MORGAN KEEGAN OPPORTUNITY FUND, L.P.



By:
——————————————

Name:
Title:
Address:
 Fax Number:







			  MORGAN KEEGAN EMPLOYEE INVESTMENT FUND, L.P.



By:
——————————————

Name:
Title:
Address:
 Fax Number:












			 CDC HOLDINGS LIMITED



By:
——————————————

Name:
Title:
Address:
 Fax Number:







50













			 THE CHALLENGE FUND - ETGAR II LP



By:
——————————————

Name:
Title:
Address:
 Fax Number:








			 AMNON EVRON & CO. TRUST COMPANY LTD.



By:
——————————————

Name:
Title:
Address:
 Fax Number:










			 FAR EAST FINANCE LIMITED



By:
——————————————

Name:
Title:
Address:
 Fax Number:








			 DAVID GOL 



By:
——————————————

Name:
Title:
Address:
 Fax Number:






51










			ARIEL SHOOB, ADV. 



By:
——————————————

Name:
Title:
Address:
 Fax Number:









			INDUSTRIAL SYSTEMS AND EQUIPMENT CO. 



By:
——————————————

Name:
Title:
Address:
 Fax Number:






52










			PLENUS TECHNOLOGIES LTD. 



By:
——————————————

Name:
Title:
Address:
 Fax Number:








			GOLDEN GATE BRIDGE FUND LP 



By:
——————————————

Name:
Title:
Address:
 Fax Number:









			PLENUS II LP 



By:
——————————————

Name:
Title:
Address:
 Fax Number:










			 PLENUS II (D.C.M.), LP



By:
——————————————

Name:
Title:
Address:
 Fax Number:






53












			SAREL ALTSHULER 



By:
——————————————

Name:
Title:
Address:
 Fax Number:







			MARCEL KATZ 



By:
——————————————

Name:
Title:
Address:
 Fax Number:








			DANA COHEN 



By:
——————————————

Name:
Title:
Address:
 Fax Number:








			 MICHAEL PENN



By:
——————————————

Name:
Title:
Address:
 Fax Number:









			GREGORY DARDYK 



By:
——————————————

Name:
Title:
Address:
 Fax Number:






54










			LINDA RITCHIE 



By:
——————————————

Name:
Title:
Address:
 Fax Number:







55










EXHIBIT A



OWNERSHIP OF ORDINARY SHARES  



	List of Sellers
	Number of

Ordinary Shares
	Percentage of

Ordinary Shares

outstanding on the

date of this

Agreement
	Percentage of fully

diluted shares

(assuming exercise of

all outstanding

options) - Pro Rata

Share

	 			
				
				
				
	IIS Intelligent Information Systems Ltd	 	 	 	6,283,866	 	 	12.61	%	 	10.89	%
	Ophir Tech Ltd	 	 	 	4,035,804	 	 	8.10	%	 	6.99	%
	Koonras Technologies Ltd	 	 	 	4,276,668	 	 	8.58	%	 	7.41	%
	Genesis Partners II LDC	 	 	 	10,100,216	 	 	20.27	%	 	17.50	%
	Genesis Partners II (Israel) LP	 	 	 	1,493,356	 	 	3.0	%	 	2.59	%
	Cisco Systems International BV	 	 	 	5,175,894	 	 	10.39	%	 	8.97	%
	Morgan Keegan Opportunity Fund LP	 	 	 	3,211,516	 	 	6.44	%	 	5.56	%
	Morgan Keegan Employee Investment Fund LP	 	 	 	1,070,506	 	 	2.15	%	 	1.85	%
	The Challenge Fund - Etgar II LP	 	 	 	3,040,234	 	 	6.10	%	 	5.27	%
	Far East Finance Limited	 	 	 	272,978	 	 	0.55	%	 	0.47	%
	David Gol	 	 	 	16,058	 	 	0.03	%	 	0.03	%
	Amnon Evron & Co.	 	 	 	10,706	 	 	0.02	%	 	0.02	%
	CDC Holdings Limited	 	 	 	1,541,528	 	 	3.09	%	 	2.67	%
	Ariel Shoob, Adv	 	 	 	7,364,482	 	 	14.77	%	 	12.76	%
	Industrial Systems And Equipment Co., Inc	 	 	 	241,458	 	 	0.48	%	 	0.42	%
	Plenus Technologies Ltd	 	 	 	215,337	 	 	0.43	%	 	0.37	%
	Golden Gate Bridge Fund LP	 	 	 	25,586	 	 	0.05	%	 	0.04	%
	Plenus II LP	 	 	 	1,241,961	 	 	2.49	%	 	2.15	%
	Plenus II (D.C.M), LP	 	 	 	123,272	 	 	0.24	%	 	0.21	%
	 	 	 
