20-F










Exhibit 4.4  



PURCHASE AGREEMENT 



Dated as of March 28,
2008  



        The
parties to this agreement are BluePhoenix Solutions Ltd. (the “Purchaser”), an
Israeli corporation, and each of Dan Gal-Ezer (“Dan”) and Yossi Shemesh
(“Yossi”). 



        Dan
and Yossi (collectively, the “Sellers”) own 75% and 25%, respectively, of all
the outstanding shares of capital stock (the “Shares”) of TIS Consultants Ltd.
(the “Company”), a Cyprian corporation, registration No. HE124901, with offices
at 81 – 83 Griva Dighenis Avenue, Jacovides Tower, 4th Floor, Nicosia
1080, Cyprus. Lior Israeli, Ramkumar Sarma, Vincent Luc and Ryan D’arch
(collectively, the “Securities Holders”) own, immediately prior to the Closing
(as defined herein below), certain securities of the Company, as more fully described in
Exhibit A (the “Issued Securities”). 



        The
Purchaser wishes to purchase from the Sellers, and the Sellers wish to sell to the
Purchaser, all the Shares on the terms set forth in this agreement. 



        Accordingly,
the parties agree as follows: 



ARTICLE I 



THE PURCHASE  



    Section 1.1       
Purchase and Sale  



		    (a)        Simultaneously
with the execution and delivery of this agreement (unless           otherwise is stated),
(a) the Purchaser is purchasing from the Sellers, and the           Sellers are selling,
assigning, and transferring to the Purchaser, all the           outstanding and issuable
Shares, free and clear of any adverse claim (as defined           below) and the
Securities Holders waive their rights with respect to the Issued           Securities,
and (b) the Purchaser is (i) not later than the seventh business day           following
the closing, paying the Sellers an aggregate amount of $500,000, each           Seller
and Security Holder shall receive the amount set opposite to his name in
          Exhibit A in immediately available funds, and (ii) agreeing to pay Dan and
Yossi           the Additional Payments in accordance with section 1.3 and to pay Dan and
Yossi           and certain Securities Holders the Contingent Payments in accordance with
          section 1.4. All payments due hereunder to the Sellers from BluePhoenix will be
          paid in US Dollars, except if otherwise expressly stated herein. As used in
this           agreement, the term “adverse claim” with respect to the Shares
means a           claim that a person or entity other than the Sellers has any direct or
indirect           ownership, security, voting, or other interest in, or encumbrance on,
the           Shares.  
















		    (b)        The
closing of the transactions contemplated by this agreement is taking place
          simultaneously with the execution and delivery of this agreement on the date of
          this agreement. Prior to or simultaneously with the execution and
          delivery of this agreement, the Sellers are delivering or have delivered, or
are           causing or have caused to be delivered, to the Purchaser the following:  







		    (i)        counterparts
of this agreement executed by the Sellers;  







		    (ii)        a
fully executed copy of the consultancy agreement dated the date of this
          agreement between Dan and the Company in the form of exhibit 1.1(b)(ii) (the
          “Consultancy Agreement”);  







		    (iii)        certificates
evidencing all the Shares, together with stock transfer powers           executed in
blank, and with all required stock transfer tax stamps attached and           waivers
indicating that none of the Securities Holders have any rights in the           Company
or its securities; and  







		    (iv)        a
copy of the resolution of the board of directors of the Company authorizing           the
execution and delivery of the Consultancy Agreement, together with a
          certificate of the an officer of the Company to the effect that (A) attached to
          such certificate are true and complete copies of the Company’s
          organizational instruments, as in effect on the date of this agreement, in the
          form of exhibit 1.1(b)(iv) (the “Company Organizational Instruments”).  







		    (c)        Simultaneously
with the execution and delivery of this agreement, the Purchaser           is  







		    (i)        delivering
to Sellers a counterpart of this agreement executed by the Purchaser;  







		    (ii)        paying
Dan, Yossi and certain Securities Holders, by wire transfer of           immediately
available funds to accounts designated in writing by them an           aggregate amount
of $500,000 as described in Exhibit A; and  







		    (iii)        delivering
to the Sellers copies of the resolution of the audit committee and           board of
directors of the Purchaser authorizing the execution and delivery of           this
agreement.  







    Section 1.3       
Additional Payments. Not later than the close of business on the seventh business
day after the Closing, the Purchaser shall pay Dan $525,000, and shall pay Yossi $175,000
(the payments under this section 1.3, collectively, the “Additional Payments”).  




2








    Section 1.4       
Contingent Payments  



		    (a)        Not
later than January 31 of each of 2009, 2010, and 2011, the Preparing Party           (as
defined below) shall prepare and deliver to the Receiving Party (as defined below) a consolidated income
statement for the Company and TISA Software Consultants Private Limited (the
“Subsidiary” or “TISA”) for each of the years ending December 31,
2008, 2009, and 2010, respectively (the “Preliminary Income Statements”), and
(ii) a report setting forth the Profit Consideration and Revenue Consideration for 2008,
2009, and 2010, respectively, and, in reasonable detail, the calculation of such amounts
(the “Preliminary Reports”), which calculations shall be based on the respective
Preliminary Income Statement. Each Preliminary Income Statement shall present fairly the
consolidated results of operations of the Company and the Subsidiary for each such year,
and shall be in conformity with United States generally accepted accounting principles
(“GAAP”) consistently applied. The Receiving Party shall cooperate with the
Preparing Party in the preparation of the Preliminary Income Statements, to the extent
reasonably required to facilitate adjustments required to make the statements GAAP
compliant.








		    (b)        (i)        The
Receiving Party shall have 21 days after receipt of the Preliminary Income
          Statement and Preliminary Report (the “Objection Period”) in
          accordance with section 1.4(a) to object to any item or items shown therein.
          During the Objection Period, the Receiving Party shall have access to all
          working papers used in the preparation of the Preliminary Income Statement. The
          Receiving Party may, during the Objection Period, notify the Preparing Party in
          writing of any good faith objections to the Preliminary Income Statement or the
          Preliminary Report, setting forth a detailed description of such objections
and,           if known to it, the dollar amount of each objection (the “Objection
          Notice”). If the Receiving Party does not so object during the Objection
          Period, the Preliminary Income Statement and Preliminary Report shall be final,
          binding, and conclusive on the parties.  







		    (ii)        If
the Receiving Party gives the Preparing Party an Objection Notice during the
          Objection Period, the parties shall attempt to resolve any objections set forth
          in the Objection Notice within fifteen days following the Preparing Party’s
          receipt of the Objection Notice. If the parties are able to resolve all such
          objections, such resolution shall be final, binding, and conclusive on the
          parties.  







		    (iii)        If
the parties are unable to resolve all objections set forth in the Objection
          Notice within the fifteen-day period referred to in section 1.4(b)(ii), the
          parties shall select and retain within 10 days following the end of that
          fifteen-day period an accounting firm mutually agreeable to the parties (or, if
          they cannot agree on a firm, either may request that the Institute of Certified
          Public Accountants in Israel select such firm (such accounting firm, the
          “Arbitrator”)) to resolve the disagreement. The Arbitrator
          shall be directed to resolve any items in dispute between the parties. The
          Arbitrator also shall determine how much of his fees and expenses shall be paid
          by each party. The parties shall (and shall cause the Company to) provide the
          Arbitrator full cooperation, and the Arbitrator shall perform such procedures
          and examine such books and records of the Company and the Subsidiary as it
deems           relevant. The Arbitrator shall be instructed to reach a conclusion
regarding the           disputed items within 30 days following the submission to him of
any           disagreements and, in any case, as soon as practicable after such
submission.           The Arbitrator’s resolution of the disputed items shall be
final, binding,           and conclusive on the parties. In the event that the Arbitrator
orders           BluePhoenix to pay the Sellers, such payment shall bear interest in the
rate of           4% per annum accrued from March 5 in the respective year.  







3








		    (iv)        As
used in this agreement, (A) the term “Final Income Statement” means
          the Preliminary Income Statement, after the acceptance of it by the Receiving
          Party or after its adjustment to reflect the resolution of all objections
          pursuant to this section 1.4(b), as the case may be, (B) the term “Final
          Report” means the Preliminary Report, after the acceptance of it by the
          Receiving Party or after its adjustment to reflect the resolution of all
          objections pursuant to this section 1.4(b), as the case may be, (C) the term
          “Preparing Party” means, at any time, the Sellers, if Dan is employed
          by the Company at that time, or the Purchaser, if Dan is not employed by the
          Company at that time, and (E) the term “Receiving Party” means, at
any           time, the Purchaser, if the Sellers are the Preparing Party at that time,
or the           Sellers, if the Purchaser is the Preparing Party at that time.  







