Unassociated Document


    Exhibit
      10.1

    
 

     

    AGREEMENT
      AND PLAN OF MERGER


     

    BY
      AND AMONG

     

    ISRAEL
      TECHNOLOGY ACQUISITION CORP.,

     

    IXI
      MOBILE, INC.,

     

    AND

     

    ITAC
      ACQUISITION SUBSIDIARY CORP.

     

    DATED
      AS OF FEBRUARY 28, 2006

     

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    Table
      of Contents

     

    
      	 	 	
              Page

            
	 	 	 
	 	 	 
	
              ARTICLE
                I

            
	
               

              DEFINITIONS

            	
               

              1

            
	
               

              ARTICLE
                II

               

            
	
              THE
                MERGER

            	
              9

            
	 	 	 
	
              2.1

            	
              The
                Merger

            	
              9

            
	
              2.2

            	
              Effective
                Time; Closing

            	
              9

            
	
              2.3

            	
              Effect
                of the Merger

            	
              10

            
	
              2.4

            	
              Certificate
                of Incorporation; Bylaws.

            	
              10

            
	
              2.5

            	
              Effect
                on Capital Stock

            	
              10

            
	
              2.6

            	
              Surrender
                of Certificates.

            	
              12

            
	
              2.7

            	
              No
                Further Ownership Rights in Company Stock

            	
              14

            
	
              2.8

            	
              Lost,
                Stolen or Destroyed Certificates

            	
              14

            
	
              2.9

            	
              Tax
                Consequences

            	
              14

            
	
               
                2.10

            	
              Taking
                of Necessary Action; Further Action

            	
              14

            
	
                2.11

            	
              Shares
                Subject to Appraisal Rights.

            	
              15

            
	
               
                2.12

            	
              Israeli
                Securities Law Limitations

            	
              15

            
	
               
                2.13

            	
              Employee
                Options.

            	
              16

            
	
                2.14

            	
              Holdback

            	
              17

            
	
               
                2.15

            	
              Additional
                Shares.

            	
              18

            
	
                2.16

            	
              Committee
                and Representative for Purposes of Escrow Agreement.

            	
              25

            
	
               
                2.17

            	
              Unclaimed
                Additional Shares

            	
              25

            
	
               
                2.18

            	
              Company
                Warrants.

            	
              26

            
	
               
                2.19

            	
              Rule
                145

            	
              27

            


    

     

    
      	
               

              ARTICLE
                III

               

            
	
              REPRESENTATIONS
                AND WARRANTIES OF THE COMPANY

            	
              27

            
	 	 	 
	
              3.1

            	
              Organization
                and Qualification.

            	
              27

            
	
              3.2

            	
              Subsidiaries.

            	
              28

            
	
              3.3

            	
              Capitalization.

            	
              28

            
	
              3.4

            	
              Authority
                Relative to this Agreement

            	
              29

            
	
              3.5

            	
              No
                Conflict; Required Filings and Consents.

            	
              30

            
	
              3.6

            	
              Compliance.

            	
              31

            
	
              3.7

            	
              Financial
                Statements.

            	
              31

            
	
              3.8

            	
              No
                Undisclosed Liabilities

            	
              32

            
	
              3.9

            	
              Absence
                of Certain Changes or Events

            	
              33

            
	
               
                3.10

            	
              Litigation

            	
              33

            
	
               
                3.11

            	
              Employee
                Benefit Plans.

            	
              33

            


    

     

    
       

    

    
      
        
        

      

      
        i

        
          

        

      

      
        
        

      

      
        Table
          of Contents

      

    

    (continued)

    
 

    
      
        	
              	 	
                Page

              
	 	 	 
	
                3.12

              	
                Labor
                  Matters.

              	
                35

              
	
                3.13

              	
                Restrictions
                  on Business Activities

              	
                36

              
	
                3.14

              	
                Title
                  to Property.

              	
                36

              
	
                3.15

              	
                Taxes.

              	
                37

              
	
                3.16

              	
                Environmental
                  Matters.

              	
                38

              
	
                3.17

              	
                Brokers;
                  Third Party Expenses

              	
                39

              
	
                3.18

              	
                Intellectual
                  Property.

              	
                39

              
	
                3.19

              	
                Agreements,
                  Contracts and Commitments.

              	
                43

              
	
                3.20

              	
                Insurance

              	
                44

              
	
                3.21

              	
                Governmental
                  Actions/Filings

              	
                45

              
	
                3.22

              	
                Interested
                  Party Transactions

              	
                45

              
	
                3.23

              	
                Certain
                  Business Practices

              	
                45

              
	
                3.24

              	
                Stockholder
                  Approval

              	
                46

              
	
                3.25

              	
                Representations
                  and Warranties Complete

              	
                46

              
	
                3.26

              	
                Survival
                  of Representations and Warranties

              	
                46

              


      

       

    

    
      	
               

              ARTICLE
                IV

               

            
	 	 
	
              REPRESENTATIONS
                AND WARRANTIES OF PARENT

            	
              46

            
	 	 	
               

            
	
              4.1

            	
              Organization
                and Qualification.

            	
              46

            
	
              4.2

            	
              Subsidiaries

            	
              47

            
	
              4.3

            	
              Capitalization.

            	
              47

            
	
              4.4

            	
              Authority
                Relative to this Agreement

            	
              48

            
	
              4.5

            	
              No
                Conflict; Required Filings and Consents.

            	
              48

            
	
              4.6

            	
              Compliance

            	
              48

            
	
              4.7

            	
              SEC
                Filings; Financial Statements.

            	
              49

            
	
              4.8

            	
              No
                Undisclosed Liabilities

            	
              49

            
	
              4.9

            	
              Absence
                of Certain Changes or Events

            	
              50

            
	
               
                4.10

            	
              Litigation

            	
              50

            
	
               
                4.11

            	
              Employee
                Benefit Plans

            	
              50

            
	
               
                4.12

            	
              Restrictions
                on Business Activities

            	
              50

            
	
               
                4.13

            	
              Title
                to Property

            	
              50

            
	
               
                4.14

            	
              Taxes

            	
              51

            
	
               
                4.15

            	
              Brokers

            	
              51

            
	
               
                4.16

            	
              Intellectual
                Property

            	
              52

            
	
               
                4.17

            	
              Agreements,
                Contracts and Commitments.

            	
              52

            
	
               
                4.18

            	
              Insurance

            	
              52

            
	
               
                4.19

            	
              Interested
                Party Transactions

            	
              52

            
	
               
                4.20

            	
              Indebtedness

            	
              53

            
	
               
                4.21

            	
              Over-the-Counter
                Bulletin Board Quotation

            	
              53

            
	
               
                4.22

            	
              Board
                Approval

            	
              53

            
	
               
                4.23

            	
              Trust
                Fund

            	
              53

            
	
               
                4.24

            	
              Governmental
                Filings

            	
              53

            
	
               
                4.25

            	
              Representations
                and Warranties Complete

            	
              53

            
	
               
                4.26

            	
              Survival
                of Representations and Warranties

            	
              54

            


    

     

    
      
        
        

      

      
        ii

        
          

        

      

      
        
        

      

      
        
          Table
            of Contents

        

        (continued)

        
 

        
          
            	
                  	 	
                    Page

                  


          

        

      

    

     

    
      	
               

              ARTICLE
                V

               

            
	
              CONDUCT
                PRIOR TO THE EFFECTIVE TIME

            	
              54

            
	 	 	 
	
              5.1

            	
              Conduct
                of Business by Company and Parent

            	
              54

            
	
               

              ARTICLE
                VI

               

            
	
              ADDITIONAL
                AGREEMENTS

            	
              57

            
	 	 	 
	
              6.1

            	
              Registration
                Statement and Prospectus/Proxy Statement; Special Meeting.

            	
              57

            
	
              6.2

            	
              Directors
                and Officers of Parent and the Company After Merger

            	
              59

            
	
              6.3

            	
              Other
                Actions.

            	
              59

            
	
              6.4

            	
              Required
                Information

            	
              59

            
	
              6.5

            	
              Confidentiality;
                Access to Information.

            	
              60

            
	
              6.6

            	
              Public
                Disclosure

            	
              61

            
	
              6.7

            	
              Reasonable
                Efforts

            	
              61

            
	
              6.8

            	
              Treatment
                as a Reorganization

            	
              62

            
	
              6.9

            	
              No
                Securities Transactions

            	
              62

            
	
               
                6.10

            	
              Disclosure
                of Certain Matters

            	
              62

            
	
               
                6.11

            	
              Listing

            	
              62

            
	
               
                6.12

            	
              Company
                Actions

            	
              62

            
	
               
                6.13

            	
              Non-Solicitation.

            	
              63

            
	
               
                6.14

            	
              Short-Swing
                Profit

            	
              64

            
	
               
                6.15

            	
              Israeli
                Tax Pre-Ruling

            	
              64

            
	
               
                6.16

            	
              Bridge
                Financing

            	
              65

            
	
               
                6.17

            	
              Indemnification
                of Officers and Directors.

            	
              65

            
	
               
                6.18

            	
              No
                Claim Against Trust Fund

            	
              66

            
	
               
                6.19

            	
              Stockholder
                Guarantees

            	
              67

            
	
               
                6.20

            	
              Stockholder
                Transfer Restrictions

            	
              67

            
	
               
                6.21

            	
              Stockholder
                Obligations

            	
              67

            
	
               

              ARTICLE
                VII

               

            
	
              CONDITIONS
                TO THE TRANSACTION

            	
              67

            
	 	 	 
	
              7.1

            	
              Conditions
                to Obligations of Each Party to Effect the Merger

            	
              67

            
	
              7.2

            	
              Additional
                Conditions to Obligations of Company

            	
              68

            
	
              7.3

            	
              Additional
                Conditions to the Obligations of Parent

            	
              70

            


    

     

    
      
        
        

      

      
        iii

        
          

        

      

      
        
        

      

    

    
      
        Table
          of Contents

      

      (continued)

      
 

      
        
          	
                	 	
                  Page

                


        

      

    

    
      	
               

              ARTICLE
                VIII

               

            
	
              INDEMNIFICATION

            	 	
              72

            
	 	 	 
	
              8.1

            	
              Indemnification
                of Parent.

            	
              72

            
	
              8.2

            	
              Indemnification
                of Third Party Claims

            	
              73

            
	
              8.3

            	
              Limitations
                on Indemnification.

            	
              75

            
	
              8.4

            	
              Exclusive
                Remedy

            	
              76

            
	
              8.5

            	
              Adjustment
                to Merger Consideration

            	
              76

            
	
              8.6

            	
              Representative
                Capacities; Application of Holdback Escrowed Shares

            	
              76

            
	
               

              ARTICLE
                IX

               

            
	
              TERMINATION

            	 	
              76

            
	 	 	 
	
              9.1

            	
              Termination

            	
              76

            
	
              9.2

            	
              Notice
                of Termination; Effect of Termination

            	
              77

            
	
              9.3

            	
              Fees
                and Expenses

            	
              78

            
	
               

              ARTICLE
                X

               

            
	GENERAL
              PROVISIONS	 	
              78

            
	 	 	 
	
              10.1

            	
              Notices

            	
              78

            
	
              10.2

            	
              Interpretation.

            	
              79

            
	
              10.3

            	
              Counterparts;
                Facsimile Signatures

            	
              80

            
	
              10.4

            	
              Entire
                Agreement; Third Party Beneficiaries

            	
              80

            
	
              10.5

            	
              Severability

            	
              80

            
	
              10.6

            	
              Other
                Remedies; Specific Performance

            	
              80

            
	
              10.7

            	
              Governing
                Law

            	
              81

            
	
              10.8

            	
              Rules
                of Construction

            	
              81

            
	
              10.9

            	
              Assignment

            	
              81

            
	
              10.10

            	
              Amendment

            	
              81

            
	
              10.11

            	
              Extension;
                Waiver

            	
              81

            


    

    


    
      
        
        

      

      
        iv

        
          

        

      

      
        
        

      

    



    AGREEMENT
      AND PLAN OF MERGER

     

    THIS
      AGREEMENT AND PLAN OF MERGER
      is made
      and entered into as of February 28, 2006, by and among Israel Technology
      Acquisition Corp., a Delaware corporation (“Parent”), ITAC Acquisition
      Subsidiary Corp., a Delaware corporation and a wholly-owned subsidiary of Parent
      (“Merger Sub”), and IXI Mobile, Inc., a Delaware corporation
      (“Company”).

     

    RECITALS

     

    A. Upon
      the
      terms and subject to the conditions of this Agreement and in accordance with
      the
      General Corporation Law of the State of Delaware (the “DGCL”), Parent and the
      Company intend to enter into a business combination transaction by means of
      a
      merger between Merger Sub and the Company in which the Company will merge with
      Merger Sub and be the surviving entity and a wholly owned subsidiary of
      Parent.

     

    B. The
      Boards of Directors of each of the Company, Parent and Merger Sub have
      determined that the Merger is fair to, and in the best interests of, their
      respective companies and their respective stockholders. 

     

    C. The
      parties intend, by executing this Agreement, to adopt a plan of reorganization
      within the meaning of Section 368 of the Internal Revenue Code of 1986, as
      amended (the “Code”).

     

    NOW,
      THEREFORE,
      in
      consideration of the covenants, promises and representations set forth herein,
      and for other good and valuable consideration, the receipt and sufficiency
      of
      which are hereby acknowledged, the parties agree as follows:

     

    ARTICLE
      I

     

    DEFINITIONS

     

    1.1 As
      used
      in this Agreement, the following terms shall have the following
      meanings:

     

    “Additional
      Share Conversion Ratio”
means
      the ratio determined by dividing the number of Additional Escrowed Shares to
      be
      distributed by the Escrow Agent upon instruction by Parent on any Additional
      Shares Issuance Date by the Outstanding Company Common Stock
      Number.

     

    “Bridge
      Equity Securities”
means
      any equity securities issued by the Company on or after the date of this
      Agreement and prior to the Closing in connection with a Bridge Financing,
      including, but not limited to any shares of Company Common Stock for which
      or
      into which any such equity securities are exercisable, exchangeable or otherwise
      convertible as compensation to the investors in such Bridge
      Financing.

     

    “Bridge
      Financing”
means
      any equity or debt financing arrangement entered into by the Company prior
      to
      the date of this Agreement and set forth in Schedule 1.1 or any such arrangement
      entered into by the Company following the date of this Agreement, including,
      but
      not limited to (a) the issuance by the Company of any Bridge Equity Securities,
      (b) the execution or extension of any mortgage, indenture, note, installment
      obligation or other instrument, agreement or arrangement for or relating to
      any
      borrowing of money by the Company or (c) any credit support arrangement or
      guarantee of the Company’s indebtedness or obligations.

     

    
      
        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

    “Business
      Day”
means
      a
      day other than a Saturday or a Sunday or other day on which commercial banks
      in
      New York are authorized or required by law to close.

     

    “Closing
      Shares”
means
      all shares of Parent Common Stock issued by Parent pursuant to clause (A) of
      Section 2.5(a)(i).

     

    “Company
      Acquisition Proposal”
means
      any offer or proposal (other than an offer or proposal made or submitted by
      Parent) contemplating or otherwise relating to any Company Acquisition
      Transaction.

     

    “Company
      Acquisition Transaction”
      shall
      mean any transaction or series of related transactions (other than the
      transactions contemplated by this Agreement including, but not limited to,
      any
      Bridge Financing, and other than any transaction approved by Parent pursuant
      to
      Article V) involving:

     

    (a) any
      merger, exchange, consolidation, business combination, plan of arrangement,
      issuance of securities, acquisition of securities, reorganization,
      recapitalization, takeover offer, tender offer, exchange offer or other similar
      transaction: (i) in which the Company is a constituent corporation; (ii) in
      which a Person or “group” (as defined in the Exchange Act and the rules
      promulgated thereunder) of Persons directly or indirectly acquires beneficial
      or
      record ownership of securities representing more than 20% of the outstanding
      securities of any class of voting securities of the Company; or (iii) in which
      the Company issues securities representing more than 20% of the outstanding
      securities of any class of voting securities of the Company;

     

    (b) any
      sale,
      lease, exchange, transfer, license, acquisition or disposition of any business
      or businesses or assets that constitute or account for 20% or more of the
      consolidated net revenues, consolidated net income or consolidated assets of
      the
      Company; 

     

    (c) other
      than any trade debt incurred by the Company in the ordinary course of business,
      any method or plan of financing through (i) the issuance of debt or equity
      securities of the Company (including, but not limited to, an initial public
      offering of any securities of the Company) or (ii) the execution or extension
      of
      any mortgage, indenture, note, installment obligation or other instrument,
      agreement or arrangement for or relating to any borrowing of money by the
      Company; or

     

    (d) any
      liquidation or dissolution of the Company.

     

    “Company
      Common Stock”
means
      the common stock, par value $0.01, of the Company. 

     

    “Company
      Derivative Securities”
means
      the Employee Options and the Company Warrants.

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    “Company
      Derivative Security Agreements”
means
      all Employee Option Agreements and Company Warrant Agreements.

     

    “Company
      Stock Option Plans”
means
      the Company’s 2000 Second Amended and Restated Stock Incentive Plan and the
      Company’s 2003 Israeli Stock Option Plan and any predecessor option or stock
      incentive plan.

     

    “Company
      Warrants”
means
      (a) all warrants for the purchase shares of Company Common Stock outstanding
      on
      the date of this Agreement and (b) all warrants for the purchase of shares
      of
      Company Preferred Stock outstanding on the date of this Agreement after being
      converted into warrants for the purchase shares of Company Common Stock in
      accordance with their terms.

     

    “Consideration
      Shares”
means
      the Closing Shares and the Reserved Shares.

     

    “Derivative
      Holder”
means
      any holder of Employee Options or Company Warrants.

     

    “Escrow
      Agreement”
means
      the escrow agreement in a form to be agreed between Parent and the
      Company.

     

    “Excess
      Additional Shares Number”
means,
      as of the termination of the Share Price Trigger Period, that number of
      Additional Shares which would have been distributable to holders of Terminated
      Employee Options or Terminated Company Warrants if such Terminated Employee
      Options or Terminated Company Warrants had been exercised immediately prior
      to
      the termination of the Share Price Trigger Period.

     

    “Excess
      Closing Shares Number”
means
      the difference between (a) 7,818,000 shares of Parent Common Stock; and (b)
      the
      sum of (i) the aggregate number of Closing Shares; and (ii) the aggregate number
      of Reserved Shares which remain reserved and unissued by Parent as of the
      termination of the Share Price Trigger Period.

     

    “Excess
      Shares Ratio”
means,
      with respect to each Holder and each Derivative Holder, a fraction, the
      numerator of which is equal to the sum of (a) the number of Closing Shares
      issued to such Holder plus (b) the number of Reserved Shares issued to such
      Holder prior to the termination of the Share Price Trigger Period and
      (c) the aggregate number of Reserved Shares that remain reserved for
      issuance to such Derivative Holder as of the termination of the Share Price
      Trigger Period, and the denominator of which is equal to the difference between
      (x) the aggregate number of Consideration Shares and (y) the Excess
      Closing Shares Number

     

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended.

     

    “Exchange
      Ratio” means
      the
      ratio determined by dividing 7,818,000 by the Outstanding Company Common Stock
      Number.

     

    “Excluded
      Shares”
means
      those shares of Company Common Stock which (i) shall be canceled in connection
      with Merger pursuant to Section 2.5(b), (ii) are subject to appraisal rights
      pursuant to Section 2.11, (iii) are Bridge Equity Securities which are redeemed
      by the Company or purchased by Parent, in each case, concurrently with the
      Closing, or (iv) are purchased by Parent pursuant to Section
      2.12.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    “Executive
      Lock-Up Agreement”
means
      the lock-up agreement substantially in the form attached hereto as Exhibit
      D.

     

    “GAAP”
means
      U.S. generally accepted accounting principles.

     

    “Governmental
      Entity”
means
      any court, administrative agency, tribunal, department, bureau or commission
      or
      other governmental authority, instrumentality or arbitral body, domestic or
      foreign, federal, state or local.

     

    “Holders”
means
      Persons who have surrendered Certificates in accordance with Section 2.6(c)
      and
      the Persons who have received Parent Common Stock upon the exercise of any
      Employee Options or Company Warrants.

     

    “Israeli
      GAAP”
means
      Israeli generally accepted accounting principles.

     

    “knowledge”
means
      actual knowledge as to a specified fact or event of a Person that is an
      individual or of an executive officer or director of a Person that is a
      corporation or of a Person in a similar capacity of an entity other than a
      corporation.

     

    “Legal
      Requirements”
means
      any federal, state, local, municipal, foreign or other law, statute,
      constitution, principle of common law, resolution, ordinance, code, edict,
      decree, rule, regulation, ruling or requirement issued, enacted, adopted,
      promulgated, implemented or otherwise put into effect by or under the authority
      of any Governmental Entity and all requirements set forth in Company Contracts
      or Parent Contracts, as applicable.

     

    “Management
      Incentive Expenses”
means
      any expenses recognized by the Parent in accordance with GAAP relating to any
      issuance, grant or payment, as the case may be, of any Additional Options,
      Share
      Price Bonus, Second Bonus, Target Bonus, Closing Bonus or Shares (as each such
      term is defined in the Employment Agreements) pursuant to either of the
      Employment Agreements.

     

    “Material
      Adverse Effect”
means,
      when used in connection with an entity, any change, event, violation,
      inaccuracy, circumstance or effect, individually or when aggregated with other
      changes, events, violations, inaccuracies, circumstances or effects, that is
      materially adverse to the business, assets (including intangible assets),
      revenues, financial condition or results of operations of such entity, it being
      understood that none of the following alone or in combination shall be deemed,
      in and of itself, to constitute a Material Adverse Effect: (i) changes
      attributable to the public announcement or pendency of the transactions
      contemplated hereby, (ii) changes in general national or regional economic
      conditions, to the extent that such conditions do not have a disproportionate
      impact on the Company, or (iii) any SEC rulemaking requiring enhanced disclosure
      of reverse merger transactions with a public shell; provided, however, that
      any
      change, event, violation, inaccuracy, circumstance or effect arising from or
      relating to acts or omissions taken by the Company with the prior consent of
      Parent (following full and fair disclosure by the Company) shall not constitute
      a Material Adverse Effect.

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    “Outstanding
      Company Common Stock Number”
means
      the difference between:

     

    (a)  the
      sum
      of: 

     

    (i)
       the
      number of shares of Company Common Stock outstanding immediately prior to the
      Closing, including any shares subject to appraisal rights in accordance with
      Section 2.11 or subject to purchase in accordance with Section 2.12;
      and

     

    (ii)
       the
      number of shares subject to options to purchase shares of Company Common Stock
      granted pursuant to the Company Stock Option Plans which are outstanding
      immediately prior to the Closing, regardless of whether such options are vested
      or unvested; and

     

    (iii) the
      number of shares of Company Common Stock subject to the Company Warrants;
      and

     

    (b)  the
      number of shares of Company Common Stock represented by, or issuable upon the
      exchange or conversion of, Bridge Equity Securities that are redeemed by the
      Company or purchased by Parent, in each case, concurrently with the Closing.
      

     

    “Parent
      Acquisition Proposal”
means
      any offer or proposal (other than an offer or proposal made or submitted by
      Company) contemplating or otherwise relating to any Parent Acquisition
      Transaction.

     

    “Parent
      Acquisition Transaction”
shall
      mean any transaction or series of related transactions (other than the
      transactions contemplated by this Agreement) involving:

     

    (a) any
      merger, exchange, consolidation, business combination, plan of arrangement,
      issuance of securities, acquisition of securities, reorganization,
      recapitalization, takeover offer, tender offer, exchange offer or other similar
      transaction: (i) in which Parent is a constituent corporation; (ii) in
      which a Person or “group” (as defined in the Exchange Act and the rules
      promulgated thereunder) of Persons directly or indirectly acquires beneficial
      or
      record ownership of securities representing more than 20% of the outstanding
      securities of any class of voting securities of Parent; (iii) in which
      Parent issues securities representing more than 20% of the outstanding
      securities of any class of voting securities of Parent; or (iv) in which Parent
      acquires securities representing more than 20% of the outstanding securities
      of
      any class of voting securities of any Person; or

     

    (b) any
      liquidation or dissolution of Parent.

     

    “Person”
means
      any individual, corporation (including any non-profit corporation), general
      partnership, limited partnership, limited liability partnership, joint venture,
      estate, trust, company (including any limited liability company or joint stock
      company), firm or other enterprise, association, organization, entity or
      Governmental Entity.

     

    “Registration
      Rights Agreement”
means
      the registration rights agreement substantially in the form attached hereto
      as
      Exhibit A.

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

    “Reserved
      Shares”
means
      the aggregate number of shares of Parent Common Stock reserved for issuance
      by
      Parent pursuant to Section 2.13(g) and Section 2.18(d).

     

    “Section
      102 Trustee”
means
      Yuli Yardeni, CPA of Yardeni Gelfand & Co. CPA, in its capacity as trustee
      under the Company Stock Option Plans for purposes of Section 102 of the Israeli
      Income Tax Ordinance, or any successor trustee under such plans.

     

    “Stockholder
      Lock-Up Agreement”
means
      the lock-up agreement substantially in the form attached hereto as Exhibit
      E.

     

    “Terminated
      Company Warrants”
means
      all Company Warrants which have been terminated or otherwise lapse during the
      Share Price Trigger Period, other than as the result of the exercise of such
      Company Warrants.

     

    “Terminated
      Employee Options”
means
      all Employee Options which have been terminated or otherwise lapse during the
      Share Price Trigger Period, other than as the result of the exercise of such
      Employee Options.

     

    1.2 The
      following terms shall have the meanings defined for such terms in the Sections
      of this Agreement set forth below:

     

    
      	
              Term

            	
              Section

            
	 	 
	
              2007
                Net Profit Shares

            	
              2.15(b)

            
	
              2007
                Net Profit Target

            	
              2.15(b)

            
	
              2008
                Net Profit Shares

            	
              2.15(b)

            
	
              2008
                Net Profit Target

            	
              2.15(b)

            
	
              Accelerated
                Revenue

            	
              2.15(h)

            
	
              Accelerated
                Share Price Shares

            	
              2.15(h)

            
	
              Acceleration
                Date

            	
              2.15(f)

            
	
              Accelerated
                Shares

            	
              2.15

            
	
              Acceleration
                Trigger Price

            	
              2.15(f)

            
	
              Additional
                Escrowed Shares

            	
              2.15(e)(i)

            
	
              Additional
                Shares

            	
              2.15(d)

            
	
              Additional
                Shares Issuance Date

            	
              2.15(e)(i)

            
	
              Agreement

            	
              2.2

            
	
              Approvals

            	
              3.1(a)

            
	
              Audited
                Financial Statements

            	
              3.7(a)

            
	
              Capitalization
                Amendment

            	
              6.1(a)

            
	
              Certificate
                of Merger

            	
              2.2

            
	
              Certificates

            	
              2.6(c)

            
	
              Change
                of Control

            	
              2.15(g)

            
	
              Change
                of Control Consideration

            	
              2.15(f)

            
	
              Charter
                Documents

            	
              3.1(a)

            
	
              Closing

            	
              2.2

            
	
              Closing
                Date

            	
              2.2

            
	
              Code

            	
              Recitals

            
	
              Company

            	
              Caption
                

            


    

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

       

      
        
          	
                  Term

                	
                  Section

                
	 


        

      

    

    
      	
              Company
                Closing Certificate

            	
              7.3(a)

            
	
              Company
                Contracts

            	
              3.19(a)

            
	
              Company
                Existing D&O Policy

            	
              6.17(b)

            
	
              Company
                Indemnified Person

            	
              6.17(a)

            
	
              Company
                Intellectual Property

            	
              3.18

            
	
              Company
                Maximum Premium

            	
              6.17(b)

            
	
              Company
                Preferred Stock

            	
              3.3(a)

            
	
              Company
                Schedule

            	
              Preamble
                to Article III

            
	
              Company
                Stock Options

            	
              3.3(a)

            
	
              Company
                Warrants

            	
              3.3(a)

            
	
              Company
                Warrant Agreement

            	
              2.18(a)

            
	
              Conditional
                Israeli Securities Exemption

            	
              2.12

            
	
              Continuing
                Derivative Escrowed Shares

            	
              2.15(e)(ii)

            
	
              Copyrights

            	
              3.18(iii)

            
	
              Corporate
                Records

            	
              3.1(c)

            
	
              Derivative
                Escrowed Shares

            	
              2.15(e)(ii)

            
	
              DGCL

            	
              Recitals

            
	
              Disclosure
                Schedule

            	
              6.10

            
	
              Dissenter

            	
              2.11(a)

            
	
              Dissenting
                Shares

            	
              2.11(b)

            
	
              Effective
                Time

            	
              2.2

            
	
              Electing
                Holders

            	
              6.15

            
	
              Employment
                Agreements

            	
              5.1(a)

            
	
              Employee
                Options

            	
              2.13(a)

            
	
              Employee
                Option Agreement

            	
              2.13(a)

            
	
              Environmental
                Law

            	
              3.16
                (b)

            
	
              ERISA

            	
              3.11(a)

            
	
              Escrow
                Agent

            	
              2.14

            
	
              Excess
                Additional Shares

            	
              2.15(e)

            
	
              Excess
                Closing Shares

            	
              2.13(f)

            
	
              Exchange
                Agent

            	
              2.6(a)

            
	
              Exhibit

            	
              10.2(a)

            
	
              First
                Share Price Measurement Period

            	
              2.15(c)

            
	
              First
                Share Price Shares

            	
              2.15(c)

            
	
              First
                Share Price Trigger

            	
              2.15(c)

            
	
              Full
                Share Price Share Acceleration Trigger

            	
              2.15(h)

            
	
              Gemini

            	
              6.14

            
	
              Government
                Grants

            	
              3.6(b)

            
	
              Governmental
                Actions/Filings

            	
              3.21

            
	
              Guarantee
                Stockholders

            	
              6.19

            
	
              Hazardous
                Substances

            	
              3.16(c)

            
	
              Holdback
                Escrowed Shares

            	
              2.14

            
	
              Holdback
                Period

            	
              2.14

            
	
              Indemnification
                Documents

            	
              6.17(a)

            
	
              Indemnified
                Persons

            	
              6.17(a)

            
	
              Insider

            	
              3.19(a)

            


    

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    
       

      
        	
                Term

              	
                Section

              
	 


      

    

    
      	
              Insurance
                Policies

            	
              3.20

            
	
              Intellectual
                Property

            	
              3.18

            
	