	Yuli Yardeni (Trustee for former employees)	 	 	 	84,784	 	 	0.17	%	 	0.15	%
	Linda Ritchie	 	 	 	10,688	 	 	0.02	%	 	0.02	%
	 	 	 
	Ordinary Shares subject to outstanding Company	 	 
	Share Options granted but not exercised (NOT A	 	 
	SELLER)	 	 	 	7,881,202	 	 	 	 	 	13.65	%
	 	 	 	 	57,718,100	 	 	100	%	 	100	%







56










EXHIBIT 2.03  



FORM OF ESCROW AGREEMENT 



57







EXHIBIT 5.07  



FORM OF CSO UNDERTAKING 



	To:  	The
Research Committee

The Office of the Chief Scientist

Jerusalem











Relating to projects that have been
financed by or are currently being financed by the Office of the Chief Scientist of the
Ministry of Industry, Trade and Labor (the “OCS”) (All considered as
belong to Plan Number 17229) and to projects of the Company (as this term is defined
below) that may be financed by the OCS in the future (the “Projects”). 



	1.  	Undertaking






We, the undersigned, of _________________________________
[Foreign investor’s name] a company incorporated, organized and existing under the
laws of _______________ and whose registered office is at _________________
(“______”), having, by an agreement dated _____________, committed to invest in _____________________ Ltd. (the “Company”), in exchange for [number and type of shares]
________ shares of the Company; 



Recognizing that the Company’s
research and development Projects are currently, have been or will be financially
supported by the Government of the State of Israel, through the OCS under and subject to
the provisions of The Encouragement of Research and Development in Industry Law 5744-1984
(the “R&D Law”) and the regulations, rules and procedures promulgated
there under; 



Recognizing that the R&D Law
places strict constraints on the transfer of know-how and/or production rights, making all
such transfers subject to the absolute discretion of the OCS’ research committee (the
“Research Committee”), acting in accordance with the aims of the R&D
Law and requiring that any such transfer receive the prior written approval of the
Research Committee; 



Hereby declare and
undertake: 



	1.  	To
observe strictly all the requirements of the R&D Law and the regulations, rules and
      procedures promulgated there under, as applied to the Company and as directed by
the Research       Committee, in particular those requirements stipulated under Sections
19, 19A and 19B of the       R&D Law relating to the prohibitions on the transfer of
know-how and/or production rights.






	2.  	As
a shareholder of the Company, to make all reasonable efforts that the Company shall
      observe strictly all the requirements of the R&D Law and the regulations, rules and
procedures       promulgated there under, as applied to the Company and as directed by
the Research Committee,       in particular those requirements stipulated under Sections
19, 19A and 19B of the R&D Law       relating to the prohibitions on the transfer of
know-how and/or production rights.






	——————————

Date	————————————————————————

Name (block letters) and signature of Authorized Company Representative and Company Seal 






58








EXHIBIT 8.02(g)  



REQUIRED CONSENTS AND
APPROVALS 



Consent of the OCS 


Consent of the Investment Center of the Israeli Ministry of Industry



Consent of the Lessor pursuant to the
lease agreement between the Company and P. Furman Properties Ltd. (the “Lessor”)
in connection with the lease of the premises at 63 Bar Yehuda Rd., Nesher, Israel. 



Microsoft Licensing, GP – OEM
Customer License Agreement, updated August 30, 2006 



WebMethods UK Ltd. –
Distribution Platform Alliance Agreement, dated September 28, 2006 



59







EXHIBIT 8.02(h)  



REQUIRED EMPLOYEES 



Tier I Employees 


Eli Shapira

Nelson Nahum

Mark Spowart

Dani Naor

Kevin Liebel

Doug Jury

Mosche Melnikov

Yair Hershko

Eitan Maggeni

Gabi CohenZamir

Michael Gralnik



60







EXHIBIT 8.02(l)  


MATTERS TO BE ADDRESSED IN OPINION OF THE COMPANY'S COUNSEL



	1.  	Due
organization and valid existence of the Company 






	2.  	Company’s
power and authority to conduct its business in Israel 






	3.  	Due
authorization, execution and delivery of this Agreement by the Company 






	4.  	Company’s
capitalization and outstanding share capital, qualified by                knowledge 






	5.  	Governmental
approvals and consents of third parties under material contracts of                the
Company known to such counsel required in connection with the transactions
               contemplated by this Agreement 






61