		    (c)        Definitions. As
used in this agreement, the following           capitalized terms shall have the
following meaning:  







		    (i)        the
“Profit Consideration” for 2008, 2009, or 2010 means an           amount
equal to the product of (1) 5.5 multiplied by (2) the Operating Profit           for
2008, 2009, or 2010, respectively,  







		    (ii)        the
“Operating Profit” for 2008, 2009, or 2010 means the
          consolidated operating profit of the Company and the Subsidiary, as reflected
in           the Final Income Statement for 2008, 2009, or 2010, respectively,  







		    (iii)        the
“Revenue Consideration” for 2008 means an amount equal to           the
sum of (1) 30% of the amount, if any, by which Revenue for 2008 exceeds
          $3,000,000 but does not exceed $3,600,000, plus (2) 35% of the amount, if any,
          by which Revenue for 2008 exceeds $3,600,000,  







		    (iv)        “Revenue
Consideration” for 2009 means an amount equal to the           sum of (Y) 30% of
the amount, if any, by which Revenue for 2009 exceeds the           greater of $3,000,000
and Revenue for 2008, but does not exceed 120% of the           Revenue for 2008, plus
(Z) 35% of the amount, if any, by which Revenue for 2009           exceeds 120% of the
greater of $3,000,000 and Revenue for 2008.  







		    (v)        “Revenue
Consideration” for 2010 means an amount equal to the           sum of (A) 30% of
the amount, if any, by which Revenue for 2010 exceeds the           greater of $3,000,000
and Revenue for 2009, but does not exceed 120% of the           Revenue for 2009, plus
(B) 35% of the amount, if any, by which Revenue for 2010           exceeds 120% of the
greater of $3,000,000 and Revenue for 2009.  







		    (vi)        the
“Revenue” for 2008, 2009, or 2010 means the consolidated
          revenue of the Company and the Subsidiary, as reflected in the Final Income
          Statement for 2008, 2009, or 2010, respectively,  







4








		    (vii)        the
“Offset Amount” on any date means an amount equal to (1)           the
sum of (a) $700,000, plus (b) the aggregate amount of all Net Losses for all
          years ended on or after December 31, 2008 and on or before the date as of which
          the Offset Amount is being determined, reduced by (2) the aggregate Offset
          Amount theretofore included in determining the amount of payment(s) under this
          section 1.4, and  







		    (viii)        the
amount of Net Loss for any year shall mean the net loss, if any, for that           year,
as set forth in the Final Income Statement for that year.  







		    (d)       2008
Payment  







	 	        Not
later than five business days after the Final Report for 2008 becomes final, binding, and
conclusive on the parties, or on February 15, 2009, whichever is later, an amount, if
any, shall be paid to the Sellers (and potentially certain Securities Holders), in cash
and without interest, equal to  







		    (1)        the
sum of (a) the Profit Consideration for 2008 plus (b) the Revenue
               Consideration for 2008, reduced (but not below zero) by  







		    (2)        the
Offset Amount on the date of payment (in the aggregate: the “2008
               Payment”).  







	 	        The
2008 Payment shall be distributed between the Sellers and certain Securities Holders as
set forth in Schedule 1.4.  







		    (e)        2009
Payment  







	 	        Not
later than five business days after the Final Report for 2009 becomes final, binding, and
conclusive on the parties, or on February 15, 2010, whichever is later, an amount, if
any, shall be paid to the Sellers (and potentially certain Securities Holders), in cash
and without interest, equal to  







		    (1)        the
sum of (a) an amount equal to the sum of 50% of the Profit Consideration for
               2008 plus 50% of the Profit Consideration for 2009 plus (b) the Revenue
               Consideration for 2009, reduced (but not below zero) by  







		    (2)        the
sum of (a) the Offset Amount on the date of payment, plus (b) the amount
               paid as the Profit Consideration for 2008 referred to in clause
1.4(d)(1)(a).  







	 	        The
2009 Payment shall be distributed between the Sellers and certain Securities Holders as
set forth in Schedule 1.4.  







		    (f)        2010
Payment  







	 	        Not
later than five business days after the Final Report for 2010 becomes final, binding, and
conclusive on the parties or on February 15, 2011, whichever is later, an amount, if any,
shall be paid to the Sellers (and potentially certain Securities Holders), in cash and
without interest, equal to  







5








		    (1)        the
sum of (a) an amount equal to the sum of 1/3 of the Profit Consideration for
               2008 plus 1/3 of the Profit Consideration for 2009 plus 1/3 of the Profit
               Consideration for 2010 plus (b) the Revenue Consideration for 2010,
reduced (but                not below zero) by  







		    (2)        the
sum of (a) the Offset Amount on the date of payment plus (b) the amount paid
               as the Profit Consideration for 2008 and 2009 referred to in each of
sections                1.4(d)(1)(a) and section 1.4(e)(1)(a).  







	 	        The
2010 Payment shall be distributed between the Sellers and certain Securities Holders as
set forth in Schedule 1.4.  







		    (g)        Notwithstanding
anything to the contrary in this section 1.4, (i) any payment           under this
section 1.4 shall be subject to the conditions that if there are any           unresolved
Claims for indemnification by a Purchaser Indemnified Party under           Article V on
the date an amount is payable under this section 1.4, the amount so           payable
shall be held back by the Purchaser, to the extent of the aggregate           amount of
all such unresolved Claims (less the aggregate amount being held back
          immediately prior thereto in accordance with this section 1.4(d)). It being
          understood and agreed, however, that (y) as and when any such unresolved Claim
          is resolved, the Purchaser shall, not later than 10 business days following
such           resolution, pay Dan, Yossi and the Securities Holders their respective
portions,           of an amount equal to the sum of (i) the amount held back in respect
of that           Claim, reduced by the aggregate amount of actual indemnification in
respect of           the Claim, plus (ii) interest on the amount referred to in the
immediately           preceding clause (i) at the rate of 4% a year, compounded annually,
from the           date the payment was held back to the date of payment in accordance
with the           provisions of this parenthetical clause; and it being further
understood and           agreed that no such payment shall be made, to the extent the
amount being held           back immediately thereafter in respect of all unresolved
Claims would be less           than the aggregate amount of all such unresolved Claims.  







		    (h)        It
is hereby agreed that notwithstanding any provision to the contrary herein or
          elsewhere, in any event, the Purchaser shall not be required to pay any amount
          to any Seller or to any Securities Holder, if the Purchaser or any of its
wholly           owned subsidiaries has any outstanding claim for payment by any of the
Sellers           under this Agreement or by any of the Securities Holders.  







6








ARTICLE II 



REPRESENTATIONS AND
WARRANTIES OF PURCHASER  



        The
Purchaser hereby represents and warrants to the Sellers as follows:  




    Section 2.1       
Existence and Corporate Power of the Purchaser. The Purchaser is a corporation
validly existing and in good standing under the law of the nation of Israel, and has the
corporate power to execute, deliver, and perform its obligations under this agreement.
Purchaser is a public Company traded on NASDAQ and Tel Aviv Stock Exchange.  



    Section 2.2       
Authority. The execution, delivery, and performance of its obligations under this
agreement by the Purchaser have been duly authorized by its board of directors, and no
other corporate proceedings on the part of the Purchaser are necessary to authorize the
execution, delivery, or performance of this agreement. This agreement has been duly and
validly executed and delivered by the Purchaser and constitutes a valid and binding
agreement of the Purchaser, enforceable against it in accordance with its terms, except
insofar as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting creditors’ rights generally,
or principles governing the availability of equitable remedies.  



    Section 2.3       
Consents and Approvals; No Violations. No filing with, and no permit,
authorization, consent, or approval of, any public body or authority is necessary for the
consummation by the Purchaser of the transactions contemplated by this agreement. Neither
the execution and delivery of this agreement by the Purchaser nor the performance by the
Purchaser of its obligations under this agreement will (a) conflict with or result in any
breach of any provisions of its organizational instruments, (b) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a default
under, any agreement or other instrument to which it is a party or by which it or any of
its assets may be bound, or (c) violate any order, writ, injunction, decree, statute,
rule, or regulation applicable to it or its assets.  