              Investment
                Center

            	
              3.6(b)

            
	
              Israeli
                Tax Pre-Ruling

            	
              6.15

            
	
              Israeli
                Securities Exemption

            	
              2.12

            
	
              Israeli
                Securities Purchase Price

            	
              2.12

            
	
              Landa

            	
              6.14

            
	
              Last
                Reported Sales Price

            	
              2.15(c)

            
	
              Lock-Up
                Agreements

            	
              6.20

            
	
              Losses

            	
              8.1(b)

            
	
              Material
                Company Contracts

            	
              3.19(a)

            
	
              Merger

            	
              2.1

            
	
              Merger
                Form 8-K

            	
              6.3(a)

            
	
              Merger
                Sub

            	
              Caption

            
	
              Merger
                Sub Common Stock

            	
              2.5(c)

            
	
              Name
                Change Amendment

            	
              6.1(a)

            
	
              Net
                Profit Shares

            	
              2.15(b)

            
	
              Notice
                of Claim

            	
              8.2(a)

            
	
              OCS

            	
              3.6(b)

            
	
              OTC
                BB

            	
              4.21

            
	
              Parent

            	
              Caption

            
	
              Parent
                Closing Certificate

            	
              7.2(a)

            
	
              Parent
                Common Stock

            	
              4.3(a)

            
	
              Parent
                Contracts

            	
              4.17(a)

            
	
              Parent
                Convertible Securities

            	
              4.3(a)

            
	
              Parent
                Existing D&O Policy

            	
              6.17(c)

            
	
              Parent
                IPO Shares

            	
              7.1(e)

            
	
              Parent
                Indemnitee

            	
              8.1(a)

            
	
              Parent
                Indemnified Person

            	
              6.17(a)

            
	
              Parent
                Maximum Premium

            	
              6.17(c)

            
	
              Parent
                Preferred Stock

            	
              4.3(a)

            
	
              Parent
                Schedule

            	
              Preamble
                to Article IV

            
	
              Parent
                SEC Reports

            	
              4.7(a)

            
	
              Parent
                Stockholder Approval

            	
              6.1(a)

            
	
              Parent
                Stock Options

            	
              4.3(a)

            
	
              Parent
                Warrants

            	
              4.3(a)

            
	
              Patents

            	
              3.18(i)

            
	
              Personal
                Property

            	
              3.14(b)

            
	
              Plan

            	
              3.11(a)

            
	
              Press
                Release

            	
              6.3(a)

            
	
              Prospectus/Proxy
                Statement

            	
              6.1(a)

            
	
              Registration
                Statement

            	
              6.1(a)

            
	
              Representative

            	
              2.16(b)

            
	
              Returns

            	
              3.15(b)

            
	
              Revenue
                Shares

            	
              2.15(a)

            
	
              Revenue
                Target

            	
              2.15(a)

            


    

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

    
       

      
        	
                Term

              	
                Section

              
	 


      

    

    
      	
              Schedule

            	
              10.2(a)

            
	
              SEC

            	
              2.15(a)

            
	
              Second
                Share Price Measurement Period

            	
              2.15(c)

            
	
              Second
                Share Price Shares

            	
              2.15(c)

            
	
              Second
                Share Price Trigger

            	
              2.15(c)

            
	
              Securities
                Act

            	
              2.13(e)

            
	
              Share
                Price Measurement Period

            	
              2.15(c)

            
	
              Share
                Price Shares

            	
              2.15(c)

            
	
              Share
                Price Trigger Period

            	
              2.15(c)

            
	
              Share
                Price Triggers

            	
              2.15(c)

            
	
              Short
                Swing Profit Opinion

            	
              6.14

            
	
              Software

            	
              3.18(v)

            
	
              Special
                Meeting

            	
              6.1(a)

            
	
              Stockholder
                Guarantees

            	
              6.19

            
	
              Subsidiaries

            	
              3.2(a)

            
	
              Survival
                Period

            	
              8.3(a)

            
	
              Surviving
                Corporation

            	
              2.1

            
	
              Tax
                or Taxes

            	
              3.15(a)

            
	
              Third
                Party Claim

            	
              8.2

            
	
              Third
                Share Price Measurement Period

            	
              2.15(c)

            
	
              Third
                Share Price Shares

            	
              2.15(c)

            
	
              Third
                Share Price Trigger

            	
              2.15(c)

            
	
              Trademarks

            	
              3.18(ii)

            
	
              Trade
                Secrets

            	
              3.18(vi)

            
	
              Trading
                Day and Trading Days

            	
              2.15(c)

            
	
              Trust
                Fund

            	
              4.23

            
	
              Unaudited
                Financial Statements

            	
              3.7(b)

            
	
              Working
                Capital

            	
              3.7(e)

            


    

    


     

    ARTICLE
      II

     

    THE
      MERGER

     

    2.1 The
      Merger.
      At the
      Effective Time and subject to and upon the terms and conditions of this
      Agreement and the applicable provisions of the DGCL, Merger Sub shall be merged
      with and into the Company (the “Merger”), the separate corporate existence of
      Merger Sub shall cease and the Company shall continue as the surviving
      corporation. The Company as the surviving corporation after the Merger is
      hereinafter sometimes referred to as the “Surviving Corporation.”

     

    2.2 Effective
      Time; Closing.
      Subject
      to the conditions of this Agreement, the parties hereto shall cause the Merger
      to be consummated by filing with the Secretary of State of the State of Delaware
      in accordance with the relevant provisions of the DGCL a Certificate of Merger
      (the “Certificate of Merger”) (the time of such filing with the Secretary of
      State of the State of Delaware, or such later time as may be agreed in writing
      by the Company and Parent and specified in the Certificate of Merger, being
      the
“Effective Time”) as soon as practicable on or after the Closing Date (as herein
      defined). The term “Agreement” as used herein refers to this Agreement and Plan
      of Merger, as the same may be amended from time to time, and all schedules
      delivered concurrently herewith, including, but not limited to, the Company
      Schedule and the Parent Schedule. Unless this Agreement shall have been
      terminated pursuant to Section 9.1, the closing of the Merger (the “Closing”)
      shall take place at the offices of Kramer, Levin, Naftalis & Frankel, LLP,
      1177 Avenue of the Americas, New York, New York 10036 at a time and date to
      be
      specified by the parties, which shall be no later than the third Business Day
      after the satisfaction or waiver of the conditions set forth in Article VII,
      or
      at such other time, date and location as the parties hereto agree in writing
      (the “Closing Date”). Closing signatures may be transmitted by
      facsimile. 

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    2.3 Effect
      of the Merger.
      At the
      Effective Time, the effect of the Merger shall be as provided in this Agreement
      and the applicable provisions of the DGCL. Without limiting the generality
      of
      the foregoing, and subject thereto, at the Effective Time all the property,
      rights, privileges, powers and franchises of the Company and Merger Sub shall
      vest in the Surviving Corporation, and all debts, liabilities and duties of
      the
      Company and Merger Sub shall become the debts, liabilities and duties of the
      Surviving Corporation.

     

    2.4 Certificate
      of Incorporation; Bylaws.

     

    (a) At
      the
      Effective Time, the Certificate of Incorporation of the Merger Sub shall be
      the
      Certificate of Incorporation of the Surviving Corporation until thereafter
      amended as provided by law and such Certificate of Incorporation of the
      Surviving Corporation.

     

    (b) The
      Bylaws of the Merger Sub shall be the Bylaws of the Surviving
      Corporation.

     

    2.5 Effect
      on Capital Stock.
      Subject
      to the terms and conditions of this Agreement, at the Effective Time, by virtue
      of the Merger and this Agreement and without any action on the part of Merger
      Sub, the Company or the holders of any of the following securities, the
      following shall occur:

     

    (a) Conversion
      of Company Common Stock.
      

     

    (i) Other
      than the Excluded Shares, each share of Company Common Stock issued and
      outstanding immediately prior to the Effective Time will be automatically
      converted into (A) the right to receive at the Effective Time that number of
      shares of Parent Common Stock determined by multiplying such share by the
      Exchange Ratio plus (B) the right to receive that number of Excess Closing
      Shares which may be distributed by the Escrow Agent at the end of the Share
      Price Trigger Period in accordance with Section 2.13(f) plus (C) the right
      to receive that number of Additional Shares which may be distributed by the
      Escrow Agent from time to time in accordance with Section 2.15 determined by
      multiplying such share by the Additional Share Conversion Ratio plus
      (D) the right to receive that number of Excess Additional Shares which may
      be distributed by the Escrow Agent in accordance with Section
      2.15(e)(iii).

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    (ii) Certificates
      representing the shares of Parent Common Stock into which the shares of Company
      Common Stock are converted at the Effective Time pursuant to this Section 2.5(a)
      shall be issued to the holder of such shares of Company Common Stock upon
      surrender of the certificate representing such shares of Company Common Stock
      in
      the manner provided in Section 2.6 (or in the case of a lost, stolen or
      destroyed certificate, upon delivery of an affidavit (and indemnity, if
      required) in the manner provided in Section 2.8). If any shares of Company
      Common Stock outstanding immediately prior to the Effective Time are unvested
      or
      are subject to a repurchase option, risk of forfeiture or other condition under
      any applicable restricted stock purchase agreement or other agreement with
      the
      Company, then the shares of Parent Common Stock issued in exchange for such
      shares of Company Common Stock will also be unvested or subject to the same
      repurchase option, risk of forfeiture or other condition, and the certificates
      representing such shares of Parent Common Stock may accordingly be marked with
      appropriate legends. The Company shall take all action that may be necessary
      to
      ensure that, from and after the Effective Time, Parent is entitled to exercise
      any such repurchase option or other right set forth in any such restricted
      stock
      purchase agreement or other agreement. The numbers of shares of Parent Common
      Stock issuable or distributable pursuant to this Section 2.5(a) (including
      Additional Shares) that would otherwise be issued to Persons who exercise their
      appraisal rights pursuant to Section 262 of the DGCL shall not be issued to
      such
      persons and shall be canceled.

     

    (b) Cancellation
      of Treasury and Parent-Owned Stock.
      Each
      share of Company Common Stock held by the Company or owned by Merger Sub, Parent
      or any direct or indirect wholly-owned subsidiary of the Company or of Parent
      immediately prior to the Effective Time shall be canceled and extinguished
      without any conversion or payment in respect thereof.

     

    (c) Capital
      Stock of Merger Sub.
      Each
      share of Common Stock, without par value, of Merger Sub (the “Merger Sub Common
      Stock”) issued and outstanding immediately prior to the Effective Time shall be
      converted into one validly issued, fully paid and nonassessable share of common
      stock, without par value, of the Surviving Corporation. Each certificate
      evidencing ownership of shares of Merger Sub Common Stock shall evidence
      ownership of such shares of common stock of the Surviving
      Corporation.

     

    (d) Adjustments
      to Exchange Ratios.
      Each of
      the Exchange Ratio, the Additional Share Conversion Ratio and the Excess Share
      Ratio, as the case may be, shall be equitably adjusted to reflect appropriately
      the effect of any stock split, reverse stock split, stock dividend (including
      any dividend or distribution of securities convertible into Parent Common Stock
      or Company Common Stock), extraordinary cash dividends, reorganization,
      recapitalization, reclassification, combination, exchange of shares or other
      like change with respect to Parent Common Stock or Company Common Stock
      occurring on or after the date hereof and prior to the Effective
      Time.

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

    (e) Fractional
      Shares.
      Notwithstanding anything to the contrary, no fraction of a share of Parent
      Common Stock will be issued by virtue of the Merger (including, but not limited
      to, the Consideration Shares and Additional Shares), and each holder of shares
      of Company Common Stock who would otherwise be entitled to a fraction of a
      share
      of Parent Common Stock (after aggregating all fractional shares of Parent Common
      Stock that otherwise would be received by such holder) shall, upon compliance
      with Section 2.6 receive from Parent one (1) share of Parent Common
      Stock.

     

    2.6 Surrender
      of Certificates.

     

    (a) Exchange
      Agent.
      Continental Stock Transfer & Trust Company shall be designated by the
      parties hereto to act as the exchange agent (the “Exchange Agent”) in the
      Merger.

     

    (b) Parent
      to Provide Common Stock.
      Promptly after the Effective Time, and in no event more than three (3) Business
      Days thereafter, Parent shall make available to the Exchange Agent, for exchange
      in accordance with this Article II, the Closing Shares in exchange for
      outstanding shares of Company Common Stock and any dividends or distributions
      to
      which holders of shares of Company Common Stock may be entitled pursuant to
      Section 2.6(d). In addition, at such time Parent shall deposit with the Escrow
      Agent the Additional Escrowed Shares in accordance with Section
      2.15(e).

     

    (c) Exchange
      Procedures.
      Promptly after the Effective Time, and in no event more than three (3) Business
      Days thereafter, Parent shall cause the Exchange Agent to mail to each holder
      of
      record (as of the Effective Time) of a certificate or certificates (the
“Certificates”), which immediately prior to the Effective Time represented
      outstanding shares of Company Common Stock whose shares were converted into
      the
      right to receive shares of Parent Common Stock pursuant to Section 2.5: (i)
      a
      letter of transmittal in customary form (which shall specify that delivery
      shall
      be effected, and risk of loss and title to the Certificates shall pass, only
      upon delivery of the Certificates to the Exchange Agent and shall contain such
      other customary provisions as Parent may reasonably specify), and (ii)
      instructions for use in effecting the surrender of the Certificates in exchange
      for certificates representing shares of Parent Common Stock and any dividends
      or
      other distributions pursuant to Section 2.6(d). Upon surrender of Certificates
      for cancellation to the Exchange Agent or to such other agent or agents as
      may
      be appointed by Parent, together with such letter of transmittal, duly completed
      and validly executed in accordance with the instructions thereto, the holders
      of
      such Certificates shall be entitled to receive in exchange therefor certificates
      representing the Closing Shares, less the shares of Parent Common Stock
      representing the Holdback Escrowed Shares referred to in Section 2.14, and
      any
      dividends or distributions payable pursuant to Section 2.6(d), and the
      Certificates so surrendered shall forthwith be canceled. Until so surrendered,
      outstanding Certificates will be deemed, from and after the Effective Time,
      to
      evidence only the right to receive the applicable number of shares of Parent
      Common Stock issuable or distributable pursuant to Section 2.5(a). 

     

    (d) Distributions
      With Respect to Unexchanged Shares.
      No
      dividends or other distributions declared or made after the date of this
      Agreement with respect to Parent Common Stock with a record date after the
      Effective Time will be paid to the holders of any unsurrendered Certificates
      with respect to the shares of Parent Common Stock to be issued upon surrender
      thereof until the holders of record of such Certificates shall surrender such
      Certificates. Subject to applicable law, following surrender of any such
      Certificates with a properly completed letter of transmittal, the Exchange
      Agent
      shall promptly deliver to the record holders thereof, without interest,
      certificates representing shares of Parent Common Stock issued in exchange
      therefor and the amount of any such dividends or other distributions with a
      record date after the Effective Time theretofore paid with respect to such
      shares of Parent Common Stock.

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

    (e) Transfers
      of Ownership.
      If
      certificates representing shares of Parent Common Stock are to be issued in
      a
      name other than that in which the Certificates surrendered in exchange therefor
      are registered, it will be a condition of the issuance thereof that the
      Certificates so surrendered will be properly endorsed and otherwise in proper
      form for transfer and that the persons requesting such exchange will have paid
      to Parent or any agent designated by it any transfer or other taxes required
      by
      reason of the issuance of certificates representing shares of Parent Common
      Stock in any name other than that of the registered holder of the Certificates
      surrendered, or established to the satisfaction of Parent or any agent
      designated by it that such tax has been paid or is not payable. 

     

    (f) Required
      Withholding.
      Each of
      the Exchange Agent, Parent and the Surviving Corporation shall be entitled
      to
      deduct and withhold from any consideration payable or otherwise deliverable
      pursuant to this Agreement to any holder or former holder of Company Common
      Stock, Employee Options or Company Warrants such amounts as are required to
      be
      deducted or withheld therefrom under the Code or under any provision of state,
      local or foreign tax law or under any other applicable legal requirement. To
      the
      extent such amounts are so deducted or withheld, such amounts shall be treated
      for all purposes under this Agreement as having been paid to the person to
      whom
      such amounts would otherwise have been paid, provided,
      however,
      that
      none of the Exchange Agent, Parent or the Surviving Corporation shall be
      entitled to withhold any amounts pursuant to this Section 2.6(f) if the Exchange
      Agent, Parent or the Surviving Corporation has received prior to the issuance
      or
      distribution of any shares of Parent Common Stock pursuant to this Agreement,
      such certificates or forms as are sufficient, under applicable law, to establish
      that withholding is not required (together with a satisfactory supporting legal
      opinion, if the Exchange Agent, Parent or the Surviving Corporation so
      requires); provided,
      further,
      that
      the Exchange Agent, Parent or the Surviving Corporation agree that, before
      withholding and paying over any amounts to a U.S. taxing authority with respect
      to a holder or former holder of Company Common Stock, Employee Options or
      Company Warrants pursuant to this Section 2.6(f) (and delivering to such holder
      the balance of the portion of the shares of Parent Common Stock payable to
      such
      holder or former holder of Company Common Stock, Employee Options or Company
      Warrants pursuant to this Agreement), Parent shall (or shall cause the Exchange
      Agent to) provide such holder or former holder of Company Common Stock, Employee
      Options or Company Warrants with written notice and shall consult with such
      holder or former holder of Company Common Stock, Employee Options or Company
      Warrants in order to minimize the amount of any such withholding.

     

    
      
        
        

      

      
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    (g) Termination
      of Exchange Agent Obligations.
      Closing
      Shares held by the Exchange Agent that have not been delivered to holders of
      Certificates within six months after the Effective Time shall promptly be paid
      or delivered, as appropriate, to Parent, and thereafter holders of Certificates
      who have not theretofore complied with the exchange procedures outlined in
      and
      contemplated by this Section 2.6 shall thereafter look only to Parent (subject
      to abandoned property, escheat and similar laws) for their claim for shares
      of
      Parent Common Stock and any dividends or distributions pursuant to Section
      2.6(d) with respect to Parent Common Stock to which they are entitled.


     

    (h) No
      Liability.
      Notwithstanding anything to the contrary in this Section 2.6, neither the
      Exchange Agent, Parent, the Surviving Corporation nor the Company shall be
      liable to a holder of shares of Parent Common Stock or Company Common Stock
      or
      holders of Employee Options or Company Warrants for any amount properly paid
      to
      a public official pursuant to any applicable abandoned property, escheat or
      similar law.

     

    2.7 No
      Further Ownership Rights in Company Stock.
      All
      shares of Parent Common Stock issued in accordance with the terms hereof shall
      be deemed to have been issued in full satisfaction of all rights pertaining
      to
      such shares of Company Common Stock, and there shall be no further registration
      of transfers on the records of the Surviving Corporation of shares of Company
      Common Stock that were outstanding immediately prior to the Effective Time.
      If,
      after the Effective Time, Certificates are presented to the Surviving
      Corporation for any reason, they shall be canceled and exchanged as provided
      in
      this Article II.

     

    2.8 Lost,
      Stolen or Destroyed Certificates.
      In the
      event that any Certificates shall have been lost, stolen or destroyed, the
      Exchange Agent shall issue in exchange for such lost, stolen or destroyed
      Certificates, upon the making of an affidavit of that fact by the holder
      thereof, certificates representing the shares of Parent Common Stock which
      the
      shares of Company Common Stock formerly represented by such Certificates were
      converted into and any dividends or distributions payable pursuant to Section
      2.6(d); provided, however, that, as a condition precedent to the issuance of
      such certificates representing shares of Parent Common Stock and other
      distributions, the owner of such lost, stolen or destroyed Certificates shall
      indemnify Parent against any claim that may be made against Parent, the
      Surviving Corporation or the Exchange Agent with respect to the Certificates
      alleged to have been lost, stolen or destroyed; provided, however, that Parent
      may also, in its commercially reasonable discretion and as an additional
      condition precedent to the issuance thereof, require the owner of such lost,
      stolen or destroyed Certificates to deliver a bond in such sum as it may
      reasonably direct against any claim that may be made against Parent or the
      Exchange Agent with respect to the Certificates alleged to have been lost,
      stolen or destroyed.

     

    2.9 Tax
      Consequences.
      It is
      intended by the parties hereto that the Merger shall constitute a reorganization
      within the meaning of Section 368 of the Code. The parties hereto adopt this
      Agreement as a “plan of reorganization” within the meaning of Sections
      1.368-2(g) and 1.368-3(a) of the United States Income Tax
      Regulations.

     

    2.10 Taking
      of Necessary Action; Further Action.
      If, at
      any time after the Effective Time, any further action is necessary or desirable
      to carry out the purposes of this Agreement and to vest the Surviving
      Corporation with full right, title and possession to all assets, property,
      rights, privileges, powers and franchises of the Company and Merger Sub, the
      officers and directors of the Company and Merger Sub will take all such lawful
      and necessary action.

     

    
      
        
        

      

      
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    2.11 Shares
      Subject to Appraisal Rights.

     

    (a) Notwithstanding
      Section 2.5 hereof, Dissenting Shares shall not be converted into a right to
      receive Parent Common Stock. The holders thereof shall be entitled only to
      such
      rights as are granted by the DGCL. Each holder of Dissenting Shares who becomes
      entitled to payment for such shares pursuant to the DGCL shall receive payment
      therefor from the Surviving Corporation in accordance with the DGCL, provided,
      however, that (i) if any stockholder of the Company who asserts appraisal rights
      in connection with the Merger (a “Dissenter”) shall have failed to establish his
      entitlement to appraisal rights as provided in the DGCL, or (ii) if any such
      Dissenter shall have effectively withdrawn his demand for payment for such
      shares or waived or lost his right to payment for his shares under the appraisal
      rights process under the DCGL, the shares of Company Common Stock held by such
      Dissenter shall be treated as if they had been converted, as of the Effective
      Time, into a right to receive Parent Common Stock as provided in Section 2.5.
      The Company shall give Parent prompt notice of any demands for payment received
      by the Company from a person asserting appraisal rights, and Parent shall have
      the right to participate in all negotiations and proceedings with respect to
      such demands. The Company shall not, except with the prior written consent
      of
      Parent, make any payment with respect to, or settle or offer to settle, any
      such
      demands.

     

    (b) As
      used
      herein, “Dissenting Shares” means any shares of Company Common Stock held by
      stockholders of the Company who are entitled to appraisal rights under the
      DGCL,
      and who have properly exercised, perfected and not subsequently withdrawn or
      lost or waived their rights to demand payment with respect to their shares
      in
      accordance with the DGCL. 

     

    2.12 Israeli
      Securities Law Limitations.
      In the
      event the Company is unable to obtain an exemption from the Israeli Securities
      Authority from the obligation to publish a prospectus pursuant to Israeli
      securities law in connection with the transactions contemplated hereby (the
      “Israeli Securities Exemption”) or the Company receives such an exemption that
      is conditional upon the reduction of the number of holders of Employee Options
      (a “Conditional Israeli Securities Exemption”), then Parent, concurrently with
      the Closing, shall offer to purchase for cash Employee Options held by such
      number of Company employees or consultants (or former employees or consultants)
      as shall permit the Company to avoid the need to publish a prospectus pursuant
      to Israeli securities law in connection with the transactions contemplated
      hereby. Parent shall offer to purchase such Employee Options from the holders
      of
      Employee Options in the manner that minimizes the aggregate purchase price
      paid
      by Parent pursuant to this Section 2.12 (the “Israeli Securities Purchase
      Price”).

     

    
      
        
        

      

      
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    2.13 Employee
      Options.

     

    (a) Subject
      to the further provisions of this Section 2.13, at the Effective Time, Parent
      shall substitute equivalent options to purchase Parent Common Stock for all
      options outstanding under the Company Stock Option Plans at the Effective Time
      (the “Employee Options”). Each agreement representing the grant of Employee
      Options is referred to herein as an “Employee Option Agreement.” Subject to the
      foregoing and Section 2.13(b) and (c), immediately after the Effective Time,
      each such Employee Option Agreement shall be deemed to constitute an option
      to
      acquire (i) from Parent that number of shares of Parent Common Stock equal
      to
      the number of shares of Company Common Stock which were subject to such Employee
      Option Agreement immediately prior to the Effective Time (whether vested or
      unvested) multiplied by the Exchange Ratio, (ii) from the Escrow Agent in
      accordance with Section 2.15, that number of Additional Shares which such holder
      of Employee Options would have received if such holder had exercised such
      Employee Options immediately prior to the Effective Time, regardless of whether
      such Employee Options had vested prior to the Effective Time, (iii) in the
      event
      of any exercise of any Employee Options after the termination of the Share
      Price
      Trigger Period, from Parent in accordance with Section 2.13(f), that number
      of
      Excess Closing Shares which such holder of Employee Options would have received
      if such holder had exercised such Employee Options immediately prior to the
      termination of the Share Price Trigger Period, regardless of whether such
      Employee Options had vested prior to the termination of the Share Price Trigger
      Period and (iv) in the event of any exercise of any Employee Options after
      the
      termination of the Share Price Trigger Date, from the Escrow Agent in accordance
      with Section 2.15(e)(iii) that number of Excess Additional Shares which such
      holder of Employee Options would have received if such holder exercised such
      Employee Options immediately prior to the termination of the Share Price Trigger
      Period, regardless of whether such Employee Options had vested prior to the
      termination of the Share Price Trigger Period. The exercise price for each
      share
      of Parent Common Stock and the proportional right to receive Additional Shares
      pursuant to each such Employee Option Agreement shall be equal to the aggregate
      exercise price of the Employee Options represented by the Employee Option
      Agreement at the Effective Time divided by the number of shares of Parent Common
      Stock for which it is exercisable pursuant to clause (i) of this Section
      2.13(a), rounded up to the nearest whole cent.

     

    (b) In
      the
      event that a holder of Employee Options exercises any Employee Option after
      the
      Closing and prior to the termination of the Holdback Period, ten percent (10%)
      of the shares of Parent Common Stock such holder receives pursuant to clause
      (i)
      of Section 2.13(a) shall be deposited with the Escrow Agent and held by the
      Escrow Agent as Holdback Escrowed Shares pursuant to the Escrow Agreement.
      Any
      shares of Parent Common Stock deposited with the Escrow Agent pursuant to this
      Section 2.13(b) shall remain subject to Sections 2.14 and 8.6.

     

    (c) In
      the
      event that a holder of Employee Options exercises any Employee Option after
      the
      termination of the Holdback Period and the Escrow Agent has, pursuant to Section
      8.6 and in accordance with the Escrow Agreement, has withheld any amounts in
      dispute related to the indemnification obligations set forth in Article VIII,
      the number of shares of Parent Common Stock such holder receives pursuant to
      clause (i) of Section 2.13(a) shall be equitably adjusted as to be consistent
      with the percentage of Closing Shares which the Persons who surrendered
      Certificates received after the application of the Holdback Escrowed Shares
      pursuant to Section 8.6. 

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

    (d) It
      is the
      intent of the parties hereto that the Employee Options assumed by Parent
      following the Closing pursuant to this Section 2.13 shall, to the extent
      permitted by applicable law, qualify as incentive stock options as defined
      in
      Section 422 of the Code and, in the case of Israeli employees, qualify for
      preferential treatment under Section 102 of the Israeli Income Tax Ordinance,
      to
      the extent any such Employee Options qualified as incentive stock options or
      for
      preferential treatment under Section 102 of the Israeli Income Tax Ordinance
      immediately prior to the Effective Time and all interpretations pursuant to
      this
      Section 2.13 shall be consistent with such intent. Any reference in this
      Agreement to the issuance of shares of Parent Common Stock upon the exercise
      of
      an Employee Option, or to the issuance or distribution of Additional Shares
      to
      the holders of Employee Options (subject to and only upon the exercise of such
      Employee Options in accordance with the terms of the applicable Employee Option
      Agreement), shall, in the case of an Israeli employee, refer to the issuance
      or
      distribution of such shares to the Section 102 Trustee if necessary to preserve
      the preferential treatment available to the employee under Section 102 of the
      Israeli Income Tax Ordinance. 

     

    (e) As
      soon
      as practicable after the Effective Time, and in any event no earlier than ninety
      (90) days thereafter and no later than one hundred and twenty (120) days after
      the Effective Time, Parent shall file a Registration Statement on Form S-8
      (or
      any successor form) under the Securities Act of 1933, as amended (“Securities
      Act”), with respect to all shares of Parent Common Stock issuable or
      distributable pursuant to options substituted in place of Employee Options,
      and
      shall use commercially reasonable efforts to maintain the effectiveness of
      such
      Registration Statement for so long as such substituted options remain
      outstanding.

     

    (f) Within
      five (5) Business Days of the termination of the Share Price Trigger Period,
      Parent shall issue to the Holders and shall reserve for subsequent issuance
      to
      Derivative Holders (subject to and only upon the exercise of such Company
      Derivative Securities in accordance with the terms of the applicable Company
      Derivative Security Agreement) an aggregate number of shares of Parent Common
      Stock equal to the Excess Closing Shares Number (the “Excess Closing Shares”).
      Each Holder and Derivative Holder (subject to and only upon the exercise of
      such
      Company Derivative Securities in accordance with the terms of the applicable
      Company Derivative Security Agreement) shall receive a number of Excess Closing
      Shares equal to the Excess Closing Shares Number multiplied by the Excess Shares
      Ratio applicable to such Holder or such Derivative Holder.

     

    (g) As
      soon
      as practicable after the Closing Date, Parent shall reserve for issuance all
      shares of Parent Common Stock issuable pursuant to Section
      2.13(a)(i).

     

    2.14 Holdback.
      As the
      sole remedy for the indemnity obligations set forth in Article VIII, Parent
      shall hold back, from the shares of Parent Common Stock to be issued as a result
      of the Merger, until December 31, 2007 (“Holdback Period”), ten percent (10%) of
      the Closing Shares, which shall be allocated among the Persons entitled to
      receive them in the same proportions as the shares of Parent Common Stock are
      allocated among them, and deposit such shares of Parent Common Stock with
      Continental Stock Transfer & Trust Company, as Escrow Agent (the “Escrow
      Agent”) to be held as “Holdback Escrowed Shares” in accordance with the terms
      and conditions of the Escrow Agreement. Subject to Article VIII, on the first
      Business Day following the conclusion of the Holdback Period, the Escrow Agent
      shall deliver the Holdback Escrowed Shares, less any amounts applied in
      satisfaction of a claim for indemnification and any amounts then in dispute
      related to the indemnification obligations set forth in Article VIII, to each
      such Person in the same proportions as withheld. Any withheld Holdback Escrowed
      Shares, to the extent not applied in satisfaction of a claim for
      indemnification, will be remitted to such Persons promptly upon resolution
      of
      the dispute or claim.