    Section 2.4       
Brokers. No broker, finder, or financial advisor is entitled to any brokerage,
finder’s, or other fee or commission in connection with the transactions
contemplated by this agreement based upon arrangements made by or on behalf of the
Purchaser.  



    Section 2.5       
Financial Ability. Purchaser has financial ability to perform its obligations
under this Agreement when they become due.  



ARTICLE III 



REPRESENTATIONS AND
WARRANTIES OF THE SELLERS  



        The
Sellers jointly and severally represent and warrant to the Purchaser as follows:  




    Section 3.1       
Existence, Qualification, Etc. Each of the Company and the Subsidiary is a company
validly existing and in good standing under the law of Cyprus and India, respectively,
and has full corporate power and authority to conduct its business and own and operate
its properties as now conducted, owned, and operated. The Company has delivered to the
Purchaser true, correct, and complete copies of the Company’s and the Subsidiary’s
organizational instruments. Neither the Company nor the Subsidiary is required to be
licensed or qualified as a foreign entity in any jurisdiction.  



7








    Section 3.2       
Authorization and Enforceability; Shares. Each Seller is legally competent to
execute, deliver, and perform his obligations under this agreement, and none of those
actions will violate any applicable law, regulation, order, or judgment, or result in the
breach of, or constitute a default (or an event that, with notice or lapse of time or
both, would constitute a default) under, any agreement, instrument, or understanding to
which he is a party or by which he is bound. This agreement constitutes a legal,
valid, and binding obligation of each Seller, enforceable against each in accordance with
its terms, except to the extent limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws of general application related to the
enforcement of creditor’s rights generally and general principles of equity.  



    Section 3.3       
Capitalization. The authorized and issued capital stock of the Company are as set
forth in schedule 3.3, which sets forth the number of Shares owned of record by each
Seller. All the Shares are validly issued, fully paid, and nonassessable, and have been
issued in compliance with all applicable laws. There are no outstanding options,
warrants, rights to subscribe for, calls or commitments of any character whatsoever
relating to, or any other securities, rights, or obligations convertible into or
exchangeable for, or otherwise giving any person or entity any right to subscribe for or
acquire, any shares, stock, or other securities of the Company or the Subsidiary
(collectively, “Equity Commitments”).  



    Section 3.4       
Subsidiaries. The Company does not own any shares or other interests of any kind
in any other business or entity, except for a 100% interest in the Subsidiary. Schedule
3.4 fairly describes the capital structure of the Subsidiary, including, without
limitation, the authorized and outstanding capital stock and Equity Commitments, the
equity and other securities of the Subsidiary owned by the Company, and all written and
oral agreements, arrangements, and understandings between the Subsidiary and its
officers, directors, and affiliates, on the one hand, and the Company and its officers,
directors, and affiliates, on the other hand.  



     Section 3.5       
Financial Statements and Information.  



        Attached
hereto as schedule 3.5 are the Company’s consolidated and consolidating balance
sheets and statements of income as of and for the years ended December 31, 2007
(collectively, the “Financial Statements”). The Financial Statements have been
prepared in accordance with sound accounting principles consistently applied and fairly
present the consolidated or consolidating, as the case may be, financial condition and
consolidated or consolidating, as the case may be, results of operations of the Company
and the Subsidiary as of the dates and for the periods indicated.  




8








    Section 3.6       
Absence of Certain Changes  



		    (a)        Except
as set forth in schedule 3.6, from December 31, 2007 (the “Financial
          Statement Date”) to the date of this agreement, neither the Company nor
the           Subsidiary has:  







		    (i)        incurred
any liabilities, other than current liabilities incurred, or           obligations under
contracts entered into, in the ordinary course of business and           consistent with
past practice;  







		    (ii)        paid,
discharged, or satisfied any claim, lien, or liability, other than any           claim,
lien, or liability (A) reflected or reserved against on the consolidated
          balance sheet as of the Financial Statement Date and paid, discharged, or
          satisfied in the ordinary course of business and consistent with past practice
          since the Financial Statement Date, (B) incurred and paid, discharged, or
          satisfied since the Financial Statement Date in the ordinary course of business
          and consistent with past practice;  







		    (iii)                     sold,
leased, assigned, or otherwise transferred any of its assets, tangible or
          intangible, or sold any of its services (other than sales of assets or services
          in the ordinary course of business and consistent with past practice);  







		    (iv)        permitted
any of its assets, tangible or intangible, to become subject to any           lien,
security interest, or other charge or encumbrance (a “Lien”)           (other
than any Permitted Lien, which for purposes of this agreement shall mean           a Lien
for Taxes (as defined in section 3.19(c)(ii)) not yet due and payable);  







		    (v)                     written
off as uncollectible any accounts receivable;  







		    (vi)                     terminated
or amended, or suffered the termination or amendment of, or failed to           perform
in all material respects, all its obligations, or suffered or permitted           any
material default to exist under, any material agreement, license, or permit;  







		    (vii)                     suffered
any damage, destruction, or loss of any fixed assets (whether or not           covered by
insurance);  







		    (viii)                     made
any loan (including, without limitation, any intercompany loan) to any           person
or entity (including advances to employees and intercompany advances);  







		    (ix)                     canceled,
waived, or released any debt, claim, or right;  







		    (x)                     paid
any amount to, or entered into any agreement, arrangement, or transaction           with,
any affiliate (including its officers, directors, and employees), other           than
payments of salary, reimbursement of expenses and benefits to employees in           the
ordinary course of business and consistent with past practice;  







		    (xi)                     except
for cash dividends to the Sellers aggregating $100,000 on January 31,           2008,
declared, set aside, or paid any dividend or distribution with respect to           its
capital stock, or redeemed, purchased, or otherwise acquired any of its           capital
stock;  







9








		    (xii)                     granted
any increase in the compensation of any officer or employee or made any           other
change in employment terms of any officer or employee;  







		    (xiii)                     made
any change in accounting or cash management practices;  







		    (xiv)                     suffered
or caused any other occurrence, event, or transaction outside the           ordinary
course of business; or  







		    (xv)                     agreed,
in writing or otherwise, to any of the foregoing.  







		    (b)        Since
the Financial Statement Date, there has been no material adverse change in           the
Company or the Subsidiary, or its respective business.  







    Section 3.7       
Litigation. Except as set forth in schedule 3.7, no claim, suit, proceeding, or
investigation is pending or, to the actual knowledge of the Sellers, threatened against
or affecting the Company or the Subsidiary, and there is no valid basis for any claim,
suit, or proceeding against the Company or the Subsidiary.  



    Section 3.8       
Licenses, Compliance with Law, Other Agreements. Each of the Company and the
Subsidiary has all material permits, licenses, and other rights to allow it to conduct
its business and is not in violation, in any material respect, of any order or decree of
any court, or of any law, order, or regulation of any Governmental Authority (as defined
below), or of the provision of any material contract or agreement to which it is a party
or by which it is bound, and neither this agreement nor the transactions contemplated by
this agreement will result in any such violation. The business of each of the Company and
the Subsidiary has been conducted in all material respects in compliance with all
applicable laws, rules, and regulations. As used in this agreement, the term “Governmental
Authority” means any domestic or foreign national, state, provincial, municipal or
other local judicial, legislative, executive, administrative, or regulatory authority or
any governmental or private body exercising any regulatory or taxing authority.  



    Section 3.9       
Third-Party Approvals. Neither the Company nor the Subsidiary is required to
obtain any order, consent, approval, or authorization of, or to make any declaration or
filing with, any Governmental Agency or other third party in connection with the
execution, delivery, or performance of this agreement or the transactions contemplated by
this agreement.  



    Section 3.10       
No Undisclosed Liabilities. Neither the Company nor the Subsidiary has any
liabilities or obligations, whether or not disclosed in the Financial Statements or the
notes to the Financial Statements, and whether actual or contingent (including, without
limitation, liabilities arising from fees or expenses referred to in section 4.2), except
(a) as disclosed in schedule 3.10 or on the face of the Financial Statements (excluding
any notes to the Financial Statements), (b) those expressly set forth as such in a
schedule to this agreement, (c) those incurred in the ordinary course of business and
consistent with past practice since the Financial Statement Date and that will involve
liability, loss, cost or payment of any kind by the Company or the Subsidiary in an
aggregate amount of not more than $50,000 (a “Material Adverse Effect”), or (d)
those under agreements, written or oral, set forth in a schedule to this agreement or not
required to be set forth in a schedule to this agreement.  