     

    
      
        
        

      

      
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    2.15 Additional
      Shares.

     

    (a) Revenue
      Shares.
      In the
      event that Parent’s total revenues equal or exceed forty-five million dollars
      ($45,000,000) (the “Revenue Target”) for the calendar year ending December 31,
      2006, Parent shall cause the Escrow Agent, in accordance with the Escrow
      Agreement and Section 2.15(e), to distribute to the Holders and Derivative
      Holders (subject to and only upon the exercise of such Company Derivative
      Securities in accordance with the terms of the applicable Company Derivative
      Security Agreement), an aggregate of 1,000,000 Additional Escrowed Shares (the
      “Revenue Shares”) in accordance with Sections 2.5, 2.13 and 2.18, respectively.
      For the purposes of this Section 2.15(a), “total revenue” shall mean the pro
      forma consolidated revenues of Parent recognized in accordance with Parent’s
      revenue recognition policies under GAAP, as reflected in Parent’s Annual Report
      on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) for
      the fiscal year ending December 31, 2006 excluding any revenues derived from
      businesses, operations or assets acquired by Company other than in the ordinary
      course of business after the date of this Agreement or by Parent or the Company
      after the Effective Time.

     

    (b) Net
      Profit Shares.
      

     

    (i) In
      the
      event that Parent’s net income exceeds $15,000,000 for the calendar year ending
      December 31, 2007 (the “2007 Net Profit Target”) Parent shall cause the Escrow
      Agent, in accordance with the Escrow Agreement and Section 2.15(e), to
      distribute to the Holders and the Derivative Holders (subject to and only upon
      the exercise of such Company Derivative Securities in accordance with the terms
      of the applicable Company Derivative Security Agreement), in accordance with
      Sections 2.5, 2.13 and 2.18, respectively, an aggregate number of Additional
      Escrowed Shares equal to 1,000,000 multiplied by a fraction (A) the numerator
      of
      which shall be the excess of Parent’s net income of the calendar year ending
      December 31, 2007 over $15,000,000 and (B) the denominator of which shall be
      $10,000,000. In no event shall the fraction in the preceding sentence exceed
      one
      (1). For the purposes of this Section 2.15(b), “net income” shall mean the
      consolidated net income after taxes of Parent calculated in accordance with
      Parent’s accounting policies under GAAP, as reflected in Parent’s Annual Report
      on Form 10-K filed with the SEC for the applicable calendar year, excluding
      (x)
      the Management Incentive Expenses applicable to such calendar year and (y)
      any
      tax consequences related to or arising from the Management Incentive Expenses,
      if any. Shares of Parent Common Stock distributed pursuant to this Section
      2.15(b)(i) shall be referred to as the “2007 Net Profit Shares”.

     

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

    (ii) In
      the
      event that Parent’s net income exceeds $20,000,000 for the calendar year ending
      December 31, 2008 (the “2008 Net Profit Target”) Parent shall cause the Escrow
      Agent, in accordance with the Escrow Agreement and Section 2.15(e), to
      distribute to the Holders and the Derivative Holders (subject to and only upon
      the exercise of such Company Derivative Securities in accordance with the terms
      of the applicable Company Derivative Security Agreement), in accordance with
      Sections 2.5, 2.13 and 2.18, respectively, an aggregate number of Additional
      Escrowed Shares equal to 2,000,000 multiplied by a fraction (A) the numerator
      of
      which shall be the excess of Parent’s net income for the calendar year ending
      December 31, 2008 over $20,000,000 and (B) the denominator of which shall be
      $25,000,000. In no event shall the fraction in the preceding sentence exceed
      one
      (1). Shares of Parent Common Stock distributed pursuant to this Section
      2.15(b)(ii) shall be referred to as the “2008 Net Profit Shares” and together
      with the 2007 Net Profit Shares, the “Net Profit Shares”.

     

    (c) Share
      Price Shares.

     

    (i) In
      the
      event that the Last Reported Sales Price of the Parent Common Stock is equal
      to
      or exceeds $8.50 (the “First Share Price Trigger”) during any twenty (20)
      Trading Days during any thirty (30) consecutive Trading Day period (the “First
      Share Price Measurement Period”) at any time during the period commencing on the
      Closing Date and ending on the fourth anniversary thereof (the “Share Price
      Trigger Period”), Parent shall cause the Escrow Agent, in accordance with the
      Escrow Agreement and Section 2.15(e), to distribute to the Holders and the
      Derivative Holders (subject to and only upon the exercise of such Company
      Derivative Securities in accordance with the terms of the applicable Company
      Derivative Security Agreement), an aggregate of 2,000,000 Additional Escrowed
      Shares in accordance with Sections 2.5, 2.13 and 2.18, respectively, (the “First
      Share Price Shares”). For the purpose of this Section 2.15(c), the “Last
      Reported Sales Price” with respect to any security on any date shall mean the
      closing sale price per such security (or if no closing sale price is reported,
      the average of the bid and asked prices or, if more than one in either case,
      the
      average of the average bid and the average asked prices) on that date as
      reported in composite transactions for the principal U.S. securities exchange
      on
      which such security is traded or, if such security is not listed on a U.S.
      national or regional securities exchange, as reported by the Nasdaq National
      Market or Nasdaq Capital Market. If such security is not listed for trading
      on a
      U.S. national or regional securities exchange and not reported by the Nasdaq
      National Market or Nasdaq Capital Market on the relevant date, the “Last
      Reported Sales Price” will be the last quoted bid price for such security in the
      over-the-counter market on the relevant date as reported by the National
      Quotation Bureau Incorporated, Pink Sheets LLC or similar organization. For
      the
      purposes of this Section 2.15(c), “Trading Day” shall mean a day during which
      trading in securities generally occurs on the principal national securities
      exchange on which the security is then listed or, if the security is not then
      listed on a national securities exchange, on the Nasdaq National Market or,
      if
      the security is not then quoted on the Nasdaq National Market, on the principal
      other market on which the security is traded. 

     

    
      
        
        

      

      
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    (ii) In
      the
      event that the Last Reported Sales Price of the Parent Common Stock is equal
      to
      or exceeds $9.50 (the “Second Share Price Trigger”) during any twenty (20)
      Trading Days during any thirty (30) consecutive Trading Day period (the “Second
      Share Price Measurement Period”) at any time during the Share Price Trigger
      Period, Parent shall cause the Escrow Agent, in accordance with the Escrow
      Agreement and Section 2.15(e), to distribute to the Holders and the Derivative
      Holders (subject to and only upon the exercise of such Company Derivative
      Securities in accordance with the terms of the applicable Company Derivative
      Security Agreement) an aggregate of 2,000,000 Additional Escrowed Shares in
      accordance with Sections 2.5, 2.13 and 2.18, respectively (the “Second Share
      Price Shares”).

     

    (iii) In
      the
      event that the Last Reported Sales Price of the Parent Common Stock is equal
      to
      or exceeds $12 (the “Third Share Price Trigger” and together with the First
      Share Price Trigger and the Second Share Price Trigger, the “Share Price
      Triggers”) during any twenty (20) Trading Days during any thirty (30)
      consecutive Trading Day period (the “Third Share Price Measurement Period” and
      together with the First Share Price Measurement Period and the Second Share
      Price Measurement Period, the “Share Price Measurement Period”) at any time
      during the Share Price Trigger Period, Parent shall cause the Escrow Agent,
      in
      accordance with the Additional Shares Escrow Agreement and Section 2.15(e),
      to
      distribute to the Holders and the Derivative Holders (subject to and only upon
      the exercise of such Company Derivative Securities in accordance with the terms
      of the applicable Company Derivative Security Agreement) an aggregate of
      2,000,000 Additional Escrowed Shares in accordance with Sections 2.5, 2.13
      and
      2.18, respectively (the “Third Share Price Shares” and together with the First
      Share Price Shares and the Second Share Price Shares, the “Share Price
      Shares”).

     

    (iv) Each
      of
      the Share Price Triggers shall be equitably adjusted to reflect appropriately
      the effect of any stock split, reverse stock split, stock dividend (including
      any dividend or distribution of securities convertible into Parent Common
      Stock), extraordinary cash dividends, reorganization, recapitalization,
      reclassification, combination, exchange of shares or other like change with
      respect to Parent Common Stock occurring after the Closing Date and prior to
      the
      termination of the Share Price Measurement Period.

     

    (v) For
      the
      avoidance of doubt, the rights of the holders of the Certificates, to receive
      Share Price Shares pursuant to this Section 2.15(c) shall be
      cumulative.

     

    
      
        
        

      

      
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    (d) For
      the
      purposes of this Agreement, the term “Additional Shares” shall mean,
      collectively, the Revenue Shares, the Net Profit Shares, the Share Price Shares
      and the Accelerated Shares.

     

    (e) Issuance
      of Additional Shares.
      

     

    (i) Promptly
      after the Effective Time and in no event more than three (3) Business Days
      thereafter Parent shall deposit with the Escrow Agent certificates representing
      10,000,000 shares of Parent Common Stock which shall be held by the Escrow
      Agent
      as “Additional Escrowed Shares”. The Additional Escrowed Shares shall be
      distributed upon Parent’s instruction to the Escrow Agent in accordance with
      this Section 2.15(e) in satisfaction of Parent’s obligations pursuant to this
      Section 2.15. Parent shall cause the Escrow Agent to distribute certificates
      for
      Additional Escrowed Shares representing Revenue Shares and Net Profit Shares
      to
      the Holders or the Derivative Holders (subject to and only upon the exercise
      of
      such Company Derivative Securities in accordance with the terms of the
      applicable Company Derivative Security Agreement) in accordance with Sections
      2.5(a)(i), 2.13 or 2.18, as the case may be, within five (5) Business Days
      following the filing with the SEC of Parent’s Annual Report on Form 10-K for the
      year with respect to which such Revenue Shares or Net Profit Shares, as the
      case
      may be, are distributable. Parent shall cause the Escrow Agent to distribute
      certificates for Additional Escrowed Shares representing the First Share Price
      Shares to the Holders and the Derivative Holders (subject to and only upon
      the
      exercise of such Company Derivative Securities in accordance with the terms
      of
      the applicable Company Derivative Security Agreement) in accordance with
      Sections 2.5(a)(i), 2.13 or 2.18, as the case may be, on the fifth
      (5th)
      Business Day following the First Share Price Measurement Period. Parent shall
      cause the Escrow Agent to distribute certificates for Additional Escrowed Shares
      representing the Second Share Price Shares or the Third Share Price Shares,
      as
      the case may be, to the Holders and Derivative Holders (subject to and only
      upon
      the exercise of such Company Derivative Securities in accordance with the terms
      of the applicable Company Derivative Security Agreement) in accordance with
      Sections 2.5(a)(i), 2.13 or 2.18, as the case may be, within five (5) Business
      Days following the applicable Share Price Measurement Period. The Additional
      Escrowed Shares shall continue to be held by the Escrow Agent until the earliest
      of their distribution pursuant to this Section 2.15(e) or Section 2.15(f) below,
      the return of Additional Escrowed Shares to Parent pursuant to Section 2.15(k)
      below or the termination of the Share Price Trigger Period. In the event that
      the Escrow Agent continues to hold any Additional Escrowed Shares upon
      termination of the Share Price Trigger Period, the Escrow Agent shall return
      such shares of Parent Common Stock to Parent for cancellation. For the purposes
      of this Agreement, each date on which Additional Shares are distributed pursuant
      to this Section 2.15(e) shall be considered to be an “Additional Shares Issuance
      Date.” 

     

    (ii) Additional
      Shares which become distributable pursuant to this Section 2.15 subject to
      and
      only upon the exercise of Company Derivative Securities in accordance with
      the
      terms of the applicable Company Derivative Security Agreement, shall continue
      to
      be held by Escrow Agent as “Derivative Escrowed Shares” until distributed to the
      Derivative Holders upon the exercise of the Company Derivative Securities
      pursuant to Section 2.13(a)(ii) or 2.18(a)(ii), as the case may be, in
      accordance with the terms of the applicable Company Derivative Security
      Agreement or distributed in accordance with Section 2.15(e)(iii).

     

    
      
        
        

      

      
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    (iii) Within
      five (5) Business Days of the termination of the Share Price Trigger Period,
      Parent shall cause the Escrow Agent to distribute to the Holders and the
      Derivative Holders (subject to and only upon the exercise of such Company
      Derivative Securities in accordance with the terms of the applicable Company
      Derivative Security Agreement) an aggregate number of Derivative Escrowed Shares
      equal to the Excess Additional Shares Number (the “Excess Additional Shares”).
      Each Holder and Derivative Holder (subject to and only upon the exercise of
      such
      Company Derivative Securities in accordance with the terms of the applicable
      Company Derivative Security Agreement) shall receive a number of Excess
      Additional Shares equal to the Excess Additional Shares Number multiplied by
      the
      Excess Shares Ratio applicable to such Holder or such Derivative Holder. Excess
      Additional Shares which become distributable pursuant to this Section
      2.15(e)(iii) subject to and only upon the exercise of Company Derivative
      Securities in accordance with the terms of the applicable Company Derivative
      Security Agreement, shall continue to be held by Escrow Agent as “Continuing
      Derivative Escrowed Shares” until distributed to the Derivative Holders upon the
      exercise of the Company Derivative Securities pursuant to Section 2.13(a)(iv)
      or
      2.18(a)(iv), as the case may be, in accordance with the terms of the applicable
      Company Derivative Security Agreement or until no Company Derivative Securities
      remain outstanding. In
      the
      event that no Company Derivative Securities remain outstanding, any remaining
      Continuing Derivative Escrowed Shares shall be returned by the Escrow Agent
      to
      the Parent for cancellation.

     

    (f) Acceleration.
      If at
      any time during the Share Price Trigger Period, a Change in Control occurs
      with
      respect to Parent in which the consideration paid to holders of Parent Common
      Stock (the “Change of Control Consideration”), at the closing date of the said
      transaction, has a fair market value which exceeds $11.00 per share of Parent
      Common Stock (after adjustment for any issuance or distribution of shares of
      Parent Common Stock pursuant to this Section 2.15(f)) (the “Acceleration Trigger
      Price”), then immediately prior to such Change of Control, Parent shall instruct
      the Escrow Agent to distribute the Accelerated Shares on such date (the
“Acceleration Date”) to the Holders and the Derivative Holders (subject to and
      only upon the exercise of such Company Derivative Securities in accordance
      with
      the terms of the applicable Company Derivative Security Agreement) in accordance
      with Sections 2.5(a)(i), 2.13(a)(ii) or 2.18(a)(ii), as the case may be.


     

    (g) For
      the
      purposes of this Section 2.15, the term “Change of Control” shall mean any of
      the following:

     

    
      
        
        

      

      
        -22-

        
          

        

      

      
        
        

      

    

    (i) the
      sale,
      lease, transfer, conveyance or other disposition (other than by way of merger
      or
      consolidation), in one or a series of related transactions, of all or
      substantially all of the assets of Parent and its subsidiaries, taken as a
      whole
      to any “person” (as such term is used in Section 13(d)(3) of the Exchange
      Act);

     

    (ii) any
      transaction (including, without limitation, any merger or consolidation) the
      result of which is that any “person” (as defined above), becomes the “beneficial
      owner” (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
      Act, except that a person shall be deemed to have “beneficial ownership” of all
      securities that such person has the right to acquire, whether such right is
      currently exercisable or is exercisable only upon the occurrence of a subsequent
      condition), directly or indirectly, of more than 80% of the capital stock of
      Parent (measured by voting power rather than number of shares);

     

    (iii) the
      consolidation of Parent with, or merging of Parent with or into, any Person,
      or
      the consolidation of any Person with, or the merging of any Person with or
      into,
      Parent, in any such event pursuant to a transaction in which any of the
      outstanding capital stock of Parent is converted into or exchanged for cash,
      securities or other property, other than any such transaction where the capital
      stock of Parent outstanding immediately prior to such transaction is converted
      into or exchanged for capital stock of the surviving or transferee Person
      constituting a majority of the outstanding shares of such capital stock of
      such
      surviving or transferee Person (immediately after giving effect to such
      issuance).

     

    (h) Accelerated
      Shares.

     

    (i) For
      the
      purposes of this Section 2.15, the term “Accelerated Shares” shall mean the sum
      of the Accelerated Revenue and Net Profit Shares and the Accelerated Share
      Price
      Shares.

     

    (ii) In
      the
      event that the Acceleration Date occurs on or prior to December 31, 2006, the
      term “Accelerated Revenue and Net Profit Shares” shall mean 4,000,000 Additional
      Escrowed Shares, and the distribution of such Accelerated Revenue and Net Profit
      Shares shall be in lieu of any future obligation of Parent to issue or cause
      the
      Escrow Agent to distribute any Revenue Shares and Net Profit
      Shares;

     

    (iii) In
      the
      event that the Acceleration Date occurs on or after January 1, 2007 but prior
      to
      January 1, 2008, the term “Accelerated Revenue and Net Profit Shares” shall mean
      3,000,000 Additional Escrowed Shares and the distribution of such Accelerated
      Revenue and Net Profit Shares shall be in lieu of any future obligation of
      Parent to issue or cause the Escrow Agent to distribute any Net Profit
      Shares.

     

    (iv) In
      the
      event that the Acceleration Date occurs on or after January 1, 2008 but prior
      to
      January 1, 2009, the term “Accelerated Revenue and Net Profit Shares” shall mean
      2,000,000 Additional Escrowed Shares and the distribution of such Accelerated
      Revenue and Net Profit Shares shall be in lieu of any future obligation of
      Parent to issue or cause the Escrow Agent to distribute any 2008 Net Profit
      Shares.

     

    
      
        
        

      

      
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    (v) In
      the
      event that that the Change of Control Consideration equals or exceeds $12.00
      (after adjustment for any issuance or distribution of shares of Parent Common
      Stock pursuant to this Section 2.15(h)) (the “Full Share Price Share
      Acceleration Trigger”), then the term “Accelerated Share Price Shares” shall
      mean the difference between 6,000,000 Additional Escrowed Shares and any Share
      Price Shares distributed in accordance with this Section 2.14 prior to the
      Acceleration Date. The distribution of such Accelerated Share Price Shares
      shall
      be in lieu of any future obligation of Parent to issue or cause the Escrow
      Agent
      to distribute any Share Price Shares.

     

    (vi) In
      the
      event that that the Change of Control Consideration is less than the Full Share
      Price Share Acceleration Trigger, then the term “Accelerated Share Price Shares”
shall mean the difference between 4,000,000 Additional Escrowed Shares and
      any
      Share Price Shares distributed in accordance with this Section 2.14 prior to
      the
      Acceleration Date. The distribution of such Accelerated Share Price Shares
      shall
      be in lieu of any future obligation of Parent to issue or cause the Escrow
      Agent
      to distribute any Share Price Shares.

     

    (i) Each
      of
      the Acceleration Trigger Price and the Full Share Price Share Acceleration
      Trigger shall be equitably adjusted to reflect appropriately the effect of
      any
      stock split, reverse stock split, stock dividend (including any dividend or
      distribution of securities convertible into Parent Common Stock), extraordinary
      cash dividends, reorganization, recapitalization, reclassification, combination,
      exchange of shares or other like change with respect to Parent Common Stock
      occurring after the Closing Date and prior to the termination of the Share
      Price
      Trigger Period.

     

    (j) The
      number of Additional Shares to be issued pursuant to this Section 2.15 shall
      be
      equitably adjusted to reflect appropriately the effect of any stock split,
      reverse stock split, stock dividend (including any dividend or distribution
      of
      securities convertible into Parent Common Stock), extraordinary cash dividends,
      reorganization, recapitalization, reclassification, combination, exchange of
      shares or other like change with respect to Parent Common Stock occurring after
      the Closing Date.

     

    (k) Notwithstanding
      a later distribution of Additional Escrowed Shares pursuant to Section
      2.15(f):

     

    (i) in
      the
      event that the Revenue Target is not met or exceeded, the Escrow Agent shall
      return to Parent for cancellation an aggregate of 1,000,000 Additional Escrowed
      Shares; 

     

    (ii) in
      the
      event that the number of 2007 Net Profit Shares is less than 1,000,000 shares,
      then the Escrow Agent shall return to Parent for cancellation an aggregate
      amount of Additional Escrowed Shares equal to the excess of 1,000,000 shares
      of
      Parent Common Stock over the number of 2007 Net Profit Shares; and

     

    
      
        
        

      

      
        -24-

        
          

        

      

      
        
        

      

    

    (iii) in
      the
      event that the number of 2008 Net Profit Shares is less than 2,000,000, then
      the
      Escrow Agent shall return to Parent for cancellation an aggregate of Additional
      Escrowed Shares equal to the excess of 2,000,000 shares of Parent Common Stock
      over the number of 2008 Net Profit Shares.

     

    2.16 Committee
      and Representative for Purposes of Escrow Agreement.

     

    (a) Parent
      Committee.
      Prior
      to the Closing, the Board of Directors of Parent shall appoint a committee
      consisting of one or more of its then members to act on behalf of Parent to
      take
      all necessary actions and make all decisions pursuant to the Escrow Agreement
      regarding the Holdback Escrowed Shares and Parent’s right to indemnification
      pursuant to Article VIII hereof. In the event of a vacancy in such committee,
      the Board of Directors of Parent shall appoint as a successor a Person who
      was a
      director of Parent prior to the Closing Date or some other Person who would
      qualify as an “independent” director of Parent and who has not had any material
      relationship with the Company prior to the Closing. Such committee is intended
      to be the “Committee” referred to in Article VIII hereof and the Escrow
      Agreement.

     

    (b) Representative.
      The
      parties hereto hereby designate Gideon Barak (the “Representative”) to represent
      the interests of the Persons entitled to receive Parent Common Stock as a result
      of the Merger for purposes of the Escrow Agreement and the Holdback Escrowed
      Shares. If such Person ceases to serve in such capacity, for any reason, such
      Person shall designate his or her successor. Failing such designation within
      ten
      (10) Business Days after the Representative has ceased to serve, those members
      of the Board of Directors of Parent who were directors of the Company prior
      to
      the Closing shall appoint as successor a Person who was a former stockholder
      of
      the Company.

     

    2.17 Unclaimed
      Additional Shares.
      In the
      event that any Additional Escrowed Shares are returned to Parent by the Escrow
      Agent and cancelled pursuant to Section 2.15(e)(i) and such shares would have
      been distributable pursuant to Section 2.5(a)(i), but for the failure by a
      holder of Certificates to comply with the exchange procedures outlined in and
      contemplated by Section 2.6, such holder shall look only to Parent (subject
      to
      abandoned property, escheat and similar laws) for such holder’s claim for any
      amount of Additional Shares which such holder may be entitled to pursuant to
      the
      terms of this Agreement. 

     

    
      
        
        

      

      
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    2.18 Company
      Warrants. 

     

    (a) Subject
      to the further provisions of this Section 2.18, at the Effective Time, Parent
      shall substitute equivalent warrants to purchase Parent Common Stock for all
      Company Warrants. Each warrant agreement representing a Company Warrant is
      referred to herein as an “Company Warrant Agreement.” Subject to the foregoing
      and Section 2.18(b) and (c), immediately after the Effective Time, each such
      Company Warrant Agreement shall be deemed to constitute a warrant to acquire
      (i)
      from Parent that number of shares of Parent Common Stock equal to the number
      of
      shares of Company Common Stock which were subject to such Company Warrant
      Agreement immediately prior to the Effective Time (whether or not such Company
      Warrant had been exercisable prior to the Effective Time) multiplied by the
      Exchange Ratio, (ii) from the Escrow Agent in accordance with Section 2.15,
      that
      number of Additional Shares which such holder of Company Warrants would have
      received if such holder had exercised such Company Warrants immediately prior
      to
      the Effective Time, regardless of whether such Company Warrants had been
      exercisable prior to the Effective Time, (iii) in the event of any exercise
      of
      any Company Warrants after the termination of the Share Price Trigger Period,
      from Parent in accordance with Section 2.13(f), that number of Excess Closing
      Shares which such holder of Company Warrants would have received if such holder
      had exercised such Company Warrants immediately prior to the termination of
      the
      Share Price Trigger Period, regardless of whether such Company Warrants had
      been
      exercisable prior to the Share Price Trigger Period and (iv) in the event of
      any
      exercise of any Company Warrants after the termination of the Share Price
      Trigger Date, from the Escrow Agent in accordance with Section 2.15(e)(iii)
      that
      number of Excess Additional Shares which such holder of Company Warrants would
      have received if such holder exercised such Company Warrants immediately prior
      to the termination of the Share Price Trigger Period, regardless of whether
      such
      Company Warrants had been exercisable prior to the Share Price Trigger Period.
      The exercise price for each share of Parent Common Stock and the proportional
      right to receive Additional Shares pursuant to each such Company Warrant
      Agreement shall be equal to the aggregate exercise price of the Company Warrants
      represented by the Company Warrant Agreement at the Effective Time divided
      by
      the number of shares of Parent Common Stock for which it is exercisable pursuant
      to clause (i) of this Section 2.18(a), rounded up to the nearest whole
      cent.

     

    (b) In
      the
      event that a holder of Company Warrants exercises any Company Warrant after
      the
      Closing and prior to the termination of the Holdback Period, ten percent (10%)
      of the shares of Parent Common Stock such holder receives pursuant to clause
      (i)
      of Section 2.18(a) shall be deposited with the Escrow Agent and held by the
      Escrow Agent as Holdback Escrowed Shares pursuant to the Escrow Agreement.
      Any
      shares of Parent Common Stock deposited with the Escrow Agent pursuant to this
      Section 2.18(b) shall remain subject to Sections 2.14 and 8.6.

     

    (c) In
      the
      event that a holder of Company Warrants exercises any Company Warrant after
      the
      termination of the Holdback Period and the Escrow Agent has, pursuant to Section
      8.6 and in accordance with the Escrow Agreement, has withheld any amounts in
      dispute related to the indemnification obligations set forth in Article VIII,
      the number of shares of Parent Common Stock such holder receives pursuant to
      clause (i) of Section 2.18(a) shall be equitably adjusted as to be consistent
      with the percentage of Closing Shares which the Persons who surrendered
      Certificates received after the application of the Holdback Escrowed Shares
      pursuant to Section 8.6.

     

    (d) As
      soon
      as practicable after the Closing Date, Parent shall reserve for issuance all
      shares of Parent Common Stock issuable pursuant to Section
      2.18(a)(i).

     

    
      
        
        

      

      
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    2.19 Rule
      145.
      All
      shares of Parent Common Stock issued pursuant to this Agreement to “affiliates”
of the Company set forth on Schedule 2.19 will be subject to certain resale
      restrictions under Rule 145 promulgated under the Securities Act and all
      certificates representing such shares shall bear an appropriate restrictive
      legend.

     

    ARTICLE
      III

     

    REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY

     

    Subject
      to the exceptions set forth in schedules of the Company delivered by the Company
      to Parent and Merger Sub concurrently herewith (the “Company Schedule”), the
      Company hereby represents and warrants to, and covenants with, Parent and Merger
      Sub, as follows:

     

    3.1 Organization
      and Qualification.

     

    (a) The
      Company is a corporation duly incorporated, validly existing and in good
      standing under the laws of the State of Delaware and has the requisite corporate
      power and authority to own, lease and operate its assets and properties and
      to
      carry on its business as it is now being or currently planned by the Company
      to
      be conducted and to perform its obligations under all Company Contracts by
      which
      it is bound. The Company is in possession of all franchises, grants,
      authorizations, licenses, permits, easements, consents, certificates, approvals
      and orders (“Approvals”) necessary to own, lease and operate the properties it
      purports to own, operate or lease and to carry on its business as it is now
      being or currently planned by the Company to be conducted, except where the
      failure to have such Approvals could not, individually or in the aggregate,
      reasonably be expected to have a Material Adverse Effect on the Company.
      Complete and correct copies of the certificate of incorporation, by-laws and
      the
      charters of all committees of the board of directors (or other comparable
      governing instruments with different names) (collectively referred to herein
      as
“Charter Documents”) of the Company, as amended and currently in effect, have
      been heretofore delivered to Parent or Parent’s counsel. The Company is not in
      violation of any of the provisions of the Company’s Charter
      Documents.

     

    (b) The
      Company is duly qualified or licensed to do business as a foreign corporation
      and is in good standing in each jurisdiction where the character of the
      properties owned, leased or operated by it or the nature of its activities
      makes
      such qualification or licensing necessary, except for such failures to be so
      duly qualified or licensed and in good standing that could not, individually
      or
      in the aggregate, reasonably be expected to have a Material Adverse Effect
      on
      the Company.

     

    (c) The
      minute books of the Company contain true, complete and accurate records of
      all
      meetings and consents in lieu of meetings of its Board of Directors (and any
      committees thereof), similar governing bodies and stockholders (“Corporate
      Records”) since the time of the Company’s organization. Copies of such Corporate
      Records of the Company have been heretofore delivered to Parent or Parent’s
      counsel.

     

    
      
        
        

      

      
        -27-

        
          

        

      

      
        
        

      

    

    (d) The
      stock
      transfer, warrant and option transfer and ownership records of the Company
      contain true, complete and accurate records of the securities ownership as
      of
      the date of such records and the transfers involving the capital stock and
      other
      securities of the Company since the time of the Company’s organization. Copies
      of such records of the Company have been heretofore delivered to Parent or
      Parent’s counsel.

     

    3.2 Subsidiaries. 

     

    (a) The
      Company has no subsidiaries other than IXI Mobile (R&D), Ltd. (which wholly
      owns IXI Mobile (Europe), Ltd., IXI Mobile (Asia Pacific), Ltd. and IXI Mobile
      (East Europe), SRL), and Neo Mobile, Inc. (which wholly owns Neo Mobile, Ltd.
      and Neo Mobile Telecom LLC) (the “Subsidiaries”). As used in this Article III
      and elsewhere in this Agreement, the term “Company” includes the Subsidiaries
      unless the context clearly indicates otherwise. The Company directly or
      indirectly owns all of the outstanding equity securities of the Subsidiaries,
      free and clear of all liens and encumbrances. Except for the Subsidiaries,
      the
      Company does not own, directly or indirectly, any ownership, equity, profits
      or
      voting interest in any Person or has any agreement or commitment to purchase
      any
      such interest, and has not agreed and is not obligated to make nor is bound
      by
      any written, oral or other agreement, contract, subcontract, lease, binding
      understanding, instrument, note, option, warranty, purchase order, license,
      sublicense, insurance policy, benefit plan, commitment or undertaking of any
      nature, as of the date hereof or as may hereafter be in effect under which
      it
      may become obligated to make, any future investment in or capital contribution
      to any other entity.

     

    (b) Each
      Subsidiary (in jurisdictions that recognize the following concepts) is a
      corporation duly incorporated, validly existing and in good standing under
      the
      laws of the jurisdiction of its incorporation and has the requisite corporate
      power and authority to own, lease and operate its assets and properties and
      to
      carry on its business as it is now being or currently planned by the Subsidiary
      to be conducted.

     

    3.3 Capitalization.

     

    (a) The
      authorized capital stock of the Company consists of 89,642,361 shares of capital
      stock, of which 49,000,000 shares are Company Common Stock, 333,334 shares
      are
      Preferred A Stock, 1,604,791 shares are Preferred B Stock, 3,104,236 shares
      are
      Preferred C Stock, 6,000,000 shares are Preferred D Stock and 29,600,000 shares
      are Preferred D-1 Stock, (collectively “Company Preferred Stock”), of which
      4,418,249 shares of Company Common Stock, 285,801 shares of Preferred A Stock,
      439,206 shares of Preferred B Stock, 1,439,581 shares of Preferred C Stock,
      3,448,473 shares of Preferred D Stock and 29,591,387 shares of Preferred D-1
      Stock are issued and outstanding as of the date of this Agreement, all of which
      are validly issued, fully paid and nonassessable. The number of shares of
      Company Common Stock and Company Preferred Stock outstanding as of the Closing
      Date shall be as reflected on the Company Schedule as of such Closing Date.
      Except as set forth on Section 3.3(a) of the Company Schedule as of the date
      of
      this Agreement and as it may be revised as of the Closing Date in accordance
      with the terms of this Agreement, (i) no shares of Company Common Stock or
      Company Preferred Stock are reserved for issuance upon the exercise of
      outstanding options to purchase Company Common Stock granted to employees of
      Company or other parties (“Company Stock Options”), and (ii) no shares of
      Company Common Stock or Company Preferred Stock are reserved for issuance upon
      the exercise of outstanding warrants to purchase Company Common Stock or Company
      Preferred Stock (“Company Warrants”). All shares of Company Common Stock and
      Company Preferred Stock set forth on Section 3.3(a) of the Company Schedule,
      upon issuance on the terms and conditions specified in the instrument pursuant
      to which they are issuable, will be duly authorized, validly issued, fully
      paid
      and nonassessable. Except as described in Section 3.3(a) of the Company
      Schedule, there are no commitments or agreements of any character to which
      Company is bound obligating Company to accelerate the vesting of any Company
      Stock Option as a result of the Merger. All outstanding shares of Company Common
      Stock and Company Preferred Stock and all outstanding Company Stock Options
      and
      Company Warrants have been issued and granted in compliance with (x) all
      applicable securities laws and (in all material respects) other applicable
      laws
      and regulations, and (y) all requirements set forth in any applicable Company
      Contracts. The Company has heretofore delivered to Parent or Parent’s counsel an
      accurate copy of substantially the forms of documents used for the issuance
      of
      Company Stock Options and a true and complete list of the holders thereof,
      including their names and the numbers of shares of Company Common Stock
      underlying such holders’ Company Stock Options. The Company has heretofore
      delivered to Parent or Parent’s counsel true and accurate copies of the Company
      Warrants.

     

    
      
        
        

      

      
        -28-

        
          

        

      

      
        
        

      

    

    (b) Except
      as
      set forth in Section 3.3(b) of the Company Schedule or as set forth in
      Section 3.3(a) there are no subscriptions, options, warrants, equity
      securities, partnership interests or similar ownership interests, calls, rights
      (including preemptive rights), commitments or agreements of any character to
      which the Company is a party or by which it is bound obligating the Company
      to
      issue, deliver or sell, or cause to be issued, delivered or sold, or repurchase,
      redeem or otherwise acquire, or cause the repurchase, redemption or acquisition
      of, any shares of capital stock, partnership interests or similar ownership
      interests of the Company or obligating the Company to grant, extend, accelerate
      the vesting of or enter into any such subscription, option, warrant, equity
      security, call, right, commitment or agreement.

     

    (c) Except
      as
      contemplated by this Agreement and except as set forth in Section 3.3(c) of
      the
      Company Schedule, there are no registration rights, and there is no voting
      trust, proxy, rights plan, antitakeover plan or other agreement or understanding
      to which the Company is a party or by which the Company is bound with respect
      to
      any equity security of any class of the Company.

     

    (d) No
      consent is required from the holder of any Employee Option to effect the
      provisions of Section 2.13.

     

    3.4 Authority
      Relative to this Agreement.
      The
      Company has all necessary corporate power and authority to execute and deliver
      this Agreement and to perform its obligations hereunder and, to consummate
      the
      transactions contemplated hereby (including the Merger). The execution and
      delivery of this Agreement and the consummation by the Company of the
      transactions contemplated hereby (including the Merger) have been duly and
      validly authorized by all necessary corporate action on the part of the Company
      (including the approval by its Board of Directors, subject in all cases to
      the
      satisfaction of the terms and conditions of this Agreement, including the
      conditions set forth in Article VII), and no other corporate proceedings on
      the
      part of the Company are necessary to authorize this Agreement or to consummate
      the transactions contemplated hereby pursuant to the DGCL and the terms and
      conditions of this Agreement, other than the giving of notice to the
      stockholders of the Company and the adoption of this Agreement and the approval
      of the Merger by the stockholders of the Company in accordance with the DGCL.
      This Agreement has been duly and validly executed and delivered by the Company
      and, assuming the due authorization, execution and delivery thereof by the
      other
      parties hereto, constitutes the legal and binding obligation of the Company,
      enforceable against the Company in accordance with its terms, except as may
      be
      limited by bankruptcy, insolvency, reorganization or other similar laws
      affecting the enforcement of creditors’ rights generally and by general
      principles of equity.

     

    
      
        
        

      

      
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    3.5 No
      Conflict; Required Filings and Consents.

     

    (a) The
      execution and delivery of this Agreement by the Company do not, and the
      performance of this Agreement by the Company shall not (i) conflict with or
      violate the Company’s Charter Documents, (ii) subject to obtaining the adoption
      of this Agreement and the Merger by the stockholders of the Company, conflict
      with or violate any Legal Requirements, (iii) result in any breach of or
      constitute a default (or an event that with notice or lapse of time or both
      would become a default) under, or materially impair the Company’s rights or
      alter the rights or obligations of any third party under, or give to others
      any
      rights of termination, amendment, acceleration or cancellation of, or result
      in
      the creation of a lien or encumbrance on any of the properties or assets of
      the
      Company pursuant to, any Company Contracts or (iv) result in the triggering,
      acceleration or increase of any payment to any Person pursuant to any Company
      Contract, including any “change in control” or similar provision of any Company
      Contract, except, with respect to clauses (ii), (iii) or (iv), for any such
      conflicts, violations, breaches, defaults, triggerings, accelerations, increases
      or other occurrences that would not, individually or in the aggregate, have
      a
      Material Adverse Effect on the Company.

     

    (b) The
      execution and delivery of this Agreement by the Company does not, and the
      performance of its obligations hereunder will not, require any consent,
      approval, authorization or permit of, or filing with or notification to,
      Governmental Entity, except (i) for applicable requirements, if any, of the
      Securities Act, the Exchange Act or Blue Sky Laws, and the rules and regulations
      thereunder, and appropriate documents received from or filed with the relevant
      authorities of other jurisdictions in which the Company is licensed or qualified
      to do business, and (ii) where the failure to obtain such consents, approvals,
      authorizations or permits, or to make such filings or notifications, would
      not,
      individually or in the aggregate, reasonably be expected to have a Material
      Adverse Effect on the Company or, after the Closing, Parent, or prevent
      consummation of the Merger or otherwise prevent the parties hereto from
      performing their obligations under this Agreement.

     

    
      
        
        

      

      
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    (c) The
      Company has withdrawn the draft prospectus that it filed with the Israel
      Securities Authority and the Tel-Aviv Stock Exchange, and has terminated the
      proposed offering contemplated thereby.

     

    3.6 Compliance. 

     

    (a) The
      Company has complied with and is not in violation of any Legal Requirements
      with
      respect to the conduct of its business, or the ownership or operation of its
      business, except for failures to comply or violations which, individually or
      in
      the aggregate, have not had and are not reasonably likely to have a Material
      Adverse Effect on the Company. The businesses and activities of the Company
      have
      not been and are not being conducted in violation of any Legal Requirements
      except for violations which, individually or in the aggregate, have not had
      and
      are not reasonably likely to have a Material Adverse Effect on the Company.
      The
      Company is not in default or violation of any term, condition or provision
      of
      any applicable Charter Documents. The Company is not in default or violation
      of
      any term, condition or provision of any applicable Company Contracts, except
      for
      defaults or violations in connection with the Company Contracts which,
      individually or in the aggregate, have not had and are not reasonably likely
      to
      have a Material Adverse Effect on the Company. Except as set forth on Section
      3.6(a) of the Company Schedule, no written notice of non-compliance with any
      Legal Requirements has been received by the Company (and the Company has no
      knowledge of any such notice delivered to any other Person).

     

    (b) Section
      3.6(b) of the Company Schedule provides a complete list of all pending and
      outstanding grants, incentives, qualifications and subsidies (collectively,
      “Government Grants”) from the Government of the State of Israel or any agency
      thereof, or from any other Governmental Body, granted to the Company, including
      Approved Enterprise Status from the Israeli Investment Center of the Israeli
      Ministry of Industry, Commerce and Labor (the “Investment Center”) and any
      grants received from the Office of the Chief Scientist of the Israeli Ministry
      of Industry, Commerce and Labor (the “OCS”). The Company is in material
      compliance with all of the terms, conditions and requirements of its Government
      Grants and has duly fulfilled in all material respects all the undertakings
      relating thereto. The Company has no knowledge of any intention of the
      Investment Center or the OCS to revoke or materially modify any of the
      Government Grants or that the Investment Center or the OCS believes that the
      Company is not in compliance in all material respects with the terms of any
      Government Grant. 

     

    3.7 Financial
      Statements.

     

    (a) The
      Company has provided to Parent a correct and complete copy of the audited
      consolidated financial statements (including any related notes thereto) of
      the
      Company for the fiscal years ended December 31, 2004 and December 31, 2003
      (the
“Audited Financial Statements”). The Audited Financial Statements were prepared
      in accordance with Israeli GAAP applied on a consistent basis throughout the
      periods involved (except as may be indicated in the notes thereto), and each
      fairly presents the consolidated financial position of the Company at the
      respective dates thereof and the results of its operations and cash flows for
      the periods indicated.

     

    
      
        
        

      

      
        -31-

        
          

        

      

      
        
        

      

    

    (b) The
      Company has provided to Parent a correct and complete copy of the unaudited
      consolidated financial statements (including, in each case, any related notes
      thereto) of Company for the nine month periods ended September 30, 2005 and
      2004
      (the “Unaudited Financial Statements”). The Unaudited Financial Statements
      comply as to form in all material respects, and were prepared in accordance
      with
      Israeli GAAP applied on a consistent basis throughout the periods involved
      (except as may be indicated in the notes thereto), and fairly present in all
      material respects the financial position of the Company at the date thereof
      and
      the results of its operations and cash flows for the period indicated, except
      that such statements are subject to normal adjustments that are not expected
      to
      have a Material Adverse Effect on the Company.

     

    (c) The
      books
      of account, minute books, stock certificate books and stock transfer ledgers
      and
      other similar books and records of the Company have been maintained in
      accordance with good business practice, are accurate, complete and correct
      in
      all material respects and there have been no material transactions that are
      required to be set forth therein and which have not been so set
      forth.

     

    (d) The
      accounts and notes receivable of the Company reflected on the balance sheets
      included in the Audited Financial Statements and the Unaudited Financial
      Statements (i) arose from bona fide sales transactions in the ordinary course
      of
      business and are payable on ordinary trade terms, (ii) are legal, valid and
      binding obligations of the respective debtors enforceable in accordance with
      their terms, except as such may be limited by bankruptcy, insolvency,
      reorganization, or other similar laws affecting creditors’ rights generally, and
      by general equitable principles, (iii) are not subject to any valid set-off
      or
      counterclaim except to the extent set forth in such balance sheet contained
      therein, (iv) are collectible in the ordinary course of business consistent
      with
      past practice in the aggregate recorded amounts thereof, net of any applicable
      reserve reflected in such balance sheet referenced above, and (v) are not the
      subject of any actions or proceedings brought by or on behalf of the
      Company.

     

    3.8 No
      Undisclosed Liabilities.
      Except
      as set forth in Section 3.8 of the Company Schedule, the Company has no
      liabilities (absolute, accrued, contingent or otherwise) of a nature required
      to
      be disclosed on a balance sheet or in the related notes to the Unaudited
      Financial Statements which are, individually or in the aggregate, material
      to
      the business, results of operations or financial condition of the Company,
      except: (i) liabilities provided for in or otherwise disclosed in the interim
      balance sheet included in the Unaudited Financial Statements, and (ii) such
      liabilities arising in the ordinary course of the Company’s business and
      consistent with past practice since September 30, 2005, none of which would
      have
      a Material Adverse Effect on the Company.

     

    
      
        
        

      

      
        -32-

        
          

        

      

      
        
        

      

    

    3.9 Absence
      of Certain Changes or Events.
      Except
      as set forth in Section 3.9 of the Company Schedule or in the Unaudited
      Financial Statements, since December 31, 2004, there has not been: (i) any
      Material Adverse Effect on the Company and no event has occurred or circumstance
      has arisen that, in combination with any event or circumstance, would or would
      be expected to result in a Material Adverse Effect, (ii) any declaration,
      setting aside or payment of any dividend on, or other distribution (whether
      in
      cash, stock or property) in respect of, any of the Company’s capital stock, or
      any purchase, redemption or other acquisition by the Company of any of the
      Company’s capital stock or any other securities of the Company or any options,
      warrants, calls or rights to acquire any such shares or other securities, (iii)
      any split, combination or reclassification of any of the Company’s capital
      stock, (iv) any granting by the Company of any increase in compensation or
      fringe benefits, except for normal increases of cash compensation in the
      ordinary course of business consistent with past practice, or any payment by
      the
      Company of any bonus, except for bonuses made in the ordinary course of business
      consistent with past practice, or any granting by the Company of any increase
      in
      severance or termination pay or any entry by the Company, except for any such
      entry in the ordinary course of business consistent with past practice, into
      any
      currently effective employment, severance, termination or indemnification
      agreement, or any entry by the Company into any agreement the benefits of which
      are contingent or the terms of which are materially altered upon the occurrence
      of a transaction involving the Company of the nature contemplated hereby, (v)
      entry by the Company into any licensing or other agreement with regard to the
      acquisition or disposition of any Intellectual Property other than licenses
      in
      the ordinary course of business consistent with past practice or any amendment
      or consent with respect to any licensing agreement filed or required to be
      filed
      by the Company with respect to any Governmental Entity, (vi) any material change
      by the Company in its accounting methods, principles or practices, (vii) any
      change in the auditors of the Company, (vii) any issuance of capital stock
      of
      the Company, (viii) any revaluation by the Company of any of its assets,
      including, without limitation, writing down the value of capitalized inventory
      or writing off notes or accounts receivable or any sale of assets of the Company
      other than in the ordinary course of business, (ix) any material claims, suits,
      actions or proceedings commenced or settled by the Company or (x) any material
      transaction or any other material action taken by the Company outside the
      ordinary course of business or inconsistent with past practices.

     

    3.10 Litigation.
      Except
      as disclosed in Section 3.10 of the Company Schedule, there are no claims,
      suits, actions or proceedings pending or, to the knowledge of the Company,
      threatened against the Company before any court, governmental department,
      commission, agency, instrumentality or authority, or any arbitrator that seeks
      to restrain or enjoin the consummation of the transactions contemplated by
      this
      Agreement or which could reasonably be expected, either singularly or in the
      aggregate with all such claims, actions or proceedings, to have a Material
      Adverse Effect on the Company or have a Material Adverse Effect on the ability
      of the parties hereto to consummate the Merger.

     

    3.11 Employee
      Benefit Plans.

     

    (a) Section
      3.11 of the Company Schedule lists all Plans. “Plan” means any “employee benefit
      plan” as defined in Section 3(3) of the Employee Retirement Income Security Act
      of 1974, as amended from time to time (“ERISA”) and any other plan, policy,
      program, practice or agreement (whether written or oral) providing compensation
      or other benefits to any current or former officer, employee or consultant
      (or
      to any dependent or beneficiary thereof), of the Company or any ERISA Affiliate,
      which are now, or within the last five (5) years were, maintained by the Company
      or any ERISA Affiliate, or with respect to which the Company or any ERISA
      Affiliate has or may have any liability, including but not limited to any
      obligation to contribute, including all employee pension, profit-sharing,
      savings, retirement, incentive, bonus, deferred compensation, vacation, holiday,
      cafeteria, medical, disability, life, accident or other insurance, stock
      purchase, stock option, stock appreciation right, phantom stock, restricted
      stock or other equity-based compensation plans, and any other plans, policies,
      programs or practices. “ERISA Affiliate” means any entity (whether or not
      incorporated) other than the Company that, together with the Company, is a
      member of a controlled group of corporations within the meaning of Section
      414(b) of the Code, of a group of trades or businesses under common control
      within the meaning of Section 414(c) of the Code, or in the case of any Plan
      subject to Part 3 of Subtitle B of Title I of ERISA, of an affiliated service
      group within the meaning of Section 414(m) of the Code.

     

    
      
        
        

      

      
        -33-

        
          

        

      

      
        
        

      

    

    (b) To
      the
      knowledge of the Company, no employee will be subject to tax under Section
      409A
      of the Code with respect to any Plan.

     

    (c) With
      respect to each Plan, the Company has delivered to Parent or its representatives
      true and complete copies of (i) the Plan (including all amendments) and summary
      plan description (including all summaries of material modifications), (ii)
      all
      trust documents, insurance contracts or policies, (iii) to the extent
      applicable, documentation of the nondiscrimination testing for the preceding
      three years, and (iv) to the extent applicable, the most recent Internal Revenue
      Service opinion or determination letter.

     

    (d) No
      Plan
      is subject to Title IV of ERISA, and no condition exists as a result of which
      the Company could have any liability under Title IV of ERISA. No Plan is a
      “multiemployer plan” within the meaning of Section 3(37) of ERISA, and no
      condition exists as a result of which the Company could have any liability
      under
      a multiemployer plan.

     

    (e) Each
      Plan
      which is intended to be qualified under Section 401(a) of the Code has received
      a favorable opinion or determination letter from the Internal Revenue Service
      and, to the knowledge of the Company, nothing has occurred and no circumstances
      exist that would reasonably be expected to cause the disqualification of such
      plan. Each Plan is and has been maintained in form and operation in all material
      respects in compliance with its terms and all applicable laws, including,
      without limitation, ERISA and the Code. As of and including the date of the
      Closing, the Company shall have made all contributions required to be made
      by
      the Company up to and including the date of the Closing with respect to each
      Plan.

     

    (f) With
      respect to each Plan, no “party in interest” or “disqualified person” (as
      defined in Section 3(14) of ERISA or Section 4975 of the Code, respectively)
      has
      at any time engaged in a transaction which could subject the Purchaser, directly
      or indirectly, to a tax, penalty or liability for prohibited transactions
      imposed by ERISA or the Code.

     

    (g) Each
      Plan
      which is a “welfare plan” within the meaning of Section 3(1) of ERISA and which
      provides health, disability or death benefits is fully insured.

     

    (h) No
      Plan
      provides for the continuation of medical, health or other welfare benefits
      or
      coverage for any participant or any dependent or beneficiary of any participant
      after such participant’s retirement or other termination of employment, except
      as may be required by COBRA or any other applicable law, and the Company has
      not
      agreed or promised to provide any such benefits or coverage.

     

    
      
        
        

      

      
        -34-

        
          

        

      

      
        
        

      

    

    (i) The
      Company has not proposed or agreed to any increase in benefits under any Plan
      (or the creation of new benefits or a new Plan ) or change in employee coverage
      which would increase the expense of maintaining any such Plan.

     

    (j) The
      consummation of the transactions contemplated by this Agreement, either alone
      or
      in combination with any other event, will not result in any new benefits, an
      increase in the amount of compensation or benefits or an acceleration of the
      vesting or timing of payment of any benefits or compensation payable in respect
      of any employee.

     

    (k) Section
      3.11 of the Company Schedule lists all leased employees and independent
      contractors providing services to the Company. The Company has delivered to
      Parent true and complete copies of any agreements with or with respect to leased
      employees and independent contractors.

     

    3.12 Labor
      Matters.

     

    (a) The
      Company is not a party to any collective bargaining agreement or other labor
      union contract applicable to persons employed by the Company nor does the
      Company know of any activities or proceedings of any labor union to organize
      any
      such employees.

     

    (b) Each
      employee and consultant of the Company 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 ninety (90) days, and there are no agreements
      or
      understandings between the Company and any of its employees or consultants
      that
      their employment or services will be for any particular period. The Company
      is
      not aware that any of its officers or key employees intends to terminate his
      or
      her employment with the Company. The Company is in compliance in all material
      respects and, to the Company’s knowledge, each of its employees and consultants
      is in compliance in all material respects, with the terms of the respective
      employment and consulting agreements between the Company and such individuals.
      There are not, and there have not been, any oral or informal arrangements,
      commitments or promises between the Company and any employees or consultants
      of
      the Company that have not been documented as part of the formal written
      agreements between any such individuals and the Company that have been made
      available to Parent.

     

    (c) The
      Company is in compliance in all material respects with all Legal Requirements
      applicable to its employees, respecting employment, employment practices, terms
      and conditions of employment and wages and hours and is not liable for any
      arrears of wages or penalties with respect thereto. The Company’s obligations to
      provide statutory severance pay to its employees in Israel are fully funded
      or
      accrued on the Unaudited Financial Statements and the Company has no knowledge
      of any circumstance that could give rise to any valid claim by a current or
      former employee for compensation on termination of employment (beyond the
      statutory severance pay to which employees are entitled). All amounts that
      the
      Company is legally or contractually required either (x) to deduct from its
      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 its employees’ salaries and benefits and to pay to
      any Governmental Entity as required by applicable Legal Requirements have,
      in
      each case, been duly deducted, transferred, withheld and paid, and the Company
      does not have any outstanding obligation to make any such deduction, transfer,
      withholding or payment. There are no pending, or to the Company’s knowledge,
      threatened or reasonably anticipated claims or actions against the Company
      by
      any employee in connection with such employee’s employment or termination of
      employment by the Company.

     

    
      
        
        

      

      
        -35-

        
          

        

      

      
        
        

      

    

    (d) No
      employee or former employee of the Company or any of its subsidiaries is owed
      any wages, benefits or other compensation for past services (other than wages,
      benefits and compensation accrued in the ordinary course of business during
      the
      current pay period and any accrued benefits for services, which by their terms
      or under applicable law, are payable in the future, such as accrued vacation,
      recreation leave and severance pay).

     

    3.13  Restrictions
      on Business Activities.
      Except
      as disclosed on Section 3.13 of the Company Schedule, to the Company’s
      knowledge, there is no agreement, commitment, judgment, injunction, order or
      decree binding upon the Company or its assets or to which the Company is a
      party
      which has the effect of prohibiting or materially impairing any acquisition
      of
      property by the Company or the conduct of business by Company as currently
      conducted other than such effects, individually or in the aggregate, which
      have
      not had and could not reasonably be expected to have a Material Adverse Effect
      on the Company.

     

    3.14 Title
      to Property.

     

    (a) The
      Company does not presently own and has not in the past owned any real property.
      There are no options or other contracts under which the Company has a right
      or
      obligation to acquire any real property.

     

    (b) All
      leases of real property held by the Company, and all personal property and
      other
      property and assets of the Company owned, used or held for use in connection
      with the business of the Company (the “Personal Property”) are shown or
      reflected on the balance sheet included in the Unaudited Financial Statements.
      The Company owns and has good and marketable title to the Personal Property,
      and
      all such Personal Property is in each case held free and clear of all liens
      and
      encumbrances, except for liens and encumbrances disclosed in the Audited
      Financial Statements or in Section 3.14(b) of the Company Schedule, none of
      which liens or encumbrances has or will have, individually or in the aggregate,
      a Material Adverse Effect on such property or on the present or contemplated
      use
      of such property in the businesses of the Company.

     

    (c) All
      leases pursuant to which the Company leases from others material real or
      Personal Property are valid and effective in accordance with their respective
      terms, and there is not, under any of such leases, any existing material default
      or event of default of the Company or, to the Company’s knowledge, any other
      party (or any event which with notice or lapse of time, or both, would
      constitute a material default), except where the lack of such validity and
      effectiveness or the existence of such default or event of default could not
      be
      expected to have a Material Adverse Effect on the Company.

     

    
      
        
        

      

      
        -36-

        
          

        

      

      
        
        

      

    

    3.15 Taxes.

     

    (a) Definition
      of Taxes. For the purposes of this Agreement, “Tax” or “Taxes” refers to any and
      all federal, state, local and foreign taxes, including, without limitation,
      gross receipts, income, profits, sales, use, occupation, value added, ad
      valorem, transfer, franchise, withholding, payroll, recapture, employment,
      excise and property taxes, assessments and duties together with all interest,
      penalties and additions imposed with respect to any such amounts, any
      obligations under any agreements or arrangements with any other person with
      respect to any such amounts, any liability of a predecessor entity for any
      such
      amounts and any taxes or liability with respect thereto arising under Treasury
      Regulation Section 1.1502-6 or comparative provision of state, local or foreign
      law.

     

    (b) Except
      as
      set forth in Section 3.15 of the Company Schedule:

     

    (i) The
      Company has timely filed all federal, state, local and foreign returns,
      estimates, information statements and reports relating to Taxes (“Returns”)
      required to be filed by the Company with any Tax authority, except such Returns
      which are not material to Company. All such Returns are true, correct and
      complete in all material respects. The Company has paid all Taxes (whether
      or
      not shown to be due on such Returns) that have become due and payable on or
      before the date hereof, except for Taxes which are being contested in good
      faith
      and for which adequate reserves have been established in accordance with Israeli
      GAAP.

     

    (ii) All
      Taxes
      that the Company is required by law to withhold or collect have been duly
      withheld or collected, and have been timely paid over to the proper Tax
      authorities to the extent due and payable.

     

    (iii) There
      are
      no material Tax deficiencies outstanding, assessed or, to the knowledge of
      the
      Company, threatened against the Company, nor has the Company executed any waiver
      of any statute of limitations or extended any period for the assessment or
      collection of any Tax.

     

    (iv) No
      audit
      or other examination of any Return of the Company by any Tax authority is
      presently pending, nor has the Company been notified of any request for such
      an
      audit or other examination.

     

    (v) No
      adjustment relating to any Returns filed by the Company has been proposed in
      writing, formally or informally, by any Tax authority to the Company or any
      representative thereof.

     

    
      
        
        

      

      
        -37-

        
          

        

      

      
        
        

      

    

    (vi) There
      are
      no Tax liens upon the assets of the Company, except liens for current Taxes
      not
      yet due and payable.

     

    (vii) The
      Company is not liable for the Taxes of any Person, is not currently under any
      contractual obligation to indemnify any Person with respect to Taxes (except
      for
      customary agreements to indemnify lenders) and is not a party to or bound by
      any
      Tax sharing agreement.

     

    (viii) The
      Company has not taken any action and does not know of any fact, agreement,
      plan
      or other circumstance that is reasonably likely to prevent the Merger from
      qualifying as a reorganization within the meaning of Section 368(a) of the
      Code.

     

    (ix) The
      Company has not engaged in any transaction which requires its participation
      to
      be disclosed under Treasury Regulation Section 1.6011-4.

     

    3.16 Environmental
      Matters.

     

    (a) Except
      as
      disclosed in Section 3.16 of the Company Schedule and except for such matters
      that, individually or in the aggregate, are not reasonably likely to have a
      Material Adverse Effect: (i) the Company has, to the knowledge of the Company,
      complied with all applicable Environmental Laws; (ii) to the knowledge of the
      Company, the properties currently operated by the Company (including soils,
      groundwater, surface water, buildings or other structures) are not contaminated
      with any Hazardous Substances; (iii) to the knowledge of the Company, the
      properties formerly operated by the Company were not contaminated with Hazardous
      Substances during the period of operation by the Company or during any prior
      period; (iv) to the knowledge of the Company, the Company is not subject to
      liability for any Hazardous Substance disposal or contamination on any third
      party property; (v) the Company has not been associated with any release or
      threat of release of any Hazardous Substance; (vi) the Company has not received
      any notice, demand, letter, claim or request for information alleging that
      the
      Company may be in violation of or liable under any Environmental Law; and (vii)
      the Company is not subject to any orders, decrees, injunctions or other
      arrangements with any Governmental Entity or subject to any indemnity or other
      agreement with any third party relating to liability under any Environmental
      Law
      or relating to Hazardous Substances.

     

    (b) As
      used
      in this Agreement, the term “Environmental Law” means any federal, state, local
      or foreign law, regulation, order, decree, permit, authorization, opinion,
      common law or agency requirement relating to: (A) the protection, investigation
      or restoration of the environment, health and safety, or natural resources;
      (B)
      the handling, use, presence, disposal, release or threatened release of any
      Hazardous Substance or (C) noise, odor, wetlands, pollution, contamination
      or
      any injury or threat of injury to persons or property.

     

    (c) As
      used
      in this Agreement, the term “Hazardous Substance” means any substance that is:
      (i) listed, classified or regulated pursuant to any Environmental Law; (ii)
      any
      petroleum product or by-product, asbestos-containing material, lead-containing
      paint or plumbing, polychlorinated biphenyls, radioactive materials or radon;
      or
      (iii) any other substance which is the subject of regulatory action by any
      Governmental Entity pursuant to any Environmental Law.

     

    
      
        
        

      

      
        -38-

        
          

        

      

      
        
        

      

    

    3.17 Brokers;
      Third Party Expenses.
      The
      Company has not incurred, nor will it incur, directly or indirectly, any
      liability for brokerage, finders’ fees, agent’s commissions or any similar
      charges in connection with this Agreement or any transactions contemplated
      hereby. Except pursuant to Sections 2.5, 2.13 and 2.18, and as disclosed on
      Section 3.17 of the Company Schedule, no shares of common stock, options,
      warrants or other securities of either Company or Parent are payable to any
      third party by Company as a result of this Merger.