10








    Section 3.11       
Tangible Assets. Each of the Company and the Subsidiary owns or leases all
tangible assets used or reasonably necessary in connection with the conduct of its
business. All material tangible assets owned or leased by the Company and the Subsidiary
are free from any Liens (other than Permitted Liens), are free from any material defects,
have been maintained in accordance with normal industry practice and any regulatory
standard or procedure to which such assets are subject, are in good operating condition
and repair (subject to normal wear and tear), and are suitable for the purposes for which
such assets are used, other than Liens, defects, and wear and tear that, in the
aggregate, could not be expected to have a Material Adverse Effect.  



     Section 3.12       
Real Property. Neither the Company nor the Subsidiary owns any real property.  



    Section 3.13       
Intellectual Property  



		    (a)        Schedule
3.13 sets forth, for the Intellectual Property, a complete and accurate           list of
all (i) Patents (as defined below); (ii) Trademarks (as defined below);           (iii)
Copyright (as defined below); and (iv) all Software (as defined below)           (other
than readily available “off-the-shelf” commercial software           programs
having an acquisition price of less than $10,000), in the case of           subclauses
(i) through (iv) above, that are owned, licensed, or leased, by the           Company or
the Subsidiary, identifying which Intellectual Property is owned,           licensed, or
leased, as the case may be, as well as the identity of the lessor           or licensor
with respect thereto. The Intellectual Property constitutes all the           material
intellectual property used in, and necessary to operate, the business           of each
of the Company and the Subsidiary in the manner in which it is currently
          operated. To the extent indicated on schedule 3.13, the Intellectual Property
          has been duly registered in, filed in or issued by the appropriate offices in
          jurisdictions so indicated, and each such registration, filing and issuance
          remains in full force and effect.  







		    (b)        Schedule
3.13 sets forth a complete and accurate list of all material oral or           written
agreements to which the Company or the Subsidiary is a party or           otherwise
bound, (i) granting or obtaining any right to use or practice any           rights
under any Intellectual Property (other than any license for readily           available
“off-the-shelf” commercial software programs purchased by           the Company
or the Subsidiary for less than $10,000, which are not bundled in           the
Intellectual Property), or (ii) restricting the Company’s or the
          Subsidiary’s right to use any Intellectual Property, including, without
          limitation, any license agreements, development agreements, distribution
          agreements, settlement agreements, consent to use agreements, and covenants not
          to sue (collectively, the “License Agreements”). The License
          Agreements are valid and binding obligations of the Company or the Subsidiary,
          as the case may be, enforceable in accordance with their terms, and, to the
          Sellers’ knowledge, there exists no event or condition that will result in
          a violation or breach of, or constitute (with or without due notice of lapse of
          time or both) a default by any party under any such License Agreement. Except
as           set forth in schedule 3.13, neither the Company nor the Subsidiary has
licensed           or sublicensed its rights in any material Intellectual Property, other
than           pursuant to a valid and binding License Agreement. No royalties,
honoraria, or           other fees are currently payable by the Company or the Subsidiary
to any third           parties for the use of or right to use any Intellectual Property,
except           pursuant to any License Agreement and set forth on schedule 3.13.  







11








		    (c)        Except
as set forth on schedule 3.13, the Company or the Subsidiary, as the case           may
be, owns the Intellectual Property identified as “owned” in           schedule
3.13 free and clear of all Liens, other than Permitted Liens, and has a           valid
right to use, free and clear of all Liens, other than Permitted Liens, all           the
Intellectual Property of the Company or the Subsidiary.  







		    (d)        Except
as set forth on schedule 3.13, none of the Intellectual Property owned by           the
Company or the Subsidiary and, to the knowledge of the Sellers, none of the
          material Intellectual Property licensed to the Company or the Subsidiary has
          been cancelled, expired, been abandoned, or otherwise terminated, and all
          renewal fees in respect thereof have been duly paid.  







		    (e)        Except
as set forth on schedule 3.13, neither the Company nor the Subsidiary has
          received any written notice or claim and there is no pending or, to the
          knowledge of the Sellers, threatened claim, suit, arbitration, interference or
          other adversarial or contested proceeding before any court, agency, arbitral
          tribunal, or registration authority in any jurisdiction (foreign or domestic)
          involving the Intellectual Property owned by the Company or the Subsidiary or
          the material Intellectual Property licensed to the Company or the Subsidiary
          alleging that the activities or the conduct of the business of the Company or
          the Subsidiary infringes upon, dilutes, violates, or constitutes the
          unauthorized use, misuse, or misappropriation of the intellectual property
          rights of any third party or challenging the Company’s or the
          Subsidiary’s ownership, use, validity, enforceability, or registrability
of           any of its Intellectual Property. There are no settlements, forebearances to
          sue, consents, judgments, or orders or similar obligations to which the Company
          or the Subsidiary is a party, other than the License Agreements, that (i)
          restrict the Company’s or the Subsidiary’s right to use any
          Intellectual Property, (ii) restrict the Company’s or the Subsidiary’s
          business in order to accommodate a third party’s Intellectual Property
          rights, or (iii) permit third parties to use any Intellectual Property owned by
          the Company or the Subsidiary.  







		    (f)        Except
as set forth on schedule 3.13, the conduct of the Company’s and the
          Subsidiary’s businesses as currently conducted does not infringe upon
          (either directly or indirectly such as through contributory infringement or
          inducement to infringe) any Intellectual Property owned or controlled by any
          third party. Except as set forth on schedule 3.13, to the Sellers’          knowledge,
no third party is misappropriating, infringing, diluting, or           violating any
Intellectual Property owned by the Company or the Subsidiary and           no such
claims, suits, arbitrations, or other adversarial proceedings have been           brought
or threatened against any third party by the Company or the Subsidiary.  








12








		    (g)        Each
of the Company and the Subsidiary takes reasonable measures to protect the
          confidentiality of its Trade Secrets (as defined below). No Trade Secret of the
          Company or the Subsidiary has been disclosed or authorized to be disclosed to
          any third party, other than pursuant to a non-disclosure agreement. To the
          knowledge of the Sellers, except as set forth on schedule 3.13, no party to any
          non-disclosure agreement relating to the Company’s or the Subsidiary’s
          Trade Secrets is in breach or default thereof. The Purchaser has been provided
          with a true and complete copy of the Company’s and the Subsidiary’s
          forms of non-disclosure agreement and the non-disclosure agreements referred to
          in this clause (g) contain substantially the same terms and conditions as the
          form of non-disclosure agreement.  







		    (h)        Except
as set forth on schedule 3.13, no current or former director, officer, or
          employee of the Company or the Subsidiary (or any of its predecessors in
          interest) will, after giving effect to the transactions contemplated by this
          agreement, directly own any of the Intellectual Property owned or used by the
          Company or the Subsidiary.  







		    (i)        The
Software set forth on schedule 3.13 as “owned” was either           developed
(i) by employees of the Company or the Subsidiary within the scope of           their
employment, or (ii) by independent contractors who have assigned their           rights
to the Company or the Subsidiary pursuant to signed, written agreements.  







		    (j)        To
the knowledge of the Sellers, the Trademarks listed on schedule 3.13 have           been
continuously used in the form appearing in, and in connection with the           goods
and services listed in, their respective registration certificates. To the
          knowledge of the Sellers, there has been no prior use of the Trademarks by any
          third party that would confer upon the third party superior rights in such
          Trademarks. The Company and the Subsidiary have undertaken reasonable policing
          of such Trademarks against third party infringement.  







		    (k)        As
used in this agreement:  







		    (i)        “Intellectual
Property” means any and all Copyrights, Patents,           Software, Trademarks,
Trade Secret, moral and economic rights of authors and           inventors (however
denominated), databases and compilations, mask works and any           registrations and
applications for mask works, and all improvements and           refinements of any of the
foregoing.  







		    (ii)        “Copyrights” means
all copyrights (including any registrations and           applications for any of the
foregoing) and copyrightable works.  







		    (iii)        “Patents” means
all patents and industrial designs (including any           continuations, divisionals,
continuations-in-part, renewals, provisionals,           reissues, and applications for
any of the foregoing), inventions (whether or not           patentable), and invention
disclosures.  







		    (iv)        “Software” means
all (A) computer programs, including any and all           software implementation of
algorithms, models and methodologies, whether in           source code or object code
form, (B) databases and compilations, including any           and all data and
collections of data, (C) designs, processes, procedures and           data collectors,
and (D) all documentation, including user manuals and training           materials,
relating to any of the foregoing.  







13








		    (v)        “Trademarks” means
all domestic and foreign registered or material           unregistered trademarks,
service marks, trade names, corporate and business           names, brand names, Internet
domain names, universal resource locators, designs,           logos, trade dress,
slogans, and general intangibles of like nature, together           with all goodwill,
registrations and applications related to the foregoing.  







		    (vi)        “Trade
Secrets” means technical data and customer lists, technology,           trade
secrets, and any other confidential information (including any lists of
          professional employees), know-how, proprietary processes, formulae, algorithms,
          models, and methodologies (whether or not patentable).  







    Section 3.14       
Clients. There has not been any material adverse change in the business
relationship of the Company or the Subsidiary with any client who accounted for more than
5% of the Company’s consolidated revenues during the year ended December 31, 2007.  



    Section 3.15       
Insurance. Schedule 3.15 contains an accurate and complete summary of all policies
of fire, liability, workmen’s compensation, and other forms of insurance owned or
held by the Company or the Subsidiary. All such policies are in full force and effect,
all premiums with respect thereto covering all periods up to and including the date of
the Closing have been paid or accrued on the books and records of the Company and the
Subsidiary, and no notice of cancellation or termination has been received with respect
to any such policy. Such policies are sufficient for compliance with all requirements of
law and of all agreements to which the Company or the Subsidiary is a party; are valid,
outstanding and enforceable policies; provide adequate insurance coverage for the assets
and operations of the Company and the Subsidiary; will remain in full force and effect
through the respective dates set forth in schedule 3.15 without the payment of additional
premiums; and will not in any way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this agreement. Neither the Company nor the Subsidiary has
been refused any insurance with respect to its assets or operations, nor has its coverage
been limited, by any insurance carrier to which it has applied for any such insurance or
with which it has carried insurance during the last five years.  



    Section 3.16       
Employees, Etc. Schedule 3.16 lists each employee (which term, as used in this
agreement, includes consultants, unless the context otherwise requires) of the Company
and the Subsidiary and the respective employee’s gross salary. From the Financial
Statement Date to the date of this agreement, no employee has terminated, or, to the
knowledge of the Sellers, plans to terminate, employment with the Company or the
Subsidiary. Neither the Company nor the Subsidiary has committed any unfair labor
practice or violated any applicable law or regulation regulating employers or the terms
and conditions of its employees’ employment. All employees are employed under
employment at will terms, and their employment can be terminated by the Company or the
subsidiary at will without prior notice or with prior notice of not more than 60 days.  



14








    Section 3.17       
Employee Benefits. Except as set forth on schedule 3.17, neither the Company nor
the Subsidiary maintains or has ever maintained any employee pension benefit plans,
employee welfare benefit plans, or fringe benefit plans or programs (collectively, “Plans”).
Except as set forth in schedule 3.17, the Financial Statements reflect all accruals
required by [sound accounting principles] consistently applied for liabilities for all
Plans, including, without limitation, vacation benefits, sick day benefits, bonuses, and
deferred compensation. Schedule 3.17 describes all benefit changes within the past 12
months. Except as set forth on schedule 3.17, no further changes have been agreed or
committed to or announced by or on behalf of the Company or the Subsidiary; and, except
as set forth on schedule 3.17, no further changes are planned, scheduled, or contemplated
by the Company or the Subsidiary prior to March 1, 2009.  



    Section 3.18       
Related Party Agreements. Schedule 3.18 sets forth all agreements, arrangements,
and understandings with each of the Company’s and the Subsidiary’s employees,
officers, directors, and affiliates. Except as set forth on schedule 3.18, the Company is
not a party to any agreements, arrangements, or understandings with any of its employees,
officers, directors, or affiliates.  



    Section 3.19       
Taxes  



		    (a)        Schedule
3.19 sets forth the dates through which all Tax Returns (as defined           below) of
the Company and the Subsidiary have been audited.  







		    (b)        Except
as set forth on schedule 3.19:  







		    (i)        each
of the Company and the Subsidiary has filed all Tax Returns it was required           to
file, and has paid all Taxes (as defined below) shown on those Tax Returns as
          owing;  







		    (ii)        neither
the Company nor the Subsidiary has any liability for the Taxes of any           other
person or entity;  







		    (iii)        each
of the Company and the Subsidiary has withheld and paid all Taxes required           to
have been withheld and paid in connection with amounts paid or owing to any
          employee, independent contractor, creditor, shareholder, or other third party;
          and  







		    (iv)        there
is no dispute or claim concerning any Tax Liability of the Company or the
          Subsidiary either (A) claimed or raised by any authority in writing or (B) as
to           which the Company or either Seller has knowledge.  







		    (c)        As
used in this agreement:  







		    (i)        “Tax
Authority” means any competent Governmental Authority responsible           for the
determination, assessment or collection of Taxes.  







15








		    (ii)        “Tax” or
“Taxes” means any and all taxes, customs, duties or           similar fees,
assessments or charges of any kind, including but not limited to           those on or
measured by or referred to as income, gross receipts, capital,           sales, use, ad
valorem, franchise, profits, license, withholding, payroll,           employment, excise,
severance, stamp, social security, workers’          compensation, unemployment
compensation, net worth, transfer, occupation,           premium, value added, real or
personal property or windfall profits taxes,           customs, duties or similar fees,
assessments or charges, together with any           interest and any penalties, additions
to tax or additional amounts imposed by           any Governmental Authority.  







		    (iii)        “Tax
Return” means any return, report, certificate, form or similar           statement
or document (including, without limitation, any related or supporting
          information or schedule attached thereto and any information return, amended
tax           return, claim for refund or declaration of estimated Tax) required or
permitted           to be supplied to, or filed with, a Tax Authority in connection the
          determination, assessment or collection of any Tax or the administration of any
          laws of any Governmental Authority relating to any Tax.  







    3.20        Certain
Fees. No fees or commissions are or will be payable by the Company or the Subsidiary
to any broker, financial advisor, finder, investment banker, or bank with respect to the
transactions contemplated by this agreement. Schedule 3.20 sets forth all costs and
expenses incurred or expected to be incurred by the Company or the Subsidiary through the
Closing in connection with this agreement or the transactions contemplated by this
agreement, including, without limitation, fees and disbursements of counsel, accountants,
and those referred to in the preceding sentence (the “Fees and Expenses”).  



    3.21        Contracts
and Commitments  



		    (a)        Except
as set forth on schedule 3.21, neither the Company nor the Subsidiary is           a
party to or bound by any of the following agreements, whether such agreements
          are written or oral:  







		    (i)        contract
for the employment of any person on a full-time, part-time, or           consulting basis
or any severance agreements, other than at the will of the           employer and subject
to termination by either party, without cause and notice of           termination not
exceeding 60 days;  







		    (ii)        except
for any capital lease under which the Company and the Subsidiary have           aggregate
payment obligations of less than $50,000, promissory note, agreement,           or
promise to pay, or indenture relating to the borrowing of money or to
          mortgaging, pledging, or otherwise placing a lien, security interest, or other
          charge or encumbrance on any of its assets, other than Permitted Liens;  







		    (iii)        agreement
with respect to the lending or investing of funds, other than           agreements
entered into in the ordinary course of business and consistent with           past
practice regarding cash management and involving not more than $50,000 in           the
aggregate;  







16








		    (iv)        license
or royalty agreements, other than off-the-shelf software and agreements           with
customers in the ordinary course of business and consistent with past           practice;  







		    (v)                     guaranty
of indebtedness or liability of any other person or entity;  







		    (vi)        lease
or agreement under which it is lessee of, or holds or operates, any           personal
property owned by any other party that involves annual payments of more           than
$250,000;  







		    (vii)        lease
or agreement under which it is lessor of or permits any third party to           hold or
operate any property, real or personal, owned or controlled by it;  