     

    3.18 Intellectual
      Property. 

     

    For
      the
      purposes of this Agreement the term “Intellectual Property” shall mean any and
      all intellectual property and proprietary rights, titles and interests,
      comprised of or with respect to any of the following: 

     

    (i) domestic,
      foreign, international or multinational patents, patent applications (petty,
      provisional, non-provisional and other), patent disclosures, invention
      disclosures and other government-issued indicia of invention or industrial
      design ownership, including but not limited to all continuations,
      continuations-in-part, continued prosecutions, divisionals, reissues,
      reexaminations, utility models, certificates of invention and design patents,
      registrations, renewals, extensions, restorations, supplementary protection
      certificates, confirmations, substitutions and additions thereof, applications
      for registrations issuing therefrom or as a result thereof (collectively, the
      “Patents”);

     

    (ii) domestic,
      foreign, international or multinational registered and common law trademarks,
      service marks, trade dress, Internet domain names, logos, trade names and
      corporate names and other indicia of source or sponsorship of any goods, service
      or business, and registrations and applications for registration (including
      renewal of registration) thereof and all goodwill related to the foregoing
      (collectively, the “Trademarks”); 

     

    (iii) domestic,
      foreign, international or multinational copyrights and rights in works of
      authorship, including, without limitation, moral rights and rights of
      attribution and integrity, copyrights in Software and in the content contained
      on any Web site, and registrations and applications for registration (including
      renewal of registration) thereof (collectively, the “Copyrights”);

     

    (iv) mask
      works and registrations and applications for registration (including renewal
      of
      registration) thereof;

     

    (v) computer
      programs (whether
      in source code or object code form),
      databases, compilations and data, and all documentation related to any of the
      foregoing (collectively, the “Software”); 

     

    
      
        
        

      

      
        -39-

        
          

        

      

      
        
        

      

    

    (vi) ideas,
      concepts, knowledge, information, data, materials, inventions, trade secrets
      and
      confidential business information, whether copyrightable or non-copyrightable,
      patentable or nonpatentable and whether or not reduced to practice, know-how,
      manufacturing and product processes and techniques, research and development
      information, copyrightable works, financial, marketing and business data,
      pricing and cost information, business and marketing plans and customer and
      supplier lists and information (collectively, the “Trade Secrets”);


     

    (vii) copies
      and tangible embodiments and expressions of the foregoing, and applications
      and
      uses thereof; and

     

    (viii) other
      proprietary rights relating to any of the foregoing (including all rights to
      enforce and sue for any past, present or future from misappropriation or
      infringement thereof and to obtain remedies therefor and rights of protection
      of
      interest therein under the laws of all jurisdictions).

     

    (a) The
      Company has the valid right (including the right to sublicense to customers,
      suppliers or others as needed) to use, by virtue of ownership or pursuant to
      written license agreements set forth on Section 3.18(a) of the Company Schedule,
      free and clear of all liens, security interests or other encumbrances, all
      Intellectual Property necessary for the conduct of the Company’s business and
      all Intellectual Property used or held for use in connection with the businesses
      of the Company as currently conducted by the Company, including the Intellectual
      Property set forth in Section 3.18(b) of the Company Schedule, together with
      all
      applications currently pending or in process for any of the foregoing (all
      of
      the aforementioned Intellectual Property, collectively, the “Company
      Intellectual Property”), except for those the failure to own or otherwise have
      such legal right to use as would not reasonably be expected to have a Material
      Adverse Effect on the Company. The Company Intellectual Property is valid and
      enforceable.

     

    (b) Section
      3.18(b) of the Company Schedule contains a complete and accurate list of all
      (a)
      Patents and registered Intellectual Property owned or used by the Company,
      (b)
      pending Patent applications and applications for registrations of other
      Intellectual Property filed by the Company, (c) material unregistered
      Intellectual Property owned or used by the Company, and (e) Software owned
      or
      used by the Company (except unmodified commercially available off-the-shelf
      Software applications purchased or licensed for less than $5,000).

     

    (c) No
      claim
      has been asserted and is pending or, to the knowledge of the Company, has been
      threatened by any Person challenging or questioning the use of any Company
      Intellectual Property or the validity, scope, enforceability, registerability,
      effectiveness or ownership of any Company Intellectual Property, in whole or
      in
      part, and there are no grounds for the same.

     

    (d) No
      claim
      has been asserted and is pending or, to the knowledge of the Company, has been
      threatened, to the effect that the conduct of the Company’s business or practice
      or exercise of any of the Company Intellectual Property, infringes or
      misappropriates the Intellectual Property or other rights of any Person, nor
      are
      there any valid grounds for any bona fide claim of any such kind.

     

    
      
        
        

      

      
        -40-

        
          

        

      

      
        
        

      

    

    (e) The
      Company has not brought or threatened a claim against any Person (i) alleging
      infringement or misappropriation of any Company Intellectual Property, or (ii)
      challenging any Person’s ownership or use of, or the validity, scope,
      enforceability or registerability of, any Intellectual Property relevant to
      the
      Company or any of its businesses or assets, and to the best of the Company’s
      knowledge, no third party has infringed or misappropriated any of the Company
      Intellectual Property and the Company is not aware of any facts that indicate
      a
      likelihood of the same.

     

    (f) The
      Company Intellectual Property has not been assigned, transferred, licensed,
      made
      subject to any option right, right of first offer, negotiation or refusal or
      any
      other contingent or non-contingent third party right or interest, or otherwise
      disposed of in any manner, in whole or in part, that limits or restricts the
      Company’s right or ability to exploit the Company Intellectual
      Property.

     

    (g) Except
      to
      the extent that it would not be expected to have a Material Adverse Effect
      on
      the Company, the Company and the owners of any Company Intellectual Property
      licensed to the Company have taken all commercially reasonable actions to
      maintain and protect the Company Intellectual Property. All personnel of the
      Company, including employees, agents, consultants and contractors who have
      contributed to or participated in the conception and development of the Company
      Intellectual Property, either (i) have been a party to a “work-for-hire”
arrangement or agreement with the Company in accordance with applicable law
      that
      has accorded the Company full, effective, exclusive and original ownership
      of
      all tangible and intangible property thereby arising, or (ii) have executed
      appropriate instruments of assignment in favor of the Company as assignee that
      have conveyed to the Company effective and exclusive ownership of all tangible
      and intangible property thereby arising.

     

    (h) All
      registered, granted or issued Patents, Trademarks, Copyrights and Software
      held
      by the Company are valid and enforceable in accordance with applicable laws,
      rules and regulations and, to the knowledge of the Company, there is no reason
      to believe that any of the claims of any Patent applications encompassed by
      the
      Company Intellectual Property will fail to issue or be materially limited or
      restricted beyond the currently pending claims.

     

    (i) No
      loss
      or expiration of any of the Company Intellectual Property is threatened, pending
      or reasonably foreseeable, except for Patents expiring at the end of their
      statutory terms (and not as a result of any act or omission by the Company,
      including, without limitation, a failure by the Company to pay any required
      maintenance fees) and the Company has not received any notice, communication
      or
      information of any such loss or expiration on or of the threat
      thereof.

     

    (j) Neither
      the execution of this Agreement nor the consummation of the transactions
      contemplated hereby will cause the diminution, termination or forfeiture of
      any
      Company Intellectual Property or of any right, title or interest in or to the
      Company Intellectual Property. 

     

    
      
        
        

      

      
        -41-

        
          

        

      

      
        
        

      

    

    (k) Except
      as
      set forth in Section 3.18(k) of the Company Schedule, the Company does not
      owe
      any royalties or other payments to third parties in respect of any Company
      Intellectual Property. All royalties or other payments set forth in Section
      3.18(k) of the Company Schedule that have accrued prior to the date of this
      Agreement been paid in full. 

     

    (l) The
      Software is free from significant defects or programming errors and conforms
      in
      all material respects to the written documentation and specifications therefor.
      The Company has used commercially reasonable efforts to regularly scan the
      Software and the Company Intellectual Property with virus detection software.
      The Software and other Company Intellectual Property contain no “viruses.” For
      the purposes of this Agreement, “virus” means any computer code intentionally
      designed to disrupt, disable or harm in any manner the operation of any software
      or hardware. None of the foregoing contains any worm, bomb, backdoor, clock,
      timer, or other disabling device code, design or routine which causes the
      software to be erased, inoperable, or otherwise incapable of being used, either
      automatically or upon command by any Person. 

     

    (m) Section
      3.18(m) of the Company Schedule lists open source materials that the Company
      has
      used in any way and describes the manner in which such open source materials
      have been used, including, without limitation, whether and how the open source
      materials have been modified and/or distributed by the Company. Except as set
      forth on Section 3.18(m) of the Company Schedule, the Company has not (i)
      incorporated open source materials into, or combined open source materials
      with,
      Software developed or distributed by the Company; (ii) distributed open source
      materials in conjunction with any other Software developed or distributed by
      the
      Company; or (iii) used open source materials governed by any agreement or
      arrangement that creates, or purports to create, obligations for the Company
      with respect to Software developed or distributed by the Company or that grants,
      or purports to grant, to any third party, any rights to or immunities under
      Intellectual Property (including, but not limited to, any use of any open source
      materials pursuant to any agreement or arrangement that requires, as a condition
      of use, modification and/or distribution of such open source materials that
      other Software incorporating or incorporated or into, derived from or used
      or
      distributed with such open source materials be (x) disclosed or distributed
      in
      source code form, (y) licensed for the purpose of making derivative works,
      or
      (z) redistributable at no charge).

     

    (n) The
      Company is not aware of any Company Intellectual Property owned or used by
      any
      competitor or third party which could be expected to supersede or make obsolete
      any product or process of the Company or to limit its business as currently
      conducted or as currently proposed to be conducted. 

     

    (o) The
      Company has made a full, complete and accurate disclosure to Parent in all
      material respects of all information and material currently in its possession
      or
      control regarding the ownership, permitted use, validity, scope, enforceability
      and encumbrance of the Company Intellectual Property, including any conditions
      or restrictions respecting the use, transferability or change of control with
      respect thereto.

     

    
      
        
        

      

      
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    (p) Except
      as
      set forth on Section 3.18(p) of the Company Schedule, no warranty claim has
      been
      asserted and
      is
      pending or, to the knowledge of the Company, has been threatened by any Person.
      For the purposes of this Section 3.18(p) “warranty claim” means any claim by a
      Person pursuant to a contractual warranty given by the Company in favor of
      such
      Person on the sale, lease, license or other transfer of the Company’s physical
      equipment (including but not limited to computing and computer-directed
      devices).

     

    3.19 Agreements,
      Contracts and Commitments.

     

    (a) Section
      3.19 of the Company Schedule sets forth a complete and accurate list of all
      Material Company Contracts (as hereinafter defined), specifying the parties
      thereto. For purposes of this Agreement, (i) the term “Company Contracts” shall
      mean all contracts, agreements, leases, mortgages, indentures, notes, bonds,
      licenses, permits, franchises, purchase orders, sales orders, and other
      understandings, commitments and obligations of any kind, whether written or
      oral, to which the Company is a party or by or to which any of the properties
      or
      assets of Company may be bound, subject or affected (including without
      limitation notes or other instruments payable to the Company) and (ii) the
      term
“Material Company Contracts” shall mean (x) each Company Contract (I) providing
      for payments (present or future) to the Company in excess of $100,000 in the
      aggregate or (II) under which or in respect of which the Company presently
      has
      any liability or obligation of any nature whatsoever (absolute, contingent
      or
      otherwise) in excess of $100,000, (y) each Company Contract that otherwise
      is or
      may be material to the businesses, operations, assets, condition (financial
      or
      otherwise) or prospects of the Company (provided, however, that non-disclosure
      agreements, employee stock option grants and agreements, employee stock option
      exercise agreements and employee agreements of former employees shall not be
      considered Material Company Contracts), and (z) without limitation of subclause
      (x) or subclause (y), each of the following Company Contracts:

     

    (i) any
      mortgage, indenture, note, installment obligation or other instrument, agreement
      or arrangement for or relating to any borrowing of money by or from the Company,
      or any officer, director or 5% or more stockholder (each an “Insider”) of the
      Company;

     

    (ii) any
      guaranty, direct or indirect, by the Company or any Insider of the Company
      of
      any obligation for borrowings, or otherwise, excluding endorsements made for
      collection in the ordinary course of business;

     

    (iii) any
      Company Contract of employment;

     

    (iv) any
      Company Contract made other than in the ordinary course of business or (x)
      providing for the grant of any preferential rights to purchase or lease any
      asset of the Company or (y) providing for any right (exclusive or non-exclusive)
      to sell or distribute, or otherwise relating to the sale or distribution of,
      any
      product or service of the Company;

     

    
      
        
        

      

      
        -43-

        
          

        

      

      
        
        

      

    

    (v) any
      obligation to register any shares of the capital stock or other securities
      of
      the Company with any Governmental Entity;

     

    (vi) any
      obligation to make payments, contingent or otherwise, arising out of the prior
      acquisition of the business, assets or stock of other Persons;

     

    (vii) any
      collective bargaining agreement with any labor union;

     

    (viii) any
      lease
      or similar arrangement for the use by the Company of personal
      property;

     

    (ix) any
      Company Contract restricting the rights of the Company to conduct business
      in
      any jurisdiction; 

     

    (x) any
      Company Contract granting or purporting to grant any interest (including,
      without limitation, a leasehold interest) in real property; and 

     

    (xi) any
      Company Contract to which any Insider of the Company is a party.

     

    (b) Each
      Company Contract was entered into at arms’ length and in the ordinary course, is
      in full force and effect and is valid and binding upon and enforceable against
      each of the parties thereto. True, correct and complete copies of all Material
      Company Contracts (or written summaries in the case of oral Material Company
      Contracts) have been heretofore delivered to Parent or Parent’s
      counsel.

     

    (c) Except
      as
      set forth in Section 3.19 of the Company Schedule, neither the Company nor,
      to
      the best of Company’s knowledge, any other party thereto is in breach of or in
      default under, and no event has occurred which with notice or lapse of time
      or
      both would become a breach of or default under, any Company Contract, and no
      party to any Company Contract has given any written notice of any claim of
      any
      such breach, default or event, which, individually or in the aggregate, are
      likely to have a Material Adverse Effect on the Company. Each agreement,
      contract or commitment to which the Company is a party or by which it is bound
      that has not expired by its terms is in full force and effect.

     

    3.20 Insurance.
      Section
      3.20 of the Company Schedule contains a list of all material insurance policies
      and fidelity bonds covering the assets, business, equipment, properties,
      operations, employees, officers and directors (collectively, the “Insurance
      Policies”) of the Company and each such policy is in full force and effect. No
      written notice of cancellation or termination has been received by the Company
      with respect to the Insurance Policies. Except as disclosed in Section 3.20
      of
      the Company Schedule, to the Company’s knowledge, there are no pending claims
      against such insurance by the Company as to which the insurers have denied
      coverage or otherwise reserved rights. The Company believes the Insurance
      Policies are adequate in amount and scope for the business in which it is
      engaged.

     

    
      
        
        

      

      
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    3.21 Governmental
      Actions/Filings.
      Except
      as set forth in Section 3.21 of the Company Schedule, the Company has been
      granted and holds, and has made, all Governmental Actions/Filings necessary
      for
      the Company to own, lease and operate its properties or to carry on its business
      as it is now being conducted and as presently proposed to be conducted or used
      or held for use by the Company, and true, complete and correct copies of which
      have heretofore been delivered to Parent. Each such Governmental Action/Filing
      is in full force and effect and, except as set forth in Section 3.21 of the
      Company Schedule, will not expire prior to December 31, 2006, and the Company
      is
      in compliance with all of its obligations with respect thereto. No event has
      occurred and is continuing which requires or permits, or after notice or lapse
      of time or both would require or permit, and consummation of the transactions
      contemplated by this Agreement or any ancillary documents will not require
      or
      permit (with or without notice or lapse of time, or both), any modification
      or
      termination of any such Governmental Actions/Filings except such events which,
      either individually or in the aggregate, would not have a Material Adverse
      Effect upon the Company. Except as set forth in Section 3.21 of the Company
      Schedule, no Governmental Action/Filing is necessary to be obtained, secured
      or
      made by the Company to enable it to continue to conduct its businesses and
      operations and use its properties after the Closing in a manner which is
      consistent with current practice.

     

    For
      purposes of this Agreement, the term “Governmental Action/Filing” shall mean any
      franchise, license, certificate of compliance, authorization, consent, order,
      permit, approval, consent or other action of, or any filing, registration or
      qualification with, any federal, state, municipal, foreign or other
      governmental, administrative or judicial body, agency or authority.

     

    3.22 Interested
      Party Transactions.
      Except
      as set forth in the Section 3.22 of the Company Schedule, no employee, officer,
      director or stockholder of the Company or a member of his or her immediate
      family is indebted to the Company, nor is the Company indebted (or committed
      to
      make loans or extend or guarantee credit) to any of them, other than (i) for
      payment of salary for services rendered, (ii) reimbursement for reasonable
      expenses incurred on behalf of the Company, and (iii) for other employee
      benefits made generally available to all employees. Except as set forth in
      Section 3.22 of the Company Schedule, to the Company’s knowledge, none of such
      individuals has any direct or indirect ownership interest in any Person with
      whom the Company is affiliated or with whom the Company has a contractual
      relationship, or in any Person that competes with the Company, except that
      each
      employee, stockholder, officer or director of Company and members of their
      respective immediate families may own less than 5% of the outstanding stock
      in
      publicly traded companies that may compete with Company. Except as set forth
      in
      Section 3.22 of the Company Schedule, to the knowledge of the Company, no
      officer, director or 5% stockholder or any member of their immediate families
      is, directly or indirectly, interested in any Material Company Contract (other
      than such contracts as relate to any such Person’s ownership of capital stock or
      other securities of the Company or such Person’s employment with the
      Company).

     

    3.23 Certain
      Business Practices.
      The
      Company has not: (a) used any funds for unlawful contributions, gifts,
      entertainment or other unlawful expenses relating to political activity;
      (b) made any unlawful payment to foreign or domestic government officials
      or employees or to foreign or domestic political parties or campaigns or
      violated any provision of the Foreign Corrupt Practices Act of 1977, as amended;
      or (c) made any other unlawful payment.

     

    
      
        
        

      

      
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    3.24 Stockholder
      Approval.
      The
      Stockholders of the Company listed on Section 3.24 of the Company Schedule
      have
      executed a stockholder consent adopting and approving the Merger and such
      stockholders hold the requisite amount of shares of Company Common Stock and
      Company Preferred Stock, voting together as a single class, necessary for the
      adoption of this Agreement and the approval of the Merger by the stockholders
      of
      the Company in accordance with the DGCL. 

     

    3.25 Representations
      and Warranties Complete.
      The
      representations and warranties of the Company included in this Agreement and
      any
      list, statement, document or information set forth in, or attached to, any
      Schedule provided pursuant to this Agreement or delivered hereunder, are
      accurate, true and complete in all material respects and do not contain any
      untrue statement of a material fact or omit to state a material fact required
      to
      be stated therein or necessary to make the statements contained therein not
      misleading, under the circumstance under which they were made.

     

    3.26 Survival
      of Representations and Warranties.
      The
      representations and warranties of the Company set forth in this Agreement shall
      survive until the end of the Holdback Period.

     

    ARTICLE
      IV

     

    REPRESENTATIONS
      AND WARRANTIES OF PARENT

     

    Subject
      to the exceptions set forth in schedules of Parent delivered by Parent to the
      Company concurrently herewith (the “Parent Schedule”), Parent hereby represents
      and warrants to, and covenants with, the Company, as follows: 

     

    4.1 Organization
      and Qualification.

     

    (a) Parent
      is
      a corporation duly incorporated, validly existing and in good standing under
      the
      laws of the State of Delaware and has the requisite corporate power and
      authority to own, lease and operate its assets and properties and to carry
      on
      its business as it is now being or currently planned by Parent to be conducted.
      Parent is in possession of all Approvals necessary to own, lease and operate
      the
      properties it purports to own, operate or lease and to carry on its business
      as
      it is now being or currently planned by Parent to be conducted, except where
      the
      failure to have such Approvals could not, individually or in the aggregate,
      reasonably be expected to have a Material Adverse Effect on Parent. Complete
      and
      correct copies of the Charter Documents of Parent, as amended and currently
      in
      effect, have been heretofore delivered to the Company. Parent is not in
      violation of any of the provisions of Parent’s Charter Documents.

     

    (b) Parent
      is
      duly qualified or licensed to do business as a foreign corporation and is in
      good standing, in each jurisdiction where the character of the properties owned,
      leased or operated by it or the nature of its activities makes such
      qualification or licensing necessary, except for such failures to be so duly
      qualified or licensed and in good standing that could not, individually or
      in
      the aggregate, reasonably be expected to have a Material Adverse Effect on
      Parent.

     

    
      
        
        

      

      
        -46-

        
          

        

      

      
        
        

      

    

    4.2 Subsidiaries.
      Except
      for Merger Sub, which is a wholly-owned subsidiary of Parent, Parent has no
      subsidiaries and does not own, directly or indirectly, any ownership, equity,
      profits or voting interest in any Person or has any agreement or commitment
      to
      purchase any such interest, and Parent has not agreed and is not obligated
      to
      make nor is bound by any written, oral or other agreement, contract,
      subcontract, lease, binding understanding, instrument, note, option, warranty,
      purchase order, license, sublicense, insurance policy, benefit plan, commitment
      or undertaking of any nature, as of the date hereof or as may hereafter be
      in
      effect under which it may become obligated to make, any future investment in
      or
      capital contribution to any other entity.

     

    4.3 Capitalization.

     

    (a) As
      of the
      date of this Agreement, the authorized capital stock of Parent consists of
      30,000,000 shares of common stock, par value $0.0001 per share (“Parent Common
      Stock”) and 1,000,000 shares of preferred stock, par value $0.0001 per share
      (“Parent Preferred Stock”), of which 7,818,000 shares of Parent Common Stock and
      no shares of Parent Preferred Stock were issued and outstanding, all of which
      are validly issued, fully paid and nonassessable. Except as set forth on Section
      4.3(a) of the Parent Schedule, (i) no shares of Parent Common Stock or Parent
      Preferred Stock are reserved for issuance upon the exercise of outstanding
      options to purchase Company Common Stock or Parent Preferred Stock granted
      to
      employees of Company or other parties (“Parent Stock Options”) and there are no
      outstanding Parent Stock Options; (ii) no shares of Parent Common Stock or
      Parent Preferred Stock are reserved for issuance upon the exercise of
      outstanding warrants to purchase Parent Common Stock or Parent Preferred Stock
      (“Parent Warrants”) and there are no outstanding Parent Warrants; and (iii) no
      shares of Parent Common Stock or Parent Preferred Stock are reserved for
      issuance upon the conversion of the Parent Preferred Stock or any outstanding
      convertible notes, debentures or securities (“Parent Convertible Securities”).
      All shares of Parent Common Stock and Parent Preferred Stock as set forth on
      Section 4.3(a) of the Parent Schedule, upon issuance on the terms and conditions
      specified in the instrument pursuant to which they are issuable, will be duly
      authorized, validly issued, fully paid and nonassessable. All outstanding shares
      of Parent Common Stock and all outstanding Parent Warrants have been issued
      and
      granted in compliance with (x) all applicable securities laws and (in all
      material respects) other applicable laws and regulations, and (y) all
      requirements set forth in any applicable Parent Contracts. Parent has heretofore
      delivered to the Company true, complete and accurate copies of the Parent
      Warrants, including any and all documents and agreements relating
      thereto.

     

    (b) The
      shares of Parent Common Stock to be issued by Parent in connection with the
      Merger, upon issuance in accordance with the terms of this Agreement, will
      be
      duly authorized and validly issued and such shares of Parent Common Stock will
      be fully paid and nonassessable.

     

    (c) Except
      as
      set forth in Section 4.3(c) of the Parent Schedule or as contemplated by this
      Agreement or the Parent SEC Reports, there are no registrations rights, and
      there is no voting trust, proxy, rights plan, antitakeover plan or other
      agreements or understandings to which Parent is a party or by which Parent
      is
      bound with respect to any equity security of any class of Parent.

     

    
      
        
        

      

      
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    4.4 Authority
      Relative to this Agreement.
      Parent
      has full corporate power and authority to: (i) execute, deliver and perform
      this
      Agreement, and each ancillary document which Parent has executed or delivered
      or
      is to execute or deliver pursuant to this Agreement, and (ii) carry out Parent’s
      obligations hereunder and thereunder and, to consummate the transactions
      contemplated hereby (including the Merger). The execution and delivery of this
      Agreement and the consummation by Parent of the transactions contemplated hereby
      (including the Merger) have been duly and validly authorized by all necessary
      corporate action on the part of Parent (including the approval by its Board
      of
      Directors), and no other corporate proceedings on the part of Parent are
      necessary to authorize this Agreement or to consummate the transactions
      contemplated hereby, other than the Parent Stockholder Approval. This Agreement
      has been duly and validly executed and delivered by Parent and, assuming the
      due
      authorization, execution and delivery thereof by the other parties hereto,
      constitutes the legal and binding obligation of Parent, enforceable against
      Parent in accordance with its terms, except as may be limited by bankruptcy,
      insolvency, reorganization or other similar laws affecting the enforcement
      of
      creditors’ rights generally and by general principles of equity.

     

    4.5 No
      Conflict; Required Filings and Consents.

     

    (a) The
      execution and delivery of this Agreement by Parent do not, and the performance
      of this Agreement by Parent shall not: (i) conflict with or violate Parent’s
      Charter Documents, (ii) conflict with or violate any Legal Requirements, or
      (iii) result in any breach of or constitute a default (or an event that with
      notice or lapse of time or both would become a default) under, or materially
      impair Parent’s rights or alter the rights or obligations of any third party
      under, or give to others any rights of termination, amendment, acceleration
      or
      cancellation of, or result in the creation of a lien or encumbrance on any
      of
      the properties or assets of Parent pursuant to, any Parent Contracts, except,
      with respect to clauses (ii) or (iii), for any such conflicts, violations,
      breaches, defaults or other occurrences that would not, individually and in
      the
      aggregate, have a Material Adverse Effect on Parent.

     

    (b) The
      execution and delivery of this Agreement by Parent do not, and the performance
      of its obligations hereunder will not, require any consent, approval,
      authorization or permit of, or filing with or notification to, any Governmental
      Entity, except (i) for applicable requirements, if any, of the Securities Act,
      the Exchange Act, Blue Sky Laws, and the rules and regulations thereunder,
      and
      appropriate documents with the relevant authorities of other jurisdictions
      in
      which Company is qualified to do business, and (ii) where the failure to obtain
      such consents, approvals, authorizations or permits, or to make such filings
      or
      notifications, would not, individually or in the aggregate, reasonably be
      expected to have a Material Adverse Effect on Parent, or prevent consummation
      of
      the Merger or otherwise prevent the parties hereto from performing their
      obligations under this Agreement.

     

    4.6 Compliance.
      Parent
      has complied with, is not in violation of, any Legal Requirements with respect
      to the conduct of its business, or the ownership or operation of its business,
      except for failures to comply or violations which, individually or in the
      aggregate, have not had and are not reasonably likely to have a Material Adverse
      Effect on Parent. The business and activities of Parent have not been and are
      not being conducted in violation of any Legal Requirements. Parent is not in
      default or violation of any term, condition or provision of its Charter
      Documents. No written notice of non-compliance with any Legal Requirements
      has
      been received by Parent.

     

    
      
        
        

      

      
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    4.7 SEC
      Filings; Financial Statements.

     

    (a) Parent
      has made available to the Company and the stockholders a correct and complete
      copy of each report, registration statement and definitive proxy statement
      filed
      by Parent with the SEC (the “Parent SEC Reports”), which are all the forms,
      reports and documents required to be filed by Parent with the SEC prior to
      the
      date of this Agreement. As of their respective dates the Parent SEC Reports:
      (i)
      were prepared in accordance and complied in all material respects with the
      requirements of the Securities Act or the Exchange Act, as the case may be,
      and
      the rules and regulations of the SEC thereunder applicable to such Parent SEC
      Reports, and (ii) did not at the time they were filed (and if amended or
      superseded by a filing prior to the date of this Agreement then on the date
      of
      such filing and as so amended or superseded) contain any untrue statement of
      a
      material fact or omit to state a material fact required to be stated therein
      or
      necessary in order to make the statements therein, in light of the circumstances
      under which they were made, not misleading. Except to the extent set forth
      in
      the preceding sentence, Parent makes no representation or warranty whatsoever
      concerning the Parent SEC Reports as of any time other than the time they were
      filed.

     

    (b) Each
      set
      of financial statements (including, in each case, any related notes thereto)
      contained in Parent SEC Reports, including each Parent SEC Report filed after
      the date hereof until the Closing, complied or will comply as to form in all
      material respects with the published rules and regulations of the SEC with
      respect thereto, was or will be prepared in accordance with GAAP applied on
      a
      consistent basis throughout the periods involved (except as may be indicated
      in
      the notes thereto or, in the case of unaudited statements, do not contain
      footnotes as permitted by Form 10-QSB of the Exchange Act) and each fairly
      presents or will fairly present in all material respects the financial position
      of Parent at the respective dates thereof and the results of its operations
      and
      cash flows for the periods indicated, except that the unaudited interim
      financial statements were, are or will be subject to normal adjustments which
      were not or are not expected to have a Material Adverse Effect on Parent taken
      as a whole.

     

    4.8 No
      Undisclosed Liabilities.
      Parent
      has no liabilities (absolute, accrued, contingent or otherwise) of a nature
      required to be disclosed on a balance sheet or in the related notes to the
      financial statements included in Parent SEC Reports which are, individually
      or
      in the aggregate, material to the business, results of operations or financial
      condition of Parent, except (i) liabilities provided for in or otherwise
      disclosed in Parent SEC Reports filed prior to the date hereof, (ii) liabilities
      incurred since September 30, 2005 in the ordinary course of business, none
      of
      which would have a Material Adverse Effect on Parent.