		    (viii)        contract
or group of related contracts with the same party for the purchase by           it of
supplies, products, or other personal property or for the furnishing or           receipt
of services that involves a sum in excess of $250,000;  







		    (ix)        contract
that prohibits or purports to prohibit it or any of its affiliates from           freely
engaging in business anywhere in the world or grants exclusive rights,           whether
in certain territory or world wide;  







		    (x)        contract
relating to the distribution, marketing, or sale of its products or           services,
other than any contract that can be terminated by the Company or the           Subsidiary
on fewer than 90 days’ notice (without penalty or other           termination
payment obligation) and involves annual payments of not more than           $100,000;  







		    (xi)        warranty
agreement with respect to products or services sold or licensed, other           than in
the ordinary course of business, consistent with past practice, and           using the
standard form agreement ordinarily used by the Company or the           Subsidiary, as
the case may be);  







		    (xii)        franchise
agreement and license agreement, other than in the ordinary course of           business
and consistent with past practice;  







		    (xiii)        agreement,
contract, or understanding pursuant to which it engages independent
          contractors, other than any contract that can be terminated by the Company or
          the Subsidiary on fewer than 90 days’ notice (without penalty or other
          termination payment obligation), involves annual payments of not more than
          $100,000, and was entered into in the ordinary course of business consistent
          with past practice; or  







		    (xiv)        other
agreement that involves annual payments in excess of $100,000 and cannot           be
terminated by the Company or the Subsidiary on fewer than 90 days’          notice
(without penalty or other termination payment obligation).  







		    (b)        As
of the date of this agreement, except as set forth on schedule 3.21, neither
          Seller has any knowledge of any material breach or anticipated material breach
          by any other party to any agreement required to be set forth on schedule 3.21.  







17








		    (c)        The
Purchaser has been provided with a true and correct copy of each written
          agreement referred to on schedule 3.21, together with all amendments, waivers,
          or other changes to those agreements. Schedule 3.21 contains an accurate and
          complete description of all material terms of all oral contracts and agreements
          referred to in that schedule.  







    Section 3.22       
Books and Records. The books of account, stock record books, and similar records
of the Company and the Subsidiary are complete and correct in all material respects and
have been maintained in accordance with sound business practices. From December 1, 2006,
the minute books of each of the Company and the Subsidiary contain accurate and complete
records of all meetings of, and corporate action taken by, the shareholders, the board of
directors, and committees of the board of directors, except where the failure to
adequately maintain such books and records would not have a material adverse effect on
the Company or the Subsidiary.  



    Section 3.23       
Bank Accounts. Schedule 3.23 sets forth the names and locations of all banks,
trust companies, savings and loan associations and other financial institutions at which
the Company or the Subsidiary maintains safe deposit boxes or accounts of any nature and
the names of all persons authorized to draw thereon, make withdrawals therefrom or have
access thereto. The Company has delivered to the Purchaser copies of all records,
including all signature or authorization cards, pertaining to such bank accounts.  



    Section 3.24       
Disclosure. None of the written information the Sellers have furnished the
Purchaser in respect of the Company and the Subsidiary and their businesses has contained
any untrue statement of a material fact or has omitted to state a material fact necessary
in order to make the statements contained therein, in the light of the circumstances
under which such statements were made, not misleading.  



ARTICLE IV 



COVENANTS  



    Section 4.1       
Public Announcements. The Purchaser may issue press releases or otherwise make
public statements or respond to press inquiries with respect to this agreement or the
transactions contemplated by this agreement. Neither Seller shall issue any press release
or otherwise make, or authorize or encourage any other party to make, any public
statement or respond to any press inquiry with respect to this agreement or the
transactions contemplated by this agreement without the prior approval of the Purchaser,
except as may be required by law.  



    Section 4.2       
Expenses. All costs and expenses incurred in connection with this agreement and
the transactions contemplated hereby, including, without limitation, fees and
disbursements of counsel, financial advisors, and accountants, will be paid by the party
incurring such costs and expenses (it being understood and agreed that the Sellers have
paid, or reimbursed the Company for, all Fees and Expenses).  



18








    Section 4.3       
Financial Statements. Until the third anniversary of the date of this agreement,
the Sellers shall use their best efforts, and the Purchaser shall cooperate with the
Sellers in those efforts as set forth in section 1.4(a) herein above, to prepare and
deliver to the Purchaser, at the times reasonably required by the Purchaser, quarterly
and annual financial statements of the Company and the Subsidiary in accordance with GAAP
and such other reports as the Purchaser reasonably requires from time to time.  



    Section 4.4.       
Covenants of the Purchaser. Unless either Seller otherwise agrees, prior to
January 1, 2011, the Purchaser shall:  



		    (a)        maintain
separate books of account with respect to the Company and the           Subsidiary
(whether as subsidiaries, divisions, or branches of the Purchaser or           its
affiliates) in accordance with past custom and practice as used in the
          preparation of the Financial Statements, except to the extent permitted or
          required by GAAP;  







		    (b)        not
withdraw the net profit accrued by the Company or use such profit to           distribute
dividend until the date on which the first installment pursuant to           Section 1.4
herein is remitted or made available to the Sellers;  







		    (c)        refrain
from material divestiture of the Company’s Current Business, unless           Dan
and Yossi agree to such divestiture. As used herein, the Company’s           Current
Business means the Company’s business as conducted on the time of           Closing,
including development and marketing of services and products related to           Temenos
T-24 and off- shore services in India;  







		    (d)        refrain
from charging the Company for management services, unless specific           services
were provided to the Company and agreed by the Sellers;  







		    (e)        permit
the Sellers and their counsel, accountants, and consultants to have           reasonable
access during business hours to the Company’s and           Subsidiary’s books
and records; and  







		    (f)        nominate
Dan to serve as a member of the board of the directors of the Company           and the
Subsidiary, until the date on which the Final Report for 2010 is           produced,
subject to any conditions or restrictions imposed by law.  







     Section 4.5       
Cooperation Regarding Certain Commercial Matters. It is understood and agreed that, from time to time,
the Purchaser may require the Company and the Subsidiary to provide professional services
to the Purchaser or its affiliates. In that event, the Company shall bill the Purchaser or
affiliate, as the case may be, according to tariffs equal to 130% of the Company’s or
the Subsidiary’s direct cost of providing those services, except for services
rendered by Dan personally, which will be billed pursuant to the tariffs payable by the
Purchaser prior to this Agreement. Notwithstanding anything to the contrary in this
agreement or otherwise, it is understood and agreed that (a) subject to the following
clause (b), for purposes of calculating Revenue and Operating Profit, the Company’s
and the Subsidiary’s Revenue derived from such services shall be deemed to be 50% of
the actual revenue derived from such services determined in accordance with GAAP, and (b)
the Purchaser may, from time to time, introduce leads to the Company or assist the Company
in closing agreements for services, products, or projects related to Temenos’ product
known as “T-24", and that any Revenue or Operating Profit the Company or the
Subsidiary recognizes from such leads for purposes of section 1.4 shall be determined by
the Purchaser and the Sellers from time to time.  



19








    Section 4.6       
Further Assurances. Each party shall take such further action, and execute and
deliver such further documents and instruments, as may reasonably be required by another
party to carry out the purposes and intent of this agreement, including insuring a smooth
management transition after the Closing.  



    Section 4.7       
Transfer of TISA Shares. Each of Dan and Yossi hereby undertakes to transfer their
holdings in TISA as promptly as practical following the date of this Agreement to any
person or entity instructed by the Purchaser. Dan and Yossi hereby represent and warrant
that following the signing of this Agreement, they will not have any rights, including
right to vote or participation in profits, in connection with TISA.  



ARTICLE V 



SURVIVAL AND
INDEMNIFICATION  



    Section 5.1       
Survival. The representations and warranties of the parties shall survive the
execution and delivery of this agreement and the consummation of the transactions
contemplated by this agreement, regardless of any investigation made by or on behalf of
any party until (i) December 31, 2011 or, (ii) December 31, 2010, in the event of
termination of the Consultancy Agreement before December 31, 2010.  



    Section 5.2       
Indemnification by the Sellers. Subject to the limitations, conditions, and
restrictions set forth in this agreement, the Sellers shall indemnify and defend the
Purchaser and its affiliates (including the Company), officers, directors, employees, and
agents (including, without limitation, those retained in connection with the transactions
contemplated by this agreement) (collectively, the “Purchaser Indemnified Parties”)
and hold them harmless (a) from and against any and all losses, liabilities, damages, and
expenses of or against the Purchaser Indemnified Parties (including reasonable attorneys’ fees
and expenses) to the extent resulting from or arising out of any breach of any covenant,
representation, or warranty made by the Sellers in this agreement, and (b) to the extent
(i) any accounts receivable outstanding on December 31, 2007 and listed on schedule 5.2
are not fully collected on or before September 30, 2008, and (ii) the consolidated
current assets of the Company and the Subsidiary at March 31, 2008 exceed the
consolidated current liabilities of the Company and the Subsidiary at March 31, 2008 by
less than $375,000 (“Claims”). The Sellers liability under this Section 5.2
shall be divided between them as follows: Dan shall be liable for 75% of any Claim amount
and Yossi shall be liable for 25% of any Claim amount. Dan’s liability under this
Section 5.2 shall not exceed 75% of the aggregate amount payable under this Agreement to
the Sellers and to any and all Securities Holders. Yossi’s liability under this
Section 5.2 shall not exceed 25% of the aggregate amount payable under this Agreement to
the Sellers and to any and all Securities Holders.  



20








    Section 5.3       
Indemnification by the Purchaser. Subject to the limitations, conditions, and
restrictions set forth in this agreement, the Purchaser shall indemnify the Sellers and
hold them harmless from and against any and all losses, liabilities, damages, and
expenses of the Sellers (including reasonable attorneys’ fees and expenses) to the
extent resulting from or arising out of any breach of any covenant, representation, or
warranty made by the Purchaser in this agreement.  



    Section 5.4       
Procedure Relative to Indemnification.  



		    (a)        In
the event that any party hereto claims that it is entitled to be indemnified,
          defended, or held harmless pursuant to the terms of this Article V (each, a
          “Claim”), such party (the “Claiming Party”) will promptly
          notify the party or parties against which the claim is made (the
          “Indemnifying Party”) in writing (a “Claim Notice”) of such
          Claim promptly after the Claiming Party receives notice of any action,
          Proceeding, demand, or assessment or otherwise has received notice of any claim
          of a third party (a “Third-Party Claim”) that may reasonably be
          expected to result in a Claim by the Claiming Party against the Indemnifying
          Party. The Claim Notice will specify the breach of representation, warranty,
          agreement, or covenant claimed by the Claiming Party and the losses incurred
by,           or imposed upon, the Claiming Party on account thereof. If such losses are
          liquidated in amount, the Claim Notice will so state, and such amount is deemed
          the amount of the Claim of the Claiming Party. If the amount is not liquidated,
          the Claim Notice will so state, and in such event a Claim is deemed asserted
          against the Indemnifying Party on behalf of the Claiming Party, but no payment
          will be made on account thereof (except for reasonable attorneys’ fees and
          expenses) until the amount of such claim is liquidated and the Claim is finally
          determined.  







		    (b)        The
following provisions apply to Claims of the Claiming Party based upon a
          Third-Party Claim (including any form of proceeding filed or instituted by any
          governmental body):  







	 	        The
Indemnifying Party has the right, upon receipt of the Claim Notice and at its expense, to
defend such Third-Party Claim in its own name or, if necessary, in the name of the
Claiming Party. The Claiming Party will cooperate with and make available to the
Indemnifying Party such assistance and materials as may be reasonably requested of the
Claiming Party, and the Claiming Party has the right, at the Claiming Party’s
expense, to participate in the defense. The Indemnifying Party has the right to settle
and compromise such Third-Party Claim only with the consent of the Claiming Party (which
consent may not be unreasonably withheld or delayed) unless there is no finding or
admission of any violation of legal requirements or any violation of the rights of any
person and no affect on any other Claims that may be made against the Claiming Party, and
the sole relief provided is monetary damages that are paid in full by the Indemnifying
Party.  







21








		    (c)        Upon
receipt of a Claim Notice that does not involve a Third-Party Claim, the
          Indemnifying Party has thirty (30) days from the receipt of such Claim Notice
to           notify the Claiming Party that the Indemnifying Party disputes such Claim.
If           the Indemnifying Party does not timely notify the Claiming Party of such
          dispute, then the amount of such Claim is deemed, conclusively, a liability of
          the Indemnifying Party hereunder. If the Indemnifying Party does timely notify
          the Claiming Party of such dispute, then the Claiming Party has thirty (30)
days           to respond in a written statement to the objection of the Indemnifying
Party. If           after such thirty (30)-day period there remains a dispute as to any
such Claim,           then the Claiming Party and the Indemnifying Party will attempt in
good faith           for a period not to exceed thirty (30) additional days to agree upon
the rights           of the respective parties with respect to such Claim. If the parties
should so           agree, a memorandum setting forth such agreement will be prepared and
signed by           the Purchaser and the Sellers. If the parties do not agree within
such           additional thirty (30)-day period, then the Claiming Party may pursue any
and           all other remedies available to it hereunder.  







		    (d)        The
Claiming Party is entitled to pursue each and every remedy available to it           at
law or in equity to enforce the indemnification provisions of this Article V
          and, in the event it is determined, or the Indemnifying Party agrees, that it
is           obligated to indemnify the Claiming Party for such Claim, the Indemnifying
Party           agrees to pay all costs, expenses and fees, including all reasonable
          attorneys’ fees which may be incurred by the Claiming Party in attempting
          to enforce indemnification under this Article 5, whether the same is enforced
by           suit or otherwise which the Indemnifying Party and the Claiming Party agree
are           due to the Claiming Party or which a court, arbitrator or other judicial
body           determines are due to the Claiming Party. In the event that it is
determined, or           that the Claiming Party agrees, that the Indemnifying Party is
not obligated to           indemnify the Claiming Party for such Claim, the Claiming
Party will pay all           costs, expenses and fees, including reasonable attorneys’ fees,
which may           have been incurred by the Indemnifying Party in defending or
disputing the Claim           by the Claiming Party under this Article V.  








22








ARTICLE VI 



GENERAL PROVISIONS  



    Section 6.1       
Notices. All notices, requests, consents, and other communications provided for in
this agreement shall be in writing and shall be (a) delivered in person, (b) transmitted
by telecopy, (c) sent by first-class, registered or certified mail, postage prepaid,
or (d) sent by reputable overnight courier service, fees prepaid, to the recipient
at the address or telecopy number set forth below, or such other address or telecopy
number as may hereafter be designated in writing by such recipient. Notices shall be
deemed given upon personal delivery, seven days following deposit in the mail as set
forth above, upon acknowledgment by the receiving telecopier or one day following deposit
with an overnight courier service.  



	 	
If
to the Sellers, to them at: 






	 	
Danny
Galezer 
19 Harimon St. 
Petah Tikva , 49215, Israel 
Facsimile: +972-3- 9243732 
Email:
dglzr@attglobal.net











	 	
Yossi
Shemesh
                                     35 Shemesh St., Caesarea

                                    PO box4355, Israel

                                    Facsimile: +972-9- 8641351
yshemesh@bphx.com 






	 	
If
to the Purchaser, to it at:






	 	
8
Maskit Street
                                     P.O. Box 2062

                                    Herzliya 46120

                                    Israel
                                     Facsimile:
 972-9-9526111
                                     Attention:   General  Counsel,   Chief
 Financial  Officer  and  Chief                                     Executive Officer







    Section 6.2       
Amendment and Waiver. No amendment of any provision of this agreement shall be
effective, unless it is in writing and signed by the party to be charged. Any failure of
a party to comply with any provision of this agreement may only be waived in writing by
the parties affected. No such waiver shall operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. No failure by any party to take any action
against any breach of this agreement or default by any other party shall constitute a
waiver of that party’s right to enforce any provision of this agreement or to take
any such action.  



    Section 6.3       
Counterparts. This agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one agreement.  



    Section 6.4       
Headings. The headings of the various sections of this agreement have been
inserted for reference only and shall not be deemed part of this agreement.  



23








    Section 6.5       
Governing Law. This agreement shall be governed by and construed in accordance
with the law of the State of Israel applicable to agreements made and to be performed
wholly in Israel.  