     

    
      
        
        

      

      
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    4.9 Absence
      of Certain Changes or Events.
      Except
      as set forth in Parent SEC Reports filed prior to the date of this Agreement,
      and except as contemplated by this Agreement, since September 30, 2005, there
      has not been: (i) any Material Adverse Effect on Parent, (ii) any declaration,
      setting aside or payment of any dividend on, or other distribution (whether
      in
      cash, stock or property) in respect of, any of Parent’s capital stock, or any
      purchase, redemption or other acquisition by Parent of any of Parent’s capital
      stock or any other securities of Parent or any options, warrants, calls or
      rights to acquire any such shares or other securities, (iii) any split,
      combination or reclassification of any of Parent’s capital stock, (iv) any
      granting by Parent of any increase in compensation or fringe benefits, except
      for normal increases of cash compensation in the ordinary course of business
      consistent with past practice, or any payment by Parent of any bonus, or any
      granting by Parent of any increase in severance or termination pay or any entry
      by Parent into any currently effective employment, severance, termination or
      indemnification agreement or any agreement the benefits of which are contingent
      or the terms of which are materially altered upon the occurrence of a
      transaction involving Parent of the nature contemplated hereby, (v) any material
      change by Parent in its accounting methods, principles or practices, except
      as
      required by concurrent changes in GAAP, (vi) any change in the auditors of
      Parent, (vii) any issuance of capital stock of Parent, (viii) any revaluation
      by
      Parent of any of its assets, (ix) any material claims, suits, actions or
      proceedings commenced or settled by Parent or (x) any material transaction
      or
      any other material action taken by Parent outside the ordinary course of
      business or inconsistent with past practices.

     

    4.10 Litigation.
      There
      are no claims, suits, actions or proceedings pending or to Parent’s knowledge,
      threatened against Parent, before any court, governmental department,
      commission, agency, instrumentality or authority, or any arbitrator that seeks
      to restrain or enjoin the consummation of the transactions contemplated by
      this
      Agreement or which could reasonably be expected, either singularly or in the
      aggregate with all such claims, actions or proceedings, to have a Material
      Adverse Effect on Parent or have a Material Adverse Effect on the ability of
      the
      parties hereto to consummate the Merger.

     

    4.11 Employee
      Benefit Plans.
      Parent
      does not maintain, and has no liability under, any Plan, and neither the
      execution and delivery of this Agreement nor the consummation of the
      transactions contemplated hereby will (i) result in any payment (including
      severance, unemployment compensation, golden parachute, bonus or otherwise)
      becoming due to any stockholder, director or employee of Parent, or (ii) result
      in the acceleration of the time of payment or vesting of any such
      benefits.

     

    4.12 Restrictions
      on Business Activities.
      Except
      as set forth in the Charter Documents of Parent, there is no agreement,
      commitment, judgment, injunction, order or decree binding upon Parent or to
      which Parent is a party which has or could reasonably be expected to have the
      effect of prohibiting or materially impairing any business practice of Parent,
      any acquisition of property by Parent or the conduct of business by Parent
      as
      currently conducted other than such effects, individually or in the aggregate,
      which have not had and could not reasonably be expected to have, a Material
      Adverse Effect on Parent.

     

    4.13 Title
      to Property.
      Parent
      does not own or lease any real property or Personal Property. Except as set
      forth in Section 4.13 of the Parent Schedule, there are no options or other
      contracts under which Parent has a right or obligation to acquire or lease
      any
      interest in Real Property or Personal Property.

     

    
      
        
        

      

      
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    4.14 Taxes.
      Except
      as set forth in Section 4.14 of the Parent Schedule:

     

    (a) Parent
      has timely filed all Returns required to be filed by Parent with any Tax
      authority, except such Returns which are not material to Parent. All such
      Returns are true, correct and complete in all material respects. Parent has
      paid
      all Taxes (whether or not shown to be due on such Returns) that have become
      due
      and payable on or before the date hereof except for Taxes which are being
      contested in good faith and for which adequate reserves have been established
      in
      accordance with GAAP.

     

    (b) All
      Taxes
      that Parent is required by law to withhold or collect have been duly withheld
      or
      collected, and have been timely paid over to the proper Tax authorities to
      the
      extent due and payable.

     

    (c) There
      are
      no material Tax deficiencies outstanding, assessed or, to the knowledge of
      Parent, threatened against Parent, nor has Parent executed any waiver of any
      statute of limitations or extended any period for the assessment or collection
      of any Tax.

     

    (d) No
      audit
      or other examination of any Return of Parent by any Tax authority is presently
      pending, nor has Parent been notified of any request for such an audit or other
      examination.

     

    (e) There
      are
      no Tax liens upon the assets of Parent, except liens for current Taxes not
      yet
      due and payable.

     

    (f) No
      adjustment relating to any Returns filed by Parent has been proposed in writing,
      formally or informally, by any Tax authority to Parent or any representative
      thereof.

     

    (g) Parent
      is
      not liable for the Taxes of any Person, is not currently under any contractual
      obligation to indemnify any Person with respect to Taxes (except for customary
      agreements to indemnify lenders) and is not a party to or bound by any Tax
      sharing agreement.

     

    (h) Parent
      has not taken any action and does not know of any fact, agreement, plan or
      other
      circumstance that is reasonably likely to prevent the Merger from qualifying
      as
      a reorganization within the meaning of Section 368(a) of the Code.

     

    (i)
       Parent
      has not engaged in any transaction which requires its participation to be
      disclosed under Treasury Regulation Section 1.6011-4.

     

    4.15 Brokers.
      Except
      as set forth on Section 4.15 of the Parent Schedule, Parent has not incurred,
      nor will it incur, directly or indirectly, any liability for brokerage or
      finders’ fees or agent’s commissions or any similar charges in connection with
      this Agreement or any transaction contemplated hereby.

     

    
      
        
        

      

      
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    4.16 Intellectual
      Property.
      Parent
      does not own, license or otherwise have any right, title or interest in any
      Intellectual Property.

     

    4.17 Agreements,
      Contracts and Commitments.

     

    (a) Except
      as
      set forth in the Parent SEC Reports filed prior to the date of this Agreement,
      there are no contracts, agreements, leases, mortgages, indentures, notes, bonds,
      liens, license, permit, franchise, purchase orders, sales orders or other
      understandings, commitments or obligations (including without limitation
      outstanding offers or proposals) of any kind, whether written or oral, to which
      Parent is a party or by or to which any of the properties or assets of Parent
      may be bound, subject or affected, which either (a) creates or imposes a
      liability greater than $100,000, or (b) may not be cancelled by Parent on thirty
      (30) Business Days’ or less prior notice (“Parent Contracts”). All Parent
      Contracts are set forth on Section 4.17 of the Parent Schedule other than those
      that are exhibits to the Parent SEC Reports.

     

    (b) Each
      Parent Contract was entered into at arms’ length and in the ordinary course, is
      in full force and effect and is valid and binding upon and enforceable against
      each of the parties thereto. True, correct and complete copies of all Parent
      Contracts (or written summaries in the case of oral Parent Contracts) and of
      all
      outstanding offers or proposals of Parent have been heretofore delivered to
      the
      Company.

     

    (c) Neither
      Parent nor, to the knowledge of Parent, any other party thereto is in breach
      of
      or in default under, and no event has occurred which with notice or lapse of
      time or both would become a breach of or default under, any Parent Contract,
      and
      no party to any Parent Contract has given any written notice of any claim of
      any
      such breach, default or event, which, individually or in the aggregate, are
      reasonably likely to have a Material Adverse Effect on Parent. Each agreement,
      contract or commitment to which Parent is a party or by which it is bound that
      has not expired by its terms is in full force and effect, except where such
      failure to be in full force and effect is not reasonably likely to have a
      Material Adverse Effect on Parent.

     

    4.18 Insurance.
      Except
      for directors’ and officers’ liability insurance, Parent does not maintain any
      Insurance Policies.

     

    4.19 Interested
      Party Transactions.
      Except
      as set forth in the Parent SEC Reports filed prior to the date of this
      Agreement, no employee, officer, director or stockholder of Parent or a member
      of his or her immediate family is indebted to Parent nor is Parent indebted
      (or
      committed to make loans or extend or guarantee credit) to any of them, other
      than reimbursement for reasonable expenses incurred on behalf of Parent. To
      Parent’s knowledge, none of such individuals has any direct or indirect
      ownership interest in any Person with whom Parent is affiliated or with whom
      Parent has a material contractual relationship, or any Person that competes
      with
      Parent, except that each employee, stockholder, officer or director of Parent
      and members of their respective immediate families may own less than 5% of
      the
      outstanding stock in publicly traded companies that may compete with Parent.
      To
      Parent’s knowledge, no officer, director or stockholder or any member of their
      immediate families is, directly or indirectly, interested in any material
      contract with Parent (other than such contracts as relate to any such individual
      ownership of capital stock or other securities of Parent).

     

    
      
        
        

      

      
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    4.20 Indebtedness.
      Parent
      has no indebtedness for borrowed money.

     

    4.21 Over-the-Counter
      Bulletin Board Quotation.
      Parent
      Common Stock is quoted on the Over-the-Counter Bulletin Board (“OTC BB”). There
      is no action or proceeding pending or, to Parent’s knowledge, threatened against
      Parent by NASD, Inc. (“NASD”) with respect to any intention by the NASD to
      prohibit or terminate the quotation of Parent Common Stock on the OTC
      BB.

     

    4.22 Board
      Approval.
      The
      Board of Directors of Parent (including any required committee or subgroup
      of
      the Board of Directors of Parent) has, as of the date of this Agreement,
      unanimously (i) declared the advisability of the Merger and approved this
      Agreement and the transactions contemplated hereby, (ii) determined that the
      Merger is in the best interests of the stockholders of Parent, and (iii)
      determined that the fair market value of the Company is equal to at least 80%
      of
      Parent’s net assets.

     

    4.23 Trust
      Fund.
      As of
      the date hereof and at the Closing Date, Parent has and will have no less than
      $32,955,360 including interest before the application of applicable taxes
      invested in United States Government securities in a trust account with JP
      Morgan Chase NY Bank, administered by Continental Stock Transfer & Trust
      Company (the “Trust Fund”), less such amounts, if any, as Parent is required to
      pay to stockholders who elect to have their shares converted to cash in
      accordance with the provisions of Parent’s Charter Documents.

     

    4.24 Governmental
      Filings.
      Except
      as set forth in Section 4.24 of the Parent Schedule, Parent has been granted
      and
      holds, and has made, all Governmental Actions/Filings necessary to the conduct
      by Parent of its business (as presently conducted) or used or held for use
      by
      Parent, and true, complete and correct copies of which have heretofore been
      delivered to the Company. Each such Governmental Action/Filing is in full force
      and effect and, except as disclosed in Section 4.24 of the Parent Schedule,
      will
      not expire prior to December 31, 2006, and Parent is in compliance with all
      of
      its obligations with respect thereto. No event has occurred and is continuing
      which requires or permits, or after notice or lapse of time or both would
      require or permit, and consummation of the transactions contemplated by this
      Agreement or any ancillary documents will not require or permit (with or without
      notice or lapse of time, or both), any modification or termination of any such
      Governmental Actions/Filings except such events which, either individually
      or in
      the aggregate, would not have a Material Adverse Effect upon
      Parent.

     

    4.25 Representations
      and Warranties Complete.
      The
      representations and warranties of Parent included in this Agreement and any
      list, statement, document or information set forth in, or attached to, any
      Schedule provided pursuant to this Agreement or delivered hereunder, are true
      and complete in all material respects and do not contain any untrue statement
      of
      a material fact or omit to state a material fact required to be stated therein
      or necessary to make the statements contained therein not misleading, under
      the
      circumstance under which they were made.

     

    
      
        
        

      

      
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    4.26 Survival
      of Representations and Warranties.
      The
      representations and warranties of Parent set forth in this Agreement shall
      survive until the Closing.

     

    ARTICLE
      V

     

    CONDUCT
      PRIOR TO THE EFFECTIVE TIME

     

    5.1 Conduct
      of Business by Company and Parent.
      During
      the period from the date of this Agreement and continuing until the earlier
      of
      the termination of this Agreement pursuant to its terms or the Closing, each
      of
      the Company, Parent and Merger Sub shall, except to the extent that the other
      party shall otherwise consent in writing, carry on its business in the usual,
      regular and ordinary course consistent with past practices, in substantially
      the
      same manner as heretofore conducted and in compliance with all applicable laws
      and regulations (except where noncompliance would not have a Material Adverse
      Effect), pay its debts and taxes when due subject to good faith disputes over
      such debts or taxes, pay or perform other material obligations when due, and
      use
      its commercially reasonable efforts consistent with past practices and policies
      to (i) preserve substantially intact its present business organization, (ii)
      keep available the services of its present officers and employees and (iii)
      preserve its relationships with customers, suppliers, distributors, licensors,
      licensees, and others with which it has significant business dealings. As used
      in this Article V, the term “Company” includes the Subsidiaries unless the
      context clearly indicates otherwise. In addition, except as required or
      permitted by the terms of this Agreement or set forth on Schedule 5.1, without
      the prior written consent of the other party, during the period from the date
      of
      this Agreement and continuing until the earlier of the termination of this
      Agreement pursuant to its terms or the Closing, each of the Company, Parent
      and
      Merger Sub shall not do any of the following:

     

    (a) Other
      than as expressly contemplated by this Agreement, including, without limitation,
      pursuant to the terms of the Employment Agreements, attached hereto as Exhibits
      B and C (the “Employment Agreements”) waive any stock repurchase rights,
      accelerate, amend or (except as specifically provided for herein) change the
      period of exercisability of options, warrants or restricted stock, or reprice
      options granted under any employee, consultant, director or other stock plans
      or
      authorize cash payments in exchange for any options granted under any of such
      plans;

     

    (b) Other
      than as expressly contemplated by this Agreement, including, without limitation,
      pursuant to the terms of the Employment Agreements, grant any severance or
      termination pay to any officer or key employee except pursuant to applicable
      law, written agreements outstanding, or policies existing on the date hereof
      and
      as previously or concurrently disclosed in writing or made available to the
      other party, or adopt any new severance plan, or amend or modify or alter in
      any
      manner any severance plan, agreement or arrangement existing on the date
      hereof;

     

    (c) Transfer
      or license to any person or otherwise extend, amend or modify any material
      rights to any Intellectual Property of the Company, or enter into grants to
      transfer or license to any person future patent rights, other than in the
      ordinary course of business consistent with past practices;

     

    
      
        
        

      

      
        -54-

        
          

        

      

      
        
        

      

    

    (d) Declare,
      set aside or pay any dividends on or make any other distributions (whether
      in
      cash, stock, equity securities or property) in respect of any capital stock
      or
      split, combine or reclassify any capital stock or issue or authorize the
      issuance of any other securities in respect of, in lieu of or in substitution
      for any capital;

     

    (e) Purchase,
      redeem or otherwise acquire, directly or indirectly, any shares of capital
      stock
      of the Company and Parent, as applicable, other than repurchases of unvested
      shares at cost in connection with the termination of the relationship with
      any
      employee or consultant pursuant to stock option or purchase agreements in effect
      on the date hereof;

     

    (f) Issue,
      deliver, sell, authorize, pledge or otherwise encumber, or agree to any of
      the
      foregoing with respect to, any shares of capital stock or any securities
      convertible into or exchangeable for shares of capital stock, or subscriptions,
      rights, warrants or options to acquire any shares of capital stock or any
      securities convertible into or exchangeable for shares of capital stock, or
      enter into other agreements or commitments of any character obligating it to
      issue any such shares or convertible or exchangeable securities other than
      in
      connection with the exercise, exchange or conversion of any securities of the
      Company outstanding on the date hereof;

     

    (g) Amend
      its
      Charter Documents;

     

    (h) Acquire
      or agree to acquire by merging or consolidating with, or by purchasing any
      equity interest in or a portion of the assets of, or by any other manner, any
      business or any corporation, partnership, association or other business
      organization or division thereof, or otherwise acquire or agree to acquire
      any
      assets which are material, individually or in the aggregate, to the business
      of
      Parent or the Company as applicable, or, without concurrently advising Parent,
      enter into any joint ventures, strategic partnerships or alliances or other
      arrangements that provide for exclusivity of territory or otherwise restrict
      such party’s ability to compete or to offer or sell any products or
      services;

     

    (i) Sell,
      lease, license, encumber or otherwise dispose of any properties or assets,
      except (A) sales of services and licenses of Intellectual Property in the
      ordinary course of business consistent with past practice, (B) sales of
      inventory in the ordinary course of business consistent with past practice,
      (C)
      the sale, lease or disposition (other than through licensing) of property or
      assets that are not material, individually or in the aggregate, to the business
      of such party, and (D) extend any leases of real property or personal
      property outstanding as of the date hereof;

     

    (j) Other
      than as set forth in Schedule 5.1(j), incur any indebtedness for borrowed money
      in excess of $150,000 in the aggregate or guarantee any such indebtedness of
      another person, issue or sell any debt securities or options, warrants, calls
      or
      other rights to acquire any debt securities of Parent or the Company, as
      applicable, enter into any “keep well” or other agreement to maintain any
      financial statement condition or enter into any arrangement having the economic
      effect of any of the foregoing;

     

    
      
        
        

      

      
        -55-

        
          

        

      

      
        
        

      

    

    (k) Other
      than as expressly contemplated by the Employment Agreements, adopt or amend
      any
      employee benefit plan, policy or arrangement, any employee stock purchase or
      employee stock option plan, or enter into any employment contract or collective
      bargaining agreement (other than offer letters and letter agreements entered
      into in the ordinary course of business consistent with past practice with
      employees who are terminable “at will”), pay any special bonus or special
      remuneration to any director or employee, or increase the salaries or wage
      rates
      or fringe benefits (including rights to severance or indemnification) of its
      directors, officers, employees or consultants, except in the ordinary course
      of
      business consistent with past practice, except as provided in Section 5.1(k)
      of
      the Company Schedule or in Section 7.3(g) hereof;

     

    (l) Pay,
      discharge, settle or satisfy any claims, liabilities or obligations (absolute,
      accrued, asserted or unasserted, contingent or otherwise), or litigation
      (whether or not commenced prior to the date of this Agreement) other than the
      payment, discharge, settlement or satisfaction, in the ordinary course of
      business consistent with past practices or in accordance with their terms,
      or
      liabilities recognized or disclosed in the Unaudited Financial Statements or
      in
      the most recent financial statements included in the Parent SEC Reports filed
      prior to the date of this Agreement, as applicable, or incurred since the date
      of such financial statements, or disclosed in the Company Schedule, or that
      would be eliminated in the consolidation process in the preparation of such
      financial statements, or waive the benefits of, agree to modify in any manner,
      terminate, release any person from or knowingly fail to enforce any
      confidentiality agreement to which the Company is a party or of which the
      Company is a beneficiary or to which Parent is a party or of which Parent is
      a
      beneficiary, as applicable;

     

    (m) Except
      in
      the ordinary course of business consistent with past practices, enter into,
      modify, amend or terminate any Company Contract, as applicable, or waive, delay
      the exercise of, release or assign any material rights or claims
      thereunder;

     

    (n) Except
      as
      required by Israeli GAAP or by the conversion of the Company’s financial
      statements to GAAP, revalue any of its assets or make any change in accounting
      methods, principles or practices;

     

    (o) Except
      in
      the ordinary course of business consistent with past practices, incur or enter
      into any agreement, contract or commitment requiring such party to pay in excess
      of $25,000 in any 12 month period;

     

    (p) Engage
      in
      any action that could reasonably be expected to cause the Merger to fail to
      qualify as a “reorganization” under Section 368(a) of the Code;

     

    (q) Make
      or
      rescind any Tax elections that, individually or in the aggregate, could be
      reasonably likely to adversely affect in any material respect the Tax liability
      or Tax attributes of such party, settle or compromise any material income tax
      liability or, except as required by applicable law, materially change any method
      of accounting for Tax purposes or prepare or file any Return in a manner
      inconsistent with past practice;

     

    
      
        
        

      

      
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    (r) Form,
      establish or acquire any subsidiary except as contemplated by this
      Agreement;

     

    (s) Permit
      any Person to exercise any of its discretionary rights under any Plan to provide
      for the automatic acceleration of any outstanding options, the termination
      of
      any outstanding repurchase rights or the termination of any cancellation rights
      issued pursuant to such plans;

     

    (t) Make
      capital expenditures except in accordance with prudent business and operational
      practices consistent with prior practice;

     

    (u) Take
      or
      omit to take any action which would be reasonably anticipated to have a Material
      Adverse Effect; 

     

    (v) Enter
      into any transaction with or distribute or advance any assets or property to
      any
      of its officers, directors, partners, stockholders or other affiliates, other
      than (A) the payment of salaries for services rendered, (B) the
      reimbursement of reasonable expenses incurred on behalf of the Company or Parent
      (as applicable), or (C) the providing of other employee benefits made
      generally available to all employees; or 

     

    (w) Agree
      in
      writing or otherwise agree, commit or resolve to take any of the actions
      described in Section 5.1 (a) through (w) above.

     

    ARTICLE
      VI

     

    ADDITIONAL
      AGREEMENTS

     

    6.1 Registration
      Statement and Prospectus/Proxy Statement; Special Meeting.

     

    (a) As
      soon
      as is reasonably practicable after receipt by Parent from the Company of all
      financial and other information relating to the Company as Parent may reasonably
      request for its preparation, Parent shall prepare and file with the SEC under
      the Exchange Act, and with all other applicable regulatory bodies, a
      Registration Statement on Form S-4 with respect to shares of Parent Common
      Stock
      to be issued in the Merger (the “Registration Statement”), which shall include
      proxy materials for the purpose of soliciting proxies from holders of Parent
      Common Stock to vote in favor of (i) the adoption of this Agreement and the
      approval of the Merger (“Parent Stockholder Approval”), (ii) the change of the
      name of Parent to a name mutually acceptable to Parent and the Company (the
      “Name Change Amendment”), (iii) an increase in the number of authorized shares
      of Parent Common Stock to 55,000,000 (the “Capitalization Amendment”), (iv) an
      amendment to remove sections A through E, inclusive of Article VI from Parent’s
      Certificate of Incorporation from and after the Closing and to redesignate
      Article VII as Article VI and Article VIII as Article VII, respectively, (v)
      the
      approval and adoption of the issuance of options to purchase shares of Company
      Common Stock to Gideon Barak and Amit Haller pursuant to each of the Employment
      Agreements, and (vi) the election as directors of Parent those persons listed
      in
      Schedule 6.1 and two more persons as chosen pursuant to Section 6.2 at a meeting
      of holders of Parent Common Stock to be called and held for such purpose (the
      “Special Meeting”). Such proxy materials shall be in the form of a
      prospectus/proxy statement to be used for the purpose of soliciting such proxies
      from holders of Parent Common Stock and also for the purpose of issuing the
      Parent Common Stock to holders of Company Common Stock in connection with the
      Merger (the “Prospectus/Proxy Statement”). The Company shall furnish to Parent
      all information concerning the Company as Parent may reasonably request in
      connection with the preparation of the Registration Statement. The Company
      and
      its counsel shall be given an opportunity to review and comment on the
      Registration Statement prior to its filing with the SEC. Parent, with the
      assistance of the Company, shall promptly respond to any SEC comments on the
      Registration Statement and shall otherwise use reasonable best efforts to cause
      the Registration Statement to be declared effective as promptly as practicable.
      Parent shall also take any and all such actions to satisfy the requirements
      of
      the Securities Act, including Rule 145 thereunder, and the Exchange Act. Prior
      to the Closing Date, Parent shall use its reasonable best efforts to cause
      the
      shares of Parent Common Stock to be issued pursuant to the Merger to be
      registered or qualified under all applicable Blue Sky Laws of each of the states
      and territories of the United States in which it is believed, based on
      information furnished by the Company, holders of the Company Common Stock reside
      and to take any other such actions which may be necessary to enable the Parent
      Common Stock to be issued pursuant to the Merger in each such
      jurisdiction.

     

    
      
        
        

      

      
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    (b) As
      soon
      as practicable following the declaration of effectiveness of the Registration
      Statement, Parent shall distribute the Prospectus/Proxy Statement to the holders
      of Parent Common Stock and, pursuant thereto, shall call the Special Meeting
      in
      accordance with the DGCL and, subject to the other provisions of this Agreement,
      solicit proxies from such holders to vote in favor of the adoption of this
      Agreement and the approval of the Merger and the other matters presented to
      the
      stockholders of Parent for approval or adoption at the Special
      Meeting.

     

    (c) Parent
      shall comply with all applicable provisions of and rules under the Exchange
      Act
      and all applicable provisions of the DGCL in the preparation, filing and
      distribution of the Registration Statement, the solicitation of proxies
      thereunder, and the calling and holding of the Special Meeting. Without limiting
      the foregoing, the Company shall ensure that the Prospectus/Proxy Statement
      does
      not, as of the date on which it is distributed to the holders of Parent Common
      Stock, and as of the date of the Special Meeting, contain any untrue statement
      of a material fact or omit to state a material fact necessary in order to make
      the statements made, in light of the circumstances under which they were made,
      not misleading (provided that Parent shall not be responsible for the accuracy
      or completeness of any information relating to the Company or any other
      information furnished by the Company for inclusion in the Prospectus/Proxy
      Statement). The Company represents and warrants that the information relating
      to
      the Company supplied by the Company for inclusion in the Registration Statement
      will not as of the effective date of the Registration Statement (or any
      amendment or supplement thereto) or at the time of the Special Meeting contain
      any statement which, at such time and in light of the circumstances under which
      it is made, is false or misleading with respect to any material fact, or omits
      to state any material fact required to be stated therein or necessary in order
      to make the statement therein not false or misleading.

     

    
      
        
        

      

      
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    (d) Parent,
      acting through its board of directors, shall include in the Prospectus/Proxy
      Statement the recommendation of its board of directors that the holders of
      Parent Common Stock vote in favor of the adoption of this Agreement and the
      approval of the Merger, and shall otherwise use reasonable best efforts to
      obtain the Parent Stockholder Approval.

     

    6.2 Directors
      and Officers of Parent and the Company After Merger.
      Parent,
      subject to the reasonable approval of the Company, shall select two persons
      who
      qualify as “independent directors” as such term is defined by Nasdaq Stock
      Market Rules to each stand for election as a director of Parent.

     

    6.3 Other
      Actions.

     

    (a) At
      least
      five (5) Business Days prior to Closing, Parent shall prepare a draft Form
      8-K
      announcing the Closing, together with, or incorporating by reference, the
      financial statements prepared by the Company and its accountant, and such other
      information that may be required to be disclosed with respect to the Merger
      in
      any report or form to be filed with the SEC (“Merger Form 8-K”), which shall be
      in a form reasonably acceptable to the Company and in a format acceptable for
      EDGAR filing. Prior to Closing, Parent and the Company shall prepare the press
      release announcing the consummation of the Merger hereunder (“Press Release”).
      Simultaneously with the Closing, Parent shall file the Merger Form 8-K with
      the
      SEC and distribute the Press Release.

     

    (b) The
      Company and Parent shall further cooperate with each other and use their
      respective reasonable best efforts to take or cause to be taken all actions,
      and
      do or cause to be done all things, necessary, proper or advisable on its part
      under this Agreement and applicable laws to consummate the Merger and the other
      transactions contemplated hereby as soon as practicable, including preparing
      and
      filing as soon as practicable all documentation to effect all necessary notices,
      reports and other filings and to obtain as soon as practicable all consents,
      registrations, approvals, permits and authorizations necessary or advisable
      to
      be obtained from any third party (including the respective independent
      accountants of the Company and Parent) and/or any Governmental Entity in order
      to consummate the Merger or any of the other transactions contemplated hereby.
      Subject to applicable laws relating to the exchange of information and the
      preservation of any applicable attorney-client privilege, work-product doctrine,
      self-audit privilege or other similar privilege, each of the Company and Parent
      shall have the right to review and comment on in advance, and to the extent
      practicable each will consult the other on, all the information relating to
      such
      party, that appear in any filing made with, or written materials submitted
      to,
      any third party and/or any Governmental Entity in connection with the Merger
      and
      the other transactions contemplated hereby. In exercising the foregoing right,
      each of the Company and Parent shall act reasonably and as promptly as
      practicable.

     

    6.4 Required
      Information.
      In
      connection with the preparation of the Merger Form 8-K and Press Release, and
      for such other reasonable purposes, the Company and Parent each shall, upon
      request by the other, furnish the other with all information concerning
      themselves, their respective directors, officers and stockholders (including
      the
      directors of Parent and the Company to be elected effective as of the Closing
      pursuant to Section 6.2 hereof) and such other matters as may be reasonably
      necessary or advisable in connection with the Merger, or any other statement,
      filing, notice or application made by or on behalf of the Company and Parent
      to
      any third party and/or any Governmental Entity in connection with the Merger
      and
      the other transactions contemplated hereby. Each party warrants and represents
      to the other party that all such information shall be true and correct in all
      material respects and will not contain any untrue statement of a material fact
      or omit to state a material fact required to be stated therein or necessary
      to
      make the statements contained therein, in light of the circumstances under
      which
      they were made, not misleading.

     

    
      
        
        

      

      
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    6.5 Confidentiality;
      Access to Information.

     

    (a) Confidentiality.
      Any confidentiality agreement previously executed by the parties shall be
      superseded in its entirety by the provisions of this Agreement. Each party
      agrees to maintain in confidence any non-public information received from the
      other party, and to use such non-public information only for purposes of
      consummating the transactions contemplated by this Agreement. Such
      confidentiality obligations will not apply to (i) information which was known
      to
      the one party or their respective agents prior to receipt from the other party;
      (ii) information which is or becomes generally known; (iii) information acquired
      by a party or their respective agents from a third party who was not bound
      to an
      obligation of confidentiality; and (iv) such disclosure as may be required
      by
      law. In the event this Agreement is terminated as provided in Article IX hereof,
      each party (i) will return or cause to be returned to the other all documents
      and other material obtained from the other in connection with the Merger
      contemplated hereby, and (ii) will use its reasonable best efforts to delete
      from its computer systems all documents and other material obtained from the
      other in connection with the Merger contemplated hereby.

     

    (b) Access
      to
      Information.

     

    (i) Company
      will afford Parent and its financial advisors, accountants, counsel and other
      representatives reasonable access during normal business hours, upon reasonable
      notice, to the properties, books, records and personnel of the Company during
      the period prior to the Closing to obtain all information concerning the
      business, including the status of product development efforts, properties,
      results of operations and personnel of the Company, as Parent may reasonably
      request. No information or knowledge obtained by Parent in any investigation
      pursuant to this Section 6.5 will affect or be deemed to modify any
      representation or warranty contained herein or the conditions to the obligations
      of the parties to consummate the Merger.

     

    (ii) Parent
      will afford the Company and its financial advisors, underwriters, accountants,
      counsel and other representatives reasonable access during normal business
      hours, upon reasonable notice, to the properties, books, records and personnel
      of Parent during the period prior to the Closing to obtain all information
      concerning the business and personnel of Parent, as the Company may reasonably
      request. No information or knowledge obtained by the Company in any
      investigation pursuant to this Section 6.5 will affect or be deemed to modify
      any representation or warranty contained herein or the conditions to the
      obligations of the parties to consummate the Merger.

     

    
      
        
        

      

      
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    6.6 Public
      Disclosure.
      From
      the date of this Agreement until Closing or termination, the parties shall
      cooperate in good faith to jointly prepare all press releases and public
      announcements pertaining to this Agreement and the transactions governed by
      it,
      and no party shall issue or otherwise make any public announcement or
      communication pertaining to this Agreement or the transaction without the prior
      consent of Parent (in the case of the Company) or the Company (in the case
      of
      Parent), except as required by any legal requirement or by the rules and
      regulations of, or pursuant to any agreement of a stock exchange or trading
      system. Each party will not unreasonably withhold approval from the others
      with
      respect to any press release or public announcement. If any party determines
      with the advice of counsel that it is required to make this Agreement and the
      terms of the transaction public or otherwise issue a press release or make
      public disclosure with respect thereto, it shall, at a reasonable time before
      making any public disclosure, consult with the other party regarding such
      disclosure, seek such confidential treatment for such terms or portions of
      this
      Agreement or the transaction as may be reasonably requested by the other party
      and disclose only such information as is legally compelled to be disclosed.
      This
      provision will not apply to communications by any party to its counsel,
      accountants and other professional advisors. Notwithstanding the foregoing,
      the
      parties hereto agree that Parent will prepare and file a current report on
      Form
      8-K pursuant to the Exchange Act to report the execution of this Agreement
      in
      the form previously approved by the Company.

     

    6.7 Reasonable
      Efforts.
      Upon
      the terms and subject to the conditions set forth in this Agreement, each of
      the
      parties agrees to use its commercially reasonable efforts to take, or cause
      to
      be taken, all actions, and to do, or cause to be done, and to assist and
      cooperate with the other parties in doing, all things necessary, proper or
      advisable to consummate and make effective, in the most expeditious manner
      practicable, the Merger and the other transactions contemplated by this
      Agreement, including using commercially reasonable efforts to accomplish the
      following: (i) to cause the conditions precedent set forth in Article VII to
      be
      satisfied, (ii) obtain all necessary actions, waivers, consents, approvals,
      orders and authorizations from Governmental Entities and to make all necessary
      registrations, declarations and filings (including registrations, declarations
      and filings with Governmental Entities, if any) and to take all reasonable
      steps
      as may be necessary to avoid any suit, claim, action, investigation or
      proceeding by any Governmental Entity, (iii) to obtain all consents, approvals
      or waivers from third parties required as a result of the transactions
      contemplated in this Agreement, (iv) to defend any suits, claims, actions,
      investigations or proceedings, whether judicial or administrative, challenging
      this Agreement or the consummation of the transactions contemplated hereby,
      including to seek to have any stay or temporary restraining order entered by
      any
      court or other Governmental Entity vacated or reversed and (v) to execute or
      deliver any additional instruments reasonably necessary to consummate the
      transactions contemplated by, and to fully carry out the purposes of, this
      Agreement. In connection with and without limiting the foregoing, Parent and
      its
      board of directors and the Company and its board of directors shall, if any
      state takeover statute or similar statute or regulation is or becomes applicable
      to the Merger, this Agreement or any of the transactions contemplated by this
      Agreement, use its commercially reasonable efforts to enable the Merger and
      the
      other transactions contemplated by this Agreement to be consummated as promptly
      as practicable on the terms contemplated by this Agreement. 

     

    
      
        
        

      

      
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    6.8 Treatment
      as a Reorganization.
      Notwithstanding any other provision herein, neither Parent nor the Company
      nor
      stockholders shall take any action prior to or following the Merger that could
      reasonably be expected to cause the Merger to fail to qualify as a
“reorganization” within the meaning of Section 368(a) of the Code.

     

    6.9 No
      Securities Transactions.
      Neither
      the Company nor any of its affiliates, directly or indirectly, shall engage
      in
      any transactions involving the securities of Parent prior to the time of the
      making of a public announcement of the transactions contemplated by this
      Agreement. The Company shall use its reasonable best efforts to require each
      of
      its officers, directors, employees, agents and representatives to comply with
      the foregoing requirement.

     

    6.10 Disclosure
      of Certain Matters.
      Each of
      Parent and the Company will provide the other with prompt written notice of
      any
      event, development or condition that (a) would cause any of such party’s
      representations and warranties to become untrue or misleading or which may
      affect its ability to consummate the transactions contemplated by this
      Agreement, (b) had it existed or been known on the date hereof would have been
      required to be disclosed under this Agreement, (c) gives such party any reason
      to believe that any of the conditions set forth in Article VII will not be
      satisfied, (d) is of a nature that is or may be materially adverse to the
      operations, prospects or condition (financial or otherwise) of the Company,
      or
      (e) would require any amendment or supplement to the Prospectus/Proxy Statement.
      The parties shall have the obligation to supplement or amend the Company
      Schedule and Parent Schedule (the “Disclosure Schedule”) being delivered
      concurrently with the execution of this Agreement and annexed hereto with
      respect to any matter hereafter arising or discovered which, if existing or
      known at the date of this Agreement, would have been required to be set forth
      or
      described in the Disclosure Schedule. The obligations of the parties to amend
      or
      supplement the Disclosure Schedule being delivered herewith shall terminate
      on
      the Closing Date. Notwithstanding any such amendment or supplementation, for
      purposes of Sections 7.2(a), 7.3(a), 8.1(a)(i), 9.1(d) and 9.1(e), the
      representations and warranties of the parties shall be made with reference
      to
      the Disclosure Schedule as they exist at the time of execution of this
      Agreement, subject to such anticipated changes as are set forth in Schedule
      5.1
      or otherwise expressly contemplated by this Agreement or which are set forth
      in
      the Disclosure Schedule as they exist on the date of this
      Agreement.

     

    6.11 Listing.
      Parent
      and the Company shall use their reasonable best efforts to obtain the listing
      for trading on Nasdaq National Market or the Nasdaq Capital Market of the Parent
      Common Stock. If such listing is not obtained by the Closing, the parties shall
      continue to use their best efforts after the Closing to obtain such
      listing.

     

    6.12 Company
      Actions.
      The
      Company shall use its best efforts to take such actions as are necessary to
      fulfill its obligations under this Agreement and to enable Parent and Merger
      Sub
      to fulfill its obligations hereunder, including without limitation distributing
      the Prospectus/Proxy Statement to its stockholders when it is made available
      by
      Parent, taking actions necessary under the DGCL in respect of Dissenting Shares
      and the appraisal rights of the holders thereof, including giving written notice
      to Parent of each such holder and the number of Dissenting Shares held by each
      such holder.

     

    
      
        
        

      

      
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    6.13 Non-Solicitation.

     

    (a) The
      Company shall not, directly or indirectly, through any officer, director, agent
      or otherwise, (i) solicit, initiate or knowingly encourage (including by
      way of furnishing nonpublic information), or take any other action to
      facilitate, any inquiries or the making of any proposal or offer that
      constitutes, or may reasonably be expected to lead to, any Company Acquisition
      Proposal, or (ii) enter into or maintain or continue discussions or
      negotiations with any person or entity in furtherance of such inquiries or
      to
      obtain a proposal or offer for a Company Acquisition Proposal, or (iii) agree
      to, approve, endorse or recommend any Company Acquisition Proposal or enter
      into
      any letter of intent or other contract, agreement or commitment contemplating
      or
      otherwise relating to any Company Acquisition Proposal, or (iv) authorize
      or permit any agent of the Company or any of its Affiliates, or any investment
      banker, financial advisor, attorney, accountant or other representative retained
      by the Company or any of its Affiliates, to take any such action. The Company
      shall, and shall direct or cause the Company’s representatives and agents to,
      immediately cease and cause to be terminated any discussions or negotiations
      with any parties that may be ongoing with respect to any Company Acquisition
      Proposal. The Company shall notify Parent as promptly as practicable (and in
      any
      event within one (1) day after the Company attains knowledge thereof), orally
      and in writing, if any proposal or offer, or any inquiry or contact with any
      person with respect thereto, regarding a Company Acquisition Proposal is made,
      specifying the material terms and conditions thereof and the identity of the
      party making such proposal or offer or inquiry or contact (including material
      amendments or proposed material amendments).

     

    (b) Parent
      shall not, directly or indirectly, through any officer, director, agent or
      otherwise, (a) solicit, initiate or knowingly encourage (including by way
      of furnishing nonpublic information), or take any other action to facilitate,
      any inquiries or the making of any proposal or offer that constitutes, or may
      reasonably be expected to lead to, any Parent Acquisition Proposal, or
      (b) enter into or maintain or continue discussions or negotiations with any
      person or entity in furtherance of such inquiries or to obtain a proposal or
      offer for a Parent Acquisition Proposal, or (c) agree to, approve, endorse
      or
      recommend any Parent Acquisition Proposal or enter into any letter of intent
      or
      other contract, agreement or commitment contemplating or otherwise relating
      to
      any Parent Acquisition Proposal, or (d) authorize or permit any agent of
      Parent or any of its Affiliates, or any investment banker, financial advisor,
      attorney, accountant or other representative retained by Parent or any of its
      Affiliates, to take any such action. Parent shall, and shall direct or cause
      Parent’s representatives and agents to, immediately cease and cause to be
      terminated any discussions or negotiations with any parties that may be ongoing
      with respect to any Parent Acquisition Proposal. Parent shall notify the Company
      as promptly as practicable (and in any event within one (1) day after Parent
      attains knowledge thereof), orally and in writing, if any proposal or offer,
      or
      any inquiry or contact with any person with respect thereto, regarding a Parent
      Acquisition Proposal is made, specifying the material terms and conditions
      thereof and the identity of the party making such proposal or offer or inquiry
      or contact (including material amendments or proposed material
      amendments).

     

    
      
        
        

      

      
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    (c) The
      obligations contained in Sections 6.13(a) and (b) shall terminate on November
      15, 2006, provided that by such date the aggregate amount of capital received
      by
      the Company equals or exceeds fifteen million dollars
      ($15,000,000).

     

    6.14 Short-Swing
      Profit.
      Subject
      to Section 6.8 hereof, in the event that Gemini Israel III L.P., Gemini Partner
      Investors L.P., Gemini Israel III Parallel Fund L.P. and Gemini Israel III
      Overflow Fund L.P. (“Gemini”) or Landa Ventures Ltd. (“Landa”) provides Parent
      with an opinion of counsel reasonably satisfactory to Parent to the effect
      that
      the receipt of shares of Parent Common Stock representing its portion of the
      Share Price Shares pursuant to Section 2.15 would cause either Gemini or Landa,
      as the case may be, to become liable to Parent pursuant to Section 16(b) of
      the
      Exchange Act (a “Short Swing Profit Opinion”), then Gemini or Landa, as the case
      may be, may elect to receive, in lieu of its right to receive any portion of
      the
      Share Price Shares, from Parent a cash payment equal to the product of (a)
      the
      Last Reported Sales Price of the Parent Common Stock on the Trading Day
      immediately preceding the Additional Share Issuance Date relating to the
      distribution of the Share Price Shares and (b) the number of Share Price Shares
      which Gemini or Landa, as the case may be, would otherwise be entitled to
      receive pursuant to Section 2.15(a). In order to exercise its right to receive
      cash in lieu of shares of Parent Common Stock pursuant to this Section 6.14,
      Gemini or Landa, as the case may be, must deliver written notice of such
      election and the related Short Swing Profit Opinion to Parent no later than
      three Business Days immediately preceding the Additional Share Issuance Date
      relating to the distribution of the First Share Price Shares. In the event
      that
      Gemini or Landa, as the case may be, exercises its right to receive cash in
      lieu
      of shares of Parent Common Stock pursuant to this Section 6.14, the Additional
      Escrowed Shares that Gemini or Landa, as the case may be, would have received
      but for such election shall be returned to Parent by the Escrow Agent for
      cancellation. 

     

    6.15 Israeli
      Tax Pre-Ruling.
      As soon
      as reasonably practicable after the execution of this Agreement, the Company
      shall cause the Company’s Israeli counsel and accountants to prepare and file
      with the Israeli Income Tax Commissioner an application for a tax pre-ruling
      permitting any Holder or Derivative Holder who elect to become a party to such
      a
      tax pre-ruling (the “Electing Holder”), to defer any applicable Israeli tax with
      respect to any Consideration Shares and Additional Shares that such Holder
      or
      Derivative Holder may receive pursuant to this Agreement until the sale,
      transfer or other conveyance for cash of such shares of Parent Common Stock
      by
      such Holder or Derivative Holder (the “Israeli Tax Pre-Ruling”). The Israeli Tax
      Pre-Ruling shall not impose any restrictions or obligations on the stockholders
      of Parent without Parent’s consent. Each of the Company and Parent shall cause
      their respective Israeli counsel and accountants to coordinate all activities,
      and to cooperate with each other, with respect to the preparation and filing
      of
      such application and in the preparation of any written or oral submissions
      that
      may be necessary, proper or advisable to obtain the Israeli Tax Pre-Ruling.
      In
      the event that the Company’s application for the Israeli Tax Pre-Ruling is
      denied or, in the sole judgment of the Company, imposes material conditions
      or
      requirements upon the Electing Holders, the requirements of this Section 6.15
      may be waived by the vote or consent of those Electing Holders who in the
      aggregate hold a majority of the Company Common Stock, on a fully-diluted basis,
      held by all of the Electing Holders. Subject to the terms and conditions hereof,
      the parties shall use commercially reasonable efforts to promptly take, or
      cause
      to be taken, all action and to do, or cause to be done, all things necessary,
      proper or advisable under any applicable Legal Requirement to obtain the Israeli
      Tax Pre-Ruling as promptly as practicable. 

     

    
      
        
        

      

      
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    6.16 Bridge
      Financing.
      Parent
      and the Company agree to cooperate and use all commercially reasonable efforts
      to procure one or more Bridge Financings in an amount sufficient to allow the
      Company to continue to operate in accordance with its current business plan
      and
      projections during the period commencing on the date of this Agreement through
      the Closing Date. For the avoidance of doubt, nothing contained in this Section
      6.16 shall detract from Parent’s discretion in exercising its approval rights
      under Article V.

     

    6.17 Indemnification
      of Officers and Directors. 

     

    (a) All
      rights to indemnification by the Company or Parent existing in favor of those
      Persons who are or were directors or officers of the Company (the “Company
      Indemnified Persons”) or directors or officers of Parent (the “Parent
      Indemnified Persons”, and together with the Company Indemnified Persons, the
“Indemnified Persons”) as of or prior to the date of this Agreement for their
      acts and omissions as directors or officers of the Company or directors or
      officers of Parent occurring prior to the Effective Time (as provided in:
      (i) the Charter Documents of the Company or Parent, as the case may be, (as
      in effect as of the date of this Agreement); and (ii) any indemnification
      agreements between the Company and said Indemnified Persons or Parent and said
      Indemnified Persons (as in effect as of the date of this Agreement) (the
“Indemnification Documents”), shall survive the Merger and be observed by the
      Surviving Corporation and Parent to the fullest extent available under the
      Indemnification Documents and applicable law for a period of seven years from
      the Effective Time, and Parent shall observe, and shall cause the Surviving
      Corporation to so observe, such rights (including, to the extent necessary,
      by
      providing funds to ensure such observance).

     

    (b) From
      the
      Effective Time until the seventh (7th)
      anniversary thereof, the Surviving Corporation shall maintain in effect the
      directors’ and officers’ liability insurance maintained by the Company as of the
      date of this Agreement in the form delivered by the Company to Parent prior
      to
      the date of this Agreement (the “Company Existing D&O Policy”), for the
      benefit of those Company Indemnified Persons who are currently insured
      thereunder with respect to their acts and omissions as directors or officers
      of
      the Company occurring prior to the Effective Time, to the extent that directors’
and officers’ liability insurance coverage is commercially available;
provided,
      however,
      that:
      (i) the Surviving Corporation may substitute for the Company Existing
      D&O Policy a policy or policies of comparable coverage; and (ii) the
      Surviving Corporation shall not be required to pay annual premiums for the
      Company Existing D&O Policy (or for any substitute policies) in excess of
      fifty thousand dollars ($50,000) (the “Company Maximum Premium”). In the event
      any future annual premiums for the Company Existing D&O Policy (or any
      substitute policies) exceed the Company Maximum Premium, the Surviving
      Corporation shall be entitled to reduce the amount of coverage of the Company
      Existing D&O Policy (or any substitute policies) to the amount of coverage
      that can be obtained for a premium equal to the Company Maximum Premium. The
      provisions of this Section 6.17(b) shall be deemed to have been satisfied
      if prepaid policies have been obtained prior to the Effective Time for purposes
      of this Section 6.17(b), which policies provide such Company Indemnified
      Persons with coverage comparable to the coverage provided by the Company
      Existing D&O Policies for an aggregate period of seven (7) years following
      the Effective Time (and the Company may, if it obtains the prior written consent
      of Parent, obtain such a prepaid policy prior to the Effective Time, provided
      that the cost thereof shall not exceed the Company Maximum Premium). If such
      prepaid policies have been obtained prior to the Effective Time, neither the
      Surviving Corporation nor Parent shall cancel such policies.

     

    
      
        
        

      

      
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    (c) From
      the
      Effective Time until the seventh (7th)
      anniversary thereof, the Parent shall maintain in effect the directors’ and
      officers’ liability insurance maintained by the Parent as of the date of this
      Agreement (the “Parent Existing D&O Policy”), for the benefit of those
      Parent Indemnified Persons who are currently insured thereunder with respect
      to
      their acts and omissions as directors or officers of Parent occurring prior
      to
      the Effective Time, to the extent that directors’ and officers’ liability
      insurance coverage is commercially available; provided,
      however,
      that:
      (i) the Parent may substitute for the Parent Existing D&O Policy a
      policy or policies of comparable coverage; and (ii) Parent shall not be
      required to pay annual premiums for the Existing D&O Policy (or for any
      substitute policies) in excess of sixty thousand dollars ($60,000) (the “Parent
      Maximum Premium”). In the event any future annual premiums for the Parent
      Existing D&O Policy (or any substitute policies) exceed the Parent Maximum
      Premium, Parent shall be entitled to reduce the amount of coverage of the
      Existing D&O Policy (or any substitute policies) to the amount of coverage
      that can be obtained for a premium equal to the Parent Maximum Premium. The
      provisions of this Section 6.17(c) shall be deemed to have been satisfied
      if prepaid policies have been obtained prior to the Effective Time for purposes
      of this Section 6.17(c), which policies provide such Parent Indemnified
      Persons with coverage comparable to the coverage provided by the Parent Existing
      D&O Policies for an aggregate period of seven (7) years following the
      Effective Time (and the Parent may obtain such a prepaid policy prior to the
      Effective Time, provided that the cost thereof shall not exceed the Parent
      Maximum Premium). If such prepaid policies have been obtained prior to the
      Effective Time, Parent shall not cancel such policies.

     

    (d) The
      obligations under this Section 6.17 shall not be terminated or modified in
      such a manner as to adversely affect any Indemnified Person without the consent
      of such affected Indemnified Person (it being expressly agreed that the
      Indemnified Persons shall be third party beneficiaries of this
      Section 6.17), and in the event that Parent or the Surviving Corporation
      consolidates or merges with any other Person and shall not be the continuing
      or
      surviving corporation or entity in such consolidation or merger, then Parent
      shall make proper provision so that the continuing or surviving corporation
      or
      entity shall assume the obligations set forth in this
      Section 6.17.

     

    6.18 No
      Claim Against Trust Fund.
      The
      Company acknowledges that, if the transactions contemplated by this Agreement
      are not consummated by July 19, 2007, Parent will be obligated to return to
      its
      stockholders the amounts being held in the Trust Fund. Accordingly, the Company
      hereby waive all rights against Parent to collect from the Trust Fund any moneys
      that may be owed to them by Parent for any reason whatsoever, including but
      not
      limited to a breach of this Agreement by Parent or any negotiations, agreements
      or understandings with Parent, and will not seek recourse against the Trust
      Fund
      for any reason whatsoever.

     

    
      
        
        

      

      
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    6.19 Stockholder
      Guarantees.
      Parent
      acknowledges that certain stockholders of the Company (the “Guarantee
      Stockholders”) have guaranteed certain indebtedness or other obligations of the
      Company or have otherwise entered into certain credit support arrangements
      with
      respect to the Company (collectively, the “Stockholder Guarantees”). Parent
      agrees to use all commercially reasonable efforts to assist the Company in
      releasing the Guarantee Stockholders from the Stockholder
      Guarantees.

     

    6.20 Stockholder
      Transfer Restrictions.
      Prior
      to the Effective Time, the Company shall cause (a) each of the executive
      officers of the Company to enter into an Executive Lock-Up Agreement
      substantially in the form attached hereto as Exhibit D (an “Executive Lock-Up
      Agreement”) and (b) each of the stockholders of the Company, holders of Employee
      Options and holders of Company Warrants listed on Schedule 6.20 to enter into
      a
      Stockholder Lock-Up Agreement substantially in the form attached hereto as
      Exhibit E (a “Stockholder Lock-Up Agreement” and together with the Executive
      Lock-Up Agreement, the “Lock-Up Agreements”). The Company agrees to use its
      reasonable best efforts to cause all stockholders of the Company and Derivative
      Holders, other than those listed on Schedule 6.20, to enter into a Stockholder
      Lock-Up Agreement. The certificates representing the shares of Parent Common
      Stock to be received by any stockholder of the Company, holder of Employee
      Options or holders of Company Warrants who has executed a Stockholder Lock-Up
      Agreement or an Executive Lock-Up Agreement shall bear legends to the effect
      that such shares of Parent Common Stock may not be transferred except upon
      compliance with the registration requirements of the Securities Act (or an
      exemption therefrom) or the provisions of the applicable Lock-Up
      Agreement.

     

    6.21 Stockholder
      Obligations.
      The
      Company shall take all commercially reasonable actions to cause the stockholders
      of the Company to repay to the Company, on or before the Closing, all direct
      and
      indirect indebtedness and obligations owed by them to the Company, including
      the
      indebtedness and other obligations set forth in Schedule 6.21.

     

    ARTICLE
      VII

     

    CONDITIONS
      TO THE TRANSACTION

     

    7.1 Conditions
      to Obligations of Each Party to Effect the Merger.
      The
      respective obligations of each party to this Agreement to effect the Merger
      shall be subject to the satisfaction at or prior to the Closing Date of the
      following conditions:

     

    (a) No
      Order.
      No
      Governmental Entity shall have enacted, issued, promulgated, enforced or entered
      any statute, rule, regulation, executive order, decree, injunction or other
      order (whether temporary, preliminary or permanent) which is in effect and
      which
      has the effect of making the Merger illegal or otherwise prohibiting
      consummation of the Merger, substantially on the terms contemplated by this
      Agreement.

     

    
      
        
        

      

      
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    (b) Registration
      Statement Effective.
      The
      Registration Statement shall have been declared effective by the
      SEC.

     

    (c) Parent
      Stockholder Approval.
      The
      Parent Stockholder Approval, the Name Change Amendment and the Capitalization
      Amendment shall have been duly approved and adopted by the stockholders of
      Parent by the requisite vote under the laws of the State of Delaware and the
      Charter Documents of Parent and an executed copy of an amendment to Parent’s
      Certificate of Incorporation reflecting the Name Change Amendment and the
      Capitalization Amendment shall have been filed with the Delaware Secretary
      of
      State to be effective as of the Closing.

     

    (d) Appraisal
      Rights.
      Holders
      of no more than five percent (5%) of the shares of any of the Company Common
      Stock outstanding immediately before the Closing shall have taken action to
      exercise their appraisal rights pursuant to Section 262 of the
      DGCL.

     

    (e) Parent
      Common Stock.
      Holders
      of no more than twenty percent (20%) of the shares of Parent Common Stock issued
      in Parent’s initial public offering of securities and outstanding immediately
      before the Closing (“Parent IPO Shares”) shall have exercised their rights to
      convert their Parent IPO Shares into a pro rata share of the Trust Fund in
      accordance with Parent’s Charter Documents. The amount of cash to be distributed
      by Parent as a result of the exercise by any holder of Parent IPO Shares to
      so
      convert such shares shall be referred to as the “Trust Fund Conversion
      Amount”.

     

    (f) Stock
      Quotation or Listing.
      The
      Parent Common Stock at the Closing will be quoted on the OTC BB or listed for
      trading on the Nasdaq National Market or Nasdaq Capital Market, if the
      application for such listing is approved, and there will be no action or
      proceeding pending or threatened against Parent by the NASD to prohibit or
      terminate the quotation of Parent Common Stock on the OTC BB or the trading
      thereof on Nasdaq National Market, Nasdaq Capital Market or American Stock
      and
      Options Exchange as the case may be.

     

    (g) Israel
      Securities Authority Exemption.
      Either
      (i) the Company shall have received the Israeli Securities Exemption or (ii)
      Parent shall have offered to purchase Employee Options from a sufficient number
      holders of Employee Options as shall permit the Company to avoid the need to
      publish a prospectus pursuant to Israeli securities law in connection with
      the
      transactions contemplated hereby or comply with the terms and conditions of
      a
      Conditional Israeli Securities Exemption and shall have received binding
      commitments from such holders to sell such Employee Options.

     

    7.2 Additional
      Conditions to Obligations of Company.
      The
      obligations of the Company to consummate and effect the Merger shall be subject
      to the satisfaction at or prior to the Closing Date of each of the following
      conditions, any of which may be waived, in writing, exclusively by the
      Company:

     

    (a) Representations
      and Warranties.
      Each
      representation and warranty of Parent contained in this Agreement that is
      qualified as to materiality shall have been true and correct (i) as of the
      date
      of this Agreement and (ii) subject to the provisions of the last sentence of
      Section 6.10, on and as of the Closing Date with the same force and effect
      as if
      made on the Closing Date. Each representation and warranty of Parent contained
      in this Agreement that is not qualified as to materiality shall have been true
      and correct (i) as of the date of this Agreement and (ii) in all material
      respects on and as of the Closing Date with the same force and effect as if
      made
      on the Closing Date. The Company shall have received a certificate with respect
      to the foregoing signed on behalf of Parent by an authorized officer of Parent
      (“Parent Closing Certificate”).

     

    
      
        
        

      

      
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    (b) Agreements
      and Covenants.
      Parent
      shall have performed or complied in all material respects with all agreements
      and covenants required by this Agreement to be performed or complied with by
      them on or prior to the Closing Date, except to the extent that any failure
      to
      perform or comply (other than a willful failure to perform or comply or failure
      to perform or comply with an agreement or covenant reasonably within the control
      of Parent) does not, or will not, constitute a Material Adverse Effect with
      respect to Parent, and the Parent Closing Certificate shall include a provision
      to such effect.

     

    (c) No
      Litigation.
      No
      action, suit or proceeding shall be pending or threatened before any
      Governmental Entity which is reasonably likely to (i) prevent consummation
      of
      any of the transactions contemplated by this Agreement, (ii) cause any of the
      transactions contemplated by this Agreement to be rescinded following
      consummation or (iii) affect materially and adversely or otherwise encumber
      the
      title of the shares of Parent Common Stock to be issued by Parent in connection
      with the Merger and no order, judgment, decree, stipulation or injunction to
      any
      such effect shall be in effect.

     

    (d) Consents.
      Parent
      shall have obtained all consents, waivers and approvals required to be obtained
      by Parent in connection with the consummation of the transactions contemplated
      hereby, other than consents, waivers and approvals the absence of which, either
      alone or in the aggregate, could not reasonably be expected to have a Material
      Adverse Effect on Parent and the Parent Closing Certificate shall include a
      provision to such effect.

     

    (e) Material
      Adverse Effect.
      No
      Material Adverse Effect with respect to Parent shall have occurred since the
      date of this Agreement.

     

    (f) SEC
      Compliance.
      Immediately prior to Closing, Parent shall be in compliance with the reporting
      requirements under the Exchange Act.

     

    (g) Opinion
      of Counsel.
      The
      Company shall have received from Graubard Miller, counsel to Parent, an opinion
      of counsel in a form to be agreed to by Parent and the Company.

     

    (h) Other
      Deliveries.
      At or
      prior to Closing, Parent shall have delivered to the Company (i) copies of
      resolutions and actions taken by Parent’s board of directors and stockholders in
      connection with the approval of this Agreement and the transactions contemplated
      hereunder, and (ii) such other documents or certificates as shall reasonably
      be
      required by the Company and its counsel in order to consummate the transactions
      contemplated hereunder.

     

    
      
        
        

      

      
        -69-

        
          

        

      

      
        
        

      

    

    (i) Press
      Release.
      Parent
      shall have delivered the Press Release to the Company, in a form reasonably
      acceptable to the Company.

     

    (j) Directors’
      and Officers’ Liability Insurance.
      The
      Company Existing D&O Policy (or any policy substituted therefor pursuant to
      Section 6.17(b)) shall be in full force and effect.

     

    (k) Resignations.
      The
      persons set forth on Schedule 7.2(k) shall have resigned from all of their
      positions and offices with Parent.

     

    (l) Trust
      Fund.
      Parent
      shall have made appropriate arrangements with the Exchange Agent to have the
      Trust Fund, which shall contain no less than the amount referred to in Section
      4.23, dispersed to Parent immediately upon the Closing.

     

    (m) Registration
      Rights.
      The
      Registration Rights Agreement substantially in the form of Exhibit A hereto
      between Parent and the stockholders of the Company set forth on Schedule 7.2(m)
      shall be in full force and effect.

     

    (n) OCS
      and Investment Center Approval.
      Parent
      and Company shall have obtained approval of the Merger from the OCS and the
      Investment Center as required by applicable Legal Requirements.

     

    (o) Israeli
      Tax Pre-Ruling.
      The
      Israeli Tax Pre-Ruling shall have been obtained by the Company from the Israeli
      Income Tax Commissioner.

     

    (p) Termination
      of Special Rights Agreements.
      The
      agreements specified in Section 7.2(p) of the Company Schedule shall have been
      terminated.