    Section 6.6       
Consent to Jurisdiction. The parties irrevocably submit to the
exclusive jurisdiction of the Israeli courts located in the City of Tel Aviv for the
purposes of any action, suit, or proceeding arising out of this agreement or any
transaction contemplated by this agreement (and agree not to commence any such action,
suit, or proceeding except in such courts). The parties further agree that service of any
process, summons, notice, or document hand delivered or sent in accordance with section
6.1 shall be effective service of process for any action, suit, or proceeding in Israel
with respect to any matters to which it or he has submitted to jurisdiction as set forth
in the immediately preceding sentence. The parties irrevocably and unconditionally waive
any objection to the laying of venue of any action, suit, or proceeding referred to above
in any of the courts referred to above, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any such
action, suit or proceeding brought in any such court has been brought in an inconvenient
forum. 



    Section 6.7       
No Third Party Beneficiaries. Nothing in this agreement is intended or shall be
construed to confer upon any person or entity other than the parties to this agreement, a
Claiming Party, and their respective successors or assigns, any rights or remedies under
or by reason of this agreement.  



    Section 6.8       
Severability. If any provision of this agreement is held by a court of competent
jurisdiction to be invalid, void, or unenforceable, the remainder of the agreement shall
remain in full force and effect and shall not be affected, impaired, or invalidated.  



    Section 6.9       
Entire Agreement. This agreement, the schedules and the other agreements executed
and delivered in connection with this agreement constitute the entire agreement among the
parties with respect to their subject matter and supersede all prior arrangements or
understandings among them.  



    Section 6.10       
parties to the agreement. It is hereby acknowledged and agreed that the parties to this
Agreement are the Purchaser, Dan and Yossi only. No one of the Securities Holders is a
party to this Agreement, nor is any of them entitled to make any claims, allegations or
any other action based on this Agreement or any of the annexes attached hereto. No
provision in this Agreement shall be considered as made for the benefit of any third
party other than the direct parties of this Agreement.  



- signatures page to follow - 




24








			PURCHASER:
BLUEPHOENIX SOLUTIONS LTD.



By: 
——————————————

Name:
Title:  






			SELLERS:



By: /s/ Dan Galezer
——————————————

Dan Galezer







			
By: /s/ Yossi Shemesh
——————————————

Yossi Shemesh






25









Exhibit A  



	 	
Distribution
of $500,000 payable under section 1.1 (a):  






	 	—	Dan:
$201,750 








	 	—	Yossi:
 $98,250 






	 	—	Lior
Israeli (personally or through Dragon Business Venture Incorporation) : $100,000 






	 	—	Vincent
Luc: $50,000 






	 	—	Ryan
D'arch:  $50,000 






26








Schedule 1.4  



	 	
Distribution
of each of the 2008 Payment, the 2009 payment and the 2010 Payment: 






	 	
Each
of the 2008 Payment, the 2009 Payment and the 2010 Payment (each referred to herein as a
“Payment”) shall be distributed between the Sellers and certain
Securities Holders, in accordance with the terms set forth herein below.  






	 	
Section A, 2008 Payment:  






	 	(a) 	If
the 2008 Payment is less than or equal to $2,000,000: 






	 	
75%
of the 2008 Payment shall be remitted to Dan; and  






	 	
25%
of the 2008 Payment shall be remitted to Yossi.  






	 	(b) 	If
a Payment is greater than $2,000,000 but less than or equal to $3,000,000,
                    such Payment shall be distributed as follows: 






				
	 	Seller/Security Holder
	Formula   for    calculating   the amount  to be paid out of the 2008 Payment
	Definitions:



P08 = the 2008 Payment.



L08 = the amount to be paid to Lior Israeli out of the 2008 payment. 

	1
	Lior        Israeli 

(personally      or through      Dragon Business    Venture Incorporation)
	5% * (P08 - $2,000,000)

	2
	Yossi Shemesh
	25% (P08 - L08)

	3
	Dan Galezer
	75% (P08 - L08)








27










		    (c)        If
a Payment is greater than $3,000,000, such Payment shall be distributed as
               follows:  







				
	 	Seller/Security Holder
	Formula   for    calculating   the amount  to be paid out of the 2008 Payment	Definitions:



P08 = the 2008 Payment.



L08 = the amount to be paid to Lior Israeli out of the 2008 payment.



R08 = the amount to be paid to Ramkumar Sarma out of the 2008 Payment. 

	1
	Lior        Israeli 

(personally      or through      Dragon Business    Venture Incorporation)
	5% * (P08 - $2,000,000)

	2
	Ramkumar Sarma
	2.5% * (P08 - $3,000,000)

	3
	Yossi Shemesh
	25% (P08 - L08 - R08)

	4
	Dan Galezer
	75% (P08 - L08 - R08)







28










	 	
Section
B, 2009 Payment:  






	(a)  	       
If
the sum of the 2008 Payment and 2009 Payment is less than or equal to
                    $2,000,000:  






	 	
75%
of the 2009 Payment shall be remitted to Dan; and  






	 	
25%
of the 2009 Payment shall be remitted to Yossi.  






	(b)  	       
If
a sum of the 2008 Payment and 2009 Payment is greater than $2,000,000 but
                    less than or equal to $3,000,000, the 2009 Payment shall be
distributed as                     follows:  







				
	 	Seller/Security Holder
	Formula   for    calculating   the amount  to be paid out of the 2009 Payment
	Definitions:



P = the sum of the 2008 Payment and the 2009 Payment.



P09 = the 2009 Payment.



L08 = the amount to be paid to Lior Israeli out of the 2008 payment



L09 = the amount to be paid to Lior Israeli out of the 2009 payment. 

	1	Lior        Israeli 

(personally      or through      Dragon Business    Venture Incorporation)
	5% * (P - $2,000,000) - L08

	2	Yossi Shemesh
	25% (P09 - L09)

	3	Dan Galezer
	75% (P09 - L09)








29













		    (c)               If
a sum of the 2008 Payment and 2009 Payment is greater than $3,000,000, such
               amount shall be distributed as follows:  








				
	 	Seller/Security Holder
	Formula   for    calculating   the amount  to be paid out of the 2009 Payment
	Definitions:





L09 = the amount to be paid to Lior Israeli out of the 2009 payment



R08 = the amount to be paid to Ramkumar Sarma out of the 2008 payment



R09 = the amount to be paid to Ramkumar Sarma out of the 2009 Payment 

	1	Lior        Israeli 

(personally      or through      Dragon Business    Venture Incorporation)
	5% * (P - $2,000,000) - L08

	2	Ramkumar Sarma
	2.5% * (P - $3,000,000)-R08

	3	Yossi Shemesh
	25% (P09 - L09 - R09)

	4	Dan Galezer
	75% (P09 - L09 - R09)








30









	 	
Section
C, 2010 Payment:  






	(a)  	       
If
the sum of the 2008 Payment, 2009 Payment and 2010 Payment is less than or
                    equal to $2,000,000:  






	 	
75%
of such amount shall be remitted to Dan; and  






	 	
25%
of the such amount shall be remitted to Yossi.  






	(b)  	       
If
a sum of the 2008 Payment, 2009 Payment and 2010 Payment is greater than
                    $2,000,000 but less than or equal to $3,000,000, such amount shall be
                    distributed as follows:  






				
	 	Seller/Security Holder
	Formula   for    calculating   the amount  to be paid out of the 2010 Payment
	Definitions:



P = the sum of the 2008 Payment, the 2009 Payment and 2010 Payment.



P10 = the 2010 Payment.



L08 = the amount to be paid to Lior Israeli out of the 2008 payment



L09 = the amount to be paid to Lior Israeli out of the 2009 payment.



L10 = the amount to be paid to Lior Israeli out of the 2010 payment.



R10 = the amount to be paid to Ramkumar Sarma out of the 2010 payment. 

	1	Lior        Israeli

(personally      or through      Dragon Business    Venture Incorporation)
	5% * (P - $2,000,000) - L08 - L09

	2	Yossi Shemesh
	25% (P10 - L10)

	3	Dan Galezer
	75% (P10 - L10)








31










	(c)  	       
If
a sum of the 2008 Payment, 2009 Payment and 2010 Payment is greater than
               $3,000,000, such amount shall be distributed as follows:  






				
	 	Seller/Security Holder
	Formula   for    calculating   the amount  to be paid out of the 2010 Payment
	Definitions:



R08 = the amount to be paid to Ramkumar Sarma out of the 2008 payment.



R09 = the amount to be paid to Ramkumar Sarma out of the 2009 payment.



R10 = the amount to