     

    7.3 Additional
      Conditions to the Obligations of Parent.
      The
      obligations of Parent to consummate and effect the Merger shall be subject
      to
      the satisfaction at or prior to the Closing Date of each of the following
      conditions, any of which may be waived, in writing, exclusively by
      Parent:

     

    (a) Representations
      and Warranties.
      Each
      representation and warranty of the Company contained in this Agreement that
      is
      qualified as to materiality shall have been true and correct (i) as of the
      date
      of this Agreement and (ii) subject to the provisions of the last sentence of
      Section 6.10, on and as of the Closing Date with the same force and effect
      as if
      made on the Closing Date. Each representation and warranty of the Company
      contained in this Agreement that is not qualified as to materiality shall have
      been true and correct (i) as of the date of this Agreement and (ii) in all
      material respects on and as of the Closing Date with the same force and effect
      as if made on the Closing Date. Parent shall have received a certificate with
      respect to the foregoing signed on behalf of the Company by an authorized
      officer of the Company (“Company Closing Certificate”).

     

    
      
        
        

      

      
        -70-

        
          

        

      

      
        
        

      

    

    (b) Agreements
      and Covenants.
      The
      Company shall have performed or complied in all material respects with all
      agreements and covenants required by this Agreement to be performed or complied
      with by them at or prior to the Closing Date except to the extent that any
      failure to perform or comply (other than a willful failure to perform or comply
      or failure to perform or comply with an agreement or covenant reasonably within
      the control of Company) does not, or will not, constitute a Material Adverse
      Effect on the Company, and the Company Closing Certificate shall include a
      provision to such effect.

     

    (c) No
      Litigation.
      No
      action, suit or proceeding shall be pending or threatened before any
      Governmental Entity which is reasonably likely to (i) prevent consummation
      of
      any of the transactions contemplated by this Agreement, (ii) cause any of the
      transactions contemplated by this Agreement to be rescinded following
      consummation or (iii) affect materially and adversely the right of Parent to
      own, operate or control any of the assets and operations of the Surviving
      Corporation following the Merger and no order, judgment, decree, stipulation
      or
      injunction to any such effect shall be in effect.

     

    (d) Consents.
      The
      Company shall have obtained all consents, waivers, permits and approvals
      required to be obtained by the Company in connection with the consummation
      of
      the transactions contemplated hereby, other than consents, waivers and approvals
      the absence of which, either alone or in the aggregate, could not reasonably
      be
      expected to have a Material Adverse Effect on the Company and the Company
      Closing Certificate shall include a provision to such effect.

     

    (e) Material
      Adverse Effect.
      No
      Material Adverse Effect with respect to the Company shall have occurred since
      the date of this Agreement.

     

    (f) Conversion
      of Company Preferred Stock.
      All
      shares of Company Preferred Stock shall have been converted to Company Common
      Stock prior to the Closing.

     

    (g)  Conversion
      of Company Derivative Securities.
      All
      warrants for the purchase of shares of Company Preferred Stock shall have been
      converted into warrants to purchase shares of Company Common Stock or
      terminated. Such exercises, exchanges, other conversions or terminations may
      be
      made contingent upon the occurrence of the Closing.

     

    (h) Employment
      Agreements.
      Employment Agreements between the Company and, separately, Gideon Barak and
      Amit
      Haller, in the forms of Exhibits B and C, respectively, shall be in full force
      and effect.

     

    (i) Opinion
      of Counsel.
      Parent
      shall have received from Day, Berry & Howard LLP, counsel to the Company, an
      opinion of counsel in a form to be agreed to by Parent and the
      Company.

     

    
      
        
        

      

      
        -71-

        
          

        

      

      
        
        

      

    

    (j) Opinion
      of IP Counsel.
      Parent
      shall have received from intellectual property counsel to the Company reasonably
      acceptable to Parent, an opinion of counsel in a form to be agreed between
      Parent and the Company.

     

    (k) Comfort
      Letters.
      Parent
      shall have received “comfort” letters in the customary form from Kost, Forer,
      Gabbay and Kasierer a Member of Ernst & Young Global, dated the effective
      date of the Registration Statement and the Closing Date (or such other date
      or
      dates reasonably acceptable to Parent) with respect to certain financial
      statements and other financial information included in the Registration
      Statement.

     

    (l) Fairness
      Opinion.
      Parent
      shall have received a “Fairness Opinion” in form and substance satisfactory to
      it from Trigger-Foresight to the effect that the Merger and the other
      transactions contemplated by this Agreement are fair to the stockholders of
      Parent.

     

    (m) Other
      Deliveries.
      At or
      prior to Closing, the Company shall have delivered to Parent: (i) copies of
      resolutions and actions taken by the Company’s board of directors and
      stockholders in connection with the approval of this Agreement and the
      transactions contemplated hereunder, and (ii) such other documents or
      certificates as shall reasonably be required by Parent and its counsel in order
      to consummate the transactions contemplated hereunder.

     

    (n) Resignations.
      The
      persons set forth on Schedule 7.3(n) shall have resigned from their positions
      and offices with the Company.

     

    (o) Transfer
      Restrictions.
      Immediately prior to the Closing, stockholders of the Company and Derivative
      Holders who hold not less than 95% of the issued and outstanding shares of
      Company Common Stock on a fully diluted basis shall either (i) be subject to
      the
      restrictions contained in a Lock-Up Agreement or (ii) be otherwise subject
      to
      restrictions with respect to the transfer of any shares of Parent Common Stock
      that such holders may receive pursuant to this Agreement for a period of not
      less than one hundred eighty (180) days after the Closing.

     

    (p) Loans.
      The
      indebtedness to the Company of any director, executive officer or stockholder
      of
      the Company or any immediate family member thereof shall be repaid in full
      at or
      prior to the Closing Date. 

     

    (q) Directors’
      and Officers’ Liability Insurance.
      The
      Parent Existing D&O Policy (or any policy substituted therefor pursuant to
      Section 6.17(c)) shall be in full force and effect.

     

    ARTICLE
      VIII

     

    INDEMNIFICATION

     

    8.1 Indemnification
      of Parent.

     

    
      
        
        

      

      
        -72-

        
          

        

      

      
        
        

      

       

    

    (a) Subject
      to the terms and conditions of this Article VIII (including without limitation
      the limitations set forth in Section 8.3), Parent and its representatives,
      successors and permitted assigns (each a “Parent Indemnitee”) shall be
      indemnified, defended and held harmless from and against all Losses asserted
      against, resulting to, imposed upon, or incurred by any Parent Indemnitee by
      reason of, arising out of or resulting from:

     

    (i) the
      inaccuracy or breach of any representation or warranty of Company contained
      in
      or made pursuant to this Agreement, any Schedule or any certificate delivered
      by
      the Company to Parent pursuant to this Agreement with respect hereto or thereto
      in connection with the Closing; or

     

    (ii) the
      non-fulfillment or breach of any covenant or agreement of the Company contained
      in this Agreement.

     

    (b) As
      used
      in this Article VIII, the term “Losses” shall include all losses, liabilities,
      damages, judgments, awards, orders, penalties, settlements, costs and expenses
      (including, without limitation, interest, penalties, court costs and reasonable
      legal fees and expenses) including those arising from any demands, claims,
      suits, actions, costs of investigation, notices of violation or noncompliance,
      causes of action, proceedings and assessments whether or not made by third
      parties or whether or not ultimately determined to be valid excluding, in any
      case, any indirect, incidental or consequential damages. Solely for the purpose
      of determining the amount of any Losses (and not for determining any breach)
      for
      which any party may be entitled to indemnification pursuant to Article VIII,
      any
      representation or warranty contained in this Agreement that is qualified by
      a
      term or terms such as “material,” “materially,” or “Material Adverse Effect”
shall be deemed made or given without such qualification and without giving
      effect to such words. 

     

    8.2 Indemnification
      of Third Party Claims.
      The
      indemnification obligations and liabilities under this Article VIII with respect
      to actions, proceedings, lawsuits, investigations, demands or other claims
      brought against Parent by a Person other than the Company (a “Third Party
      Claim”) shall be subject to the following terms and conditions:

     

    (a) Notice
      of Claim.
      Parent,
      acting through the Committee, will give the Representative prompt written notice
      after receiving written notice of any Third Party Claim or discovering the
      liability, obligation or facts giving rise to such Third Party Claim (a “Notice
      of Claim”) which Notice of Third Party Claim shall set forth (i) a brief
      description of the nature of the Third Party Claim, (ii) the total amount of
      the
      actual out-of-pocket Loss or the anticipated potential Loss (including any
      costs
      or expenses which have been or may be reasonably incurred in connection
      therewith), and (iii) whether such Loss may be covered (in whole or in part)
      under any insurance and the estimated amount of such Loss which may be covered
      under such insurance, and the Representative shall be entitled to participate
      in
      the defense of the Third Party Claim at its expense.

     

    (b) Defense.
      The
      Representative shall have the right, at its option and at its own expense,
      by
      written notice to Parent, to assume the entire control of, subject to the right
      of Parent to participate (at its expense and with counsel of its choice) in,
      the
      defense, compromise or settlement of the Third Party Claim as to which such
      Notice of Claim has been given, and shall be entitled to appoint a recognized
      and reputable counsel reasonably acceptable to Parent to be the lead counsel
      in
      connection with such defense. If the Representative is permitted and elects
      to
      assume the defense of a Third Party Claim:

     

    
      
        
        

      

      
        -73-

        
          

        

      

      
        
        

      

    

    (i) the
      Representative shall diligently and in good faith defend such Third Party Claim
      and shall keep Parent reasonably informed of the status of such defense;
      provided, however, that in the case of any settlement providing for remedies
      other than monetary damages for which indemnification is provided, Parent shall
      have the right to approve the settlement; and 

     

    (ii) Parent
      shall cooperate fully in all respects with the Representative in any such
      defense, compromise or settlement thereof, including, without limitation, the
      selection of counsel, and Parent shall make available to the Representative
      all
      pertinent information and documents under its control.

     

    (c) Limitations.
      Failure
      to give prompt Notice of Claim or to provide copies of relevant available
      documents or to furnish relevant available data shall not constitute a defense
      (in whole or in part) to any Third Party Claim by Parent against the
      Representative and shall not affect the Representative’s duty or obligations
      under this Article VIII, except to the extent (and only to the extent that)
      such
      failure shall have adversely affected the ability of the Representative to
      defend against or reduce its liability or caused or increased such liability
      or
      otherwise caused the damages for which the Representative is obligated to be
      greater than such damages would have been had Parent given the Representative
      prompt notice hereunder. Parent shall make available to the Representative
      all
      relevant records and other relevant materials required by it and in the
      possession or under the control of Parent, for the use of the Representative
      and
      its representatives in defending any such action, and shall in other respects
      give reasonable cooperation in such defense.

     

    (d) Failure
      to Defend.
      If the
      Representative, promptly after receiving a Notice of Claim, fails to defend
      such
      Third Party Claim actively and in good faith, Parent, at the reasonable cost
      and
      expense of the Representative, will (upon further written notice) have the
      right
      to undertake the defense, compromise or settlement of such Third Party Claim
      as
      it may determine in its reasonable discretion, provided that the Representative
      shall have the right to approve any settlement, which approval will not be
      unreasonably withheld or delayed.

     

    (e) Settlement
      of Third Party Claims.
      The
      Representative shall not, without the written consent of Parent, effect the
      settlement or compromise of, or consent to the entry of any judgment with
      respect to, any pending or threatened Third Party Claim in respect of which
      indemnification may be sought hereunder (whether or not any Parent Indemnitee
      is
      an actual or potential party to such action or claim) unless such settlement,
      compromise or judgment (i) includes an unconditional release of the Parent
      Indemnitees from all liability arising out of such action or claim and (ii)
      does
      not include a statement as to or an admission of fault, culpability or a failure
      to act, by or on behalf of any Parent Indemnitee. The Representative shall
      not,
      without the written consent of Parent, effect the settlement or compromise
      of,
      or consent to the entry of any judgment with respect to, any pending or
      threatened Third Party Claim in respect of which indemnification may be sought
      hereunder (whether or not any Parent Indemnitee is an actual or potential party
      to such action or claim), which consent shall not be unreasonably
      withheld.

     

    
      
        
        

      

      
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    8.3 Limitations
      on Indemnification.

     

    (a) Survival:
      Time Limitation.
      The
      representations, warranties, covenants and agreements in this Agreement or
      in
      any writing delivered by the Company to Parent in connection with this Agreement
      (including the certificate required to be delivered by the Company pursuant
      to
      Section 7.3(a)) shall survive the Closing until the last date in the Holdback
      Period (the “Survival Period”), provided that the representations, warranties,
      covenants and agreements contained in Section 3.18 of this Agreement shall
      survive the Closing for a period of six months. Notwithstanding the foregoing
      or
      any other provision of this Agreement:

     

    (i) Any
      claim
      made by a party hereunder by filing a suit or action in a court of competent
      jurisdiction or a court reasonably believed to be of competent jurisdiction
      for
      breach of a representation or warranty prior to the termination of the Survival
      Period provided hereunder for such claim shall be preserved despite the
      subsequent termination of such Survival Period; and 

     

    (ii) The
      indemnification and other obligations under this Article VIII shall survive
      for
      the same Survival Period and shall terminate with the expiration of such
      Survival Period, except that any claims set forth in a Notice of Claim sent
      prior to the expiration of such Survival Period shall survive until final
      resolution thereof. Except as set forth in the immediately preceding sentence,
      no claim for indemnification under this Article VIII shall be brought after
      the
      end of the applicable Survival Period.

     

    (b) Threshold.
      No
      amount shall be payable under Article VIII unless and until the aggregate amount
      of all indemnifiable Losses otherwise payable exceeds $1,000,000, after which
      time the full amount of all indemnifiable Losses shall be payable, subject
      to
      the limitations set forth in Section 8.3(c). 

     

    (c) Aggregate
      Amount Limitation.
      The
      aggregate liability for Losses pursuant to Section 8.1 shall not in any event
      exceed the Holdback Escrowed Shares, and Parent shall have no claim against
      the
      Company’s stockholders other than for the Holdback Escrowed Shares (and any
      proceeds of the shares or distributions with respect to the
      shares).

     

    (d) Exceptions
      to Limitations.
      Notwithstanding the foregoing, the limitation in Section 8.3(b) shall not apply
      with respect to (A) any breach or violation of, inaccuracy in or omission from
      any of the representations and warranties of the Company set forth in
      Section 3.3 or the related sections and subsections of the Company Schedule
      (disregarding any materiality limitation therein), or (B) any of the matters
      set
      forth in Section 8.3(d) of the Company Schedule, any of which shall be
      recoverable without respect to any threshold amount and despite any disclosure
      in the Company Schedule.

     

    
      
        
        

      

      
        -75-

        
          

        

      

      
        
        

      

    

    8.4 Exclusive
      Remedy.
      Parent
      hereby acknowledges and agrees that, from and after the Closing, its sole remedy
      with respect to any and all claims for money damages arising out of or relating
      to this Agreement shall be pursuant and subject to the requirements of the
      indemnification provisions set forth in this Article VIII. Notwithstanding
      any
      of the foregoing, nothing contained in this Article VIII shall in any way
      impair, modify or otherwise limit Parent’s or Company’s right to bring any
      claim, demand or suit against the other party based upon such other party’s
      actual fraud or intentional or willful misrepresentation or omission, it being
      understood that a mere breach of a representation and warranty, without
      intentional or willful misrepresentation or omission, does not constitute
      fraud.

     

    8.5 Adjustment
      to Merger Consideration.
      Amounts
      paid for indemnification under Article VIII shall be deemed to be an adjustment
      to the value of the shares of Parent Common Stock issued by Parent as a result
      of the Merger, except as otherwise required by law.

     

    8.6 Representative
      Capacities; Application of Holdback Escrowed Shares.
      The
      parties acknowledge that the Representative’s obligations under this Article
      VIII are solely as a representative of the Company’s stockholders in the manner
      set forth in the Escrow Agreement with respect to the obligations to indemnify
      Parent under this Article VIII and that the Representative shall have no
      personal responsibility for any expenses incurred by him in such capacity and
      that all payments to Parent as a result of such indemnification obligations
      shall be made solely from, and to the extent of, the Holdback Escrowed Shares.
      Out-of-pocket expenses of the Representative for attorneys’ fees and other costs
      shall be borne in the first instance by Parent, which may make a claim for
      reimbursement thereof against the Holdback Escrowed Shares upon the claim with
      respect to which such expenses are incurred becoming an Established Claim (as
      defined in the Escrow Agreement). The parties further acknowledge that all
      actions to be taken by Parent pursuant to this Article VIII shall be taken
      on
      its behalf by the Committee in accordance with the provisions of the Escrow
      Agreement relating to the Holdback Escrowed Shares. The Escrow Agent, in
      accordance with the terms of the Escrow Agreement, may apply all or a portion
      of
      the Holdback Escrowed Shares to satisfy any claim for indemnification pursuant
      to this Article VIII. 

     

    ARTICLE
      IX

     

    TERMINATION

     

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

     

    (a) by
      mutual
      written agreement of Parent and the Company at any time prior to the
      Closing;

     

    (b) by
      either
      Parent or the Company if the Merger shall not have been consummated by December
      31, 2006 for any reason provided,
      however,
      that a party shall not be permitted to terminate this Agreement pursuant to
      this Section 9.1(b) if the failure to consummate the Merger by December 31,
      2006 is a result of a failure on the part of such party to perform any covenant
      or obligation in this Agreement required to be performed by such party at or
      prior to the Effective Time or is the result of such party’s breach of any
      representation or warranty of such party contained in this
      Agreement;

     

    
      
        
        

      

      
        -76-

        
          

        

      

      
        
        

      

    

    (c) by
      either
      Parent or the Company if a Governmental Entity shall have issued an order,
      decree or ruling or taken any other action, in any case having the effect of
      permanently restraining, enjoining or otherwise prohibiting the Merger, which
      order, decree, ruling or other action is final and nonappealable;

     

    (d) by
      the
      Company, upon a material breach of any representation, warranty, covenant or
      agreement on the part of Parent set forth in this Agreement, or if any
      representation or warranty of Parent shall have become untrue, in either case
      such that the conditions set forth in Article VII would not be satisfied as
      of
      the time of such breach or as of the time such representation or warranty shall
      have become untrue, provided, that if such breach by Parent is curable by Parent
      prior to the Closing Date, then the Company may not terminate this Agreement
      under this Section 9.1(d) for thirty (30) Business Days after delivery of
      written notice from the Company to Parent of such breach, provided Parent
      continues to exercise commercially reasonable efforts to cure such breach (it
      being understood that the Company may not terminate this Agreement pursuant
      to
      this Section 9.1(d) if it shall have materially breached this Agreement or
      if
      such breach by Parent is cured during such thirty (30) day period);

     

    (e) by
      Parent, upon a material breach of any representation, warranty, covenant or
      agreement on the part of the Company set forth in this Agreement, or if any
      representation or warranty of the Company shall have become untrue, in either
      case such that the conditions set forth in Article VII would not be satisfied
      as
      of the time of such breach or as of the time such representation or warranty
      shall have become untrue, provided, that if such breach is curable by the
      Company prior to the Closing Date, then Parent may not terminate this Agreement
      under this Section 9.1(e) for thirty (30) Business Days after delivery of
      written notice from Parent to the Company of such breach, provided the Company
      continues to exercise commercially reasonable efforts to cure such breach (it
      being understood that Parent may not terminate this Agreement pursuant to this
      Section 9.1(e) if it shall have materially breached this Agreement or if such
      breach by the Company is cured during such thirty (30) day period);
      or

     

    (f) by
      either
      Parent or the Company, if, at the Special Meeting (including any adjournments
      thereof), this Agreement and the transactions contemplated thereby shall fail
      to
      be approved and adopted by the affirmative vote of the holders of Parent Common
      Stock required under Parent’s certificate of incorporation, or the holders of
      20% or more of the number of shares of Parent Common Stock issued in Parent’s
      initial public offering and outstanding as of the date of the record date of
      the
      Special Meeting exercise their rights to convert the shares of Parent Common
      Stock held by them into cash in accordance with Parent’s certificate of
      incorporation.

     

    9.2 Notice
      of Termination; Effect of Termination.
      Any
      termination of this Agreement under Section 9.1 above will be effective
      immediately upon (or, if the termination is pursuant to Section 9.1(d) or
      Section 9.1(e) and the proviso therein is applicable, thirty (30) Business
      Days
      after) the delivery of written notice of the terminating party to the other
      parties hereto. In the event of the termination of this Agreement as provided
      in
      Section 9.1, this Agreement shall be of no further force or effect and the
      Merger shall be abandoned, except for and subject to the following: (i) Sections
      6.5, 9.2 and 9.3 and Article X (General Provisions) shall survive the
      termination of this Agreement, and (ii) nothing herein shall relieve any party
      from liability for any breach of this Agreement, including a breach by a party
      electing to terminate this Agreement pursuant to Section 9.1(b) caused by the
      action or failure to act of such party constituting a principal cause of or
      resulting in the failure of the Merger to occur on or before the date stated
      therein.

     

    
      
        
        

      

      
        -77-

        
          

        

      

      
        
        

      

    

    9.3 Fees
      and Expenses.
      All
      fees and expenses incurred in connection with this Agreement and the
      transactions contemplated hereby shall be paid by the party incurring such
      expenses whether or not the Merger is consummated. In addition, the Company
      and
      Parent shall each pay one-half of the expenses of Kramer Levin Naftalis &
Frankel LLP. In the event the Merger is consummated, Parent shall pay the
      expenses of DLA Piper Rudnick Gray Cary US LLP up to an aggregate amount of
      $20,000.

     

    ARTICLE
      X

     

    GENERAL
      PROVISIONS

     

    10.1 Notices.
      All
      notices and other communications hereunder shall be in writing and shall be
      deemed given if delivered personally or by commercial delivery service, or
      sent
      via telecopy (receipt confirmed) to the parties at the following addresses
      or
      telecopy numbers (or at such other address or telecopy numbers for a party
      as
      shall be specified by like notice):

     

    if
      to
      Parent, to:

     

    Israel
      Technology Acquisition Corp.

    7
      Gush
      Etzion, 3rd
      Floor

    Givaat
      Shmuel

    Israel
      54030

    Attention:
      Israel Frieder, Chief Executive Officer

    972-3-532-5918
      telephone

    972-3-532-5447
      telecopy

    


    with
      a
      copy to:

    


    Naschitz,
      Brandes & Co

    5
      Tuval
      Street

    Tel-Aviv

    Israel
      67897

    Attention:
      Aaron M. Lampert, Adv.

    972-3-623-5000
      telephone

    972-3-623-5005
      telecopy

    


    
      
        
        

      

      
        -78-

        
          

        

      

      
        
        

      

    

    with
      a
      copy to:

     

    Graubard
      Miller

    The
      Chrysler Building

    405
      Lexington Avenue

    New
      York,
      New York 10174-1901

    Attention:
      David Alan Miller, Esq.

    212-818-8800
      telephone

    212-818-8881
      telecopy

    


    


    if
      to
      Company, to:

    


    IXI
      Mobile, Inc.

    17
      Hatidhar Street

    Ra’anana
      

    Israel
      43665

    Attention:
      Gideon Barak, Chairman

    972-9-747-6666
      telephone

    972-9-747-6600
      telecopy

    


    with
      a
      copy to:

    


    Berkman,
      Wechsler, Sahar, Bloom & Co

    1
      Azrieli
      Center, 36th
      Floor

    Tel
      Aviv


    Israel
      67021

    Attention:
      Alon Sahar, Adv.

    972-3-607-2222
      telephone

    972-3-607-2220
      telecopy

    


    With
      a
      copy to:

     

    Graubard
      Miller

    The
      Chrysler Building
405
      Lexington Avenue

    New
      York,
      New York 10174-1901

    Attention:
      David Alan Miller, Esq.

    212-818-8800
      telephone

    212-818-8881
      telecopy

     

    10.2 Interpretation.

     

    (a) When
      a
      reference is made in this Agreement to an Exhibit or Schedule, such reference
      shall be to an Exhibit or Schedule to this Agreement unless otherwise indicated.
      When a reference is made in this Agreement to Sections or subsections, such
      reference shall be to a Section or subsection of this Agreement. Unless
      otherwise indicated the words “include,” “includes” and “including” when used
      herein shall be deemed in each case to be followed by the words “without
      limitation.” The table of contents and headings contained in this Agreement are
      for reference purposes only and shall not affect in any way the meaning or
      interpretation of this Agreement. When reference is made herein to “the business
      of” an entity, such reference shall be deemed to include the business of all
      direct and indirect subsidiaries of such entity. Reference to the subsidiaries
      of an entity shall be deemed to include all direct and indirect subsidiaries
      of
      such entity.

     

    
      
        
        

      

      
        -79-

        
          

        

      

      
        
        

      

    

    (b) For
      purposes of this Agreement, all monetary amounts set forth herein are referenced
      in United States dollars, unless otherwise stated.

     

    10.3 Counterparts;
      Facsimile Signatures.
      This
      Agreement may be executed in one or more counterparts, all of which shall be
      considered one and the same agreement and shall become effective when one or
      more counterparts have been signed by each of the parties and delivered to
      the
      other party, it being understood that all parties need not sign the same
      counterpart. Delivery by facsimile to counsel for the other party of a
      counterpart executed by a party shall be deemed to meet the requirements of
      the
      previous sentence.

     

    10.4 Entire
      Agreement; Third Party Beneficiaries.
      This
      Agreement and the documents and instruments and other agreements among the
      parties hereto as contemplated by or referred to herein, including the Schedules
      hereto (a) constitute the entire agreement among the parties with respect to
      the
      subject matter hereof and supersede all prior agreements and understandings,
      both written and oral, among the parties with respect to the subject matter
      hereof, it being understood that the letter of intent between Parent and the
      Company dated January 31, 2006 is hereby terminated in its entirety and shall
      be
      of no further force and effect; and (b) are not intended to confer upon any
      other person any rights or remedies hereunder (except as specifically provided
      in this Agreement).

     

    10.5 Severability.
      In the
      event that any provision of this Agreement, or the application thereof, becomes
      or is declared by a court of competent jurisdiction to be illegal, void or
      unenforceable, the remainder of this Agreement will continue in full force
      and
      effect and the application of such provision to other persons or circumstances
      will be interpreted so as reasonably to effect the intent of the parties hereto.
      The parties further agree to replace such void or unenforceable provision of
      this Agreement with a valid and enforceable provision that will achieve, to
      the
      extent possible, the economic, business and other purposes of such void or
      unenforceable provision.

     

    10.6 Other
      Remedies; Specific Performance.
      Except
      as otherwise provided herein, any and all remedies herein expressly conferred
      upon a party will be deemed cumulative with and not exclusive of any other
      remedy conferred hereby, or by law or equity upon such party, and the exercise
      by a party of any one remedy will not preclude the exercise of any other remedy.
      The parties hereto agree that irreparable damage would occur in the event that
      any of the provisions of this Agreement were not performed in accordance with
      their specific terms or were otherwise breached. It is accordingly agreed that
      the parties shall be entitled to seek an injunction or injunctions to prevent
      breaches of this Agreement and to enforce specifically the terms and provisions
      hereof in any court of the United States or any state having jurisdiction,
      this
      being in addition to any other remedy to which they are entitled at law or
      in
      equity.

     

    
      
        
        

      

      
        -80-

        
          

        

      

      
        
        

      

    

    10.7 Governing
      Law.
      This
      Agreement shall be governed by and construed in accordance with the law of
      the
      State of Delaware regardless of the law that might otherwise govern under
      applicable principles of conflicts of law thereof.

     

    10.8 Rules
      of Construction.
      The
      parties hereto agree that they have been represented by counsel during the
      negotiation and execution of this Agreement and, therefore, waive the
      application of any law, regulation, holding or rule of construction providing
      that ambiguities in an agreement or other document will be construed against
      the
      party drafting such agreement or document.

     

    10.9 Assignment.
      No
      party may assign either this Agreement or any of its rights, interests, or
      obligations hereunder without the prior written approval of the other parties.
      Subject to the first sentence of this Section 10.9, this Agreement shall be
      binding upon and shall inure to the benefit of the parties hereto and their
      respective successors and permitted assigns.

     

    10.10 Amendment.
      This
      Agreement may be amended by the parties hereto at any time by execution of
      an
      instrument in writing signed on behalf of each of the parties.

     

    10.11 Extension;
      Waiver.
      At any
      time prior to the Closing, any party hereto may, to the extent legally allowed,
      (i) extend the time for the performance of any of the obligations or other
      acts
      of the other parties hereto, (ii) waive any inaccuracies in the representations
      and warranties made to such party contained herein or in any document delivered
      pursuant hereto and (iii) waive compliance with any of the agreements or
      conditions for the benefit of such party contained herein. Any agreement on
      the
      part of a party hereto to any such extension or waiver shall be valid only
      if
      set forth in an instrument in writing signed on behalf of such party. Delay
      in
      exercising any right under this Agreement shall not constitute a waiver of
      such
      right.

     

    [THE
      REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]

     

    
      
        
        

      

      
        -81-

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF,
      the
      parties hereto have caused this Agreement to be executed as of the date first
      written above.

     

    


    ISRAEL
      TECHNOLOGY ACQUISITION CORP.

    


    By:  /s/
      Israel Frieder

    Name:
      Israel Frieder

    Title:
      Chairman

    


    


    


    IXI
      MOBILE, INC.

    


    By:  /s/
      Amit Haller

    Name:
      Amit Haller

    Title:
      Chief Executive Officer

    


    


    ITAC
      ACQUISITION SUBSIDIARY CORP.

    


    By:  /s/
      Israel Frieder

    Name:
      Israel Frieder

    Title:
      Chairman

     

    [SIGNATURE
      PAGE TO AGREEMENT AND PLAN OF MERGER]


    
      
        
        

      

      
        -82-

        
          

        

      

      
        
        

      

    

     

     

     

    INDEX
      OF EXHIBITS

     

    EXHIBITS

     

    EXHIBIT
      A
      - FORM OF REGISTRATION RIGHTS AGREEMENT

     

    EXHIBIT
      B
      - FORM OF EMPLOYMENT AGREEMENT FOR GIDEON BARAK

     

    EXHIBIT
      C
      - FORM OF EMPLOYMENT AGREEMENT FOR AMIT HALLER

     

    EXHIBIT
      D
      - FORM OF EXECUTIVE LOCK-UP AGREEMENT

     

    EXHIBIT
      E
      - FORM OF STOCKHOLDER LOCK-UP AGREEMENT

     

    
      
        
        

      

      -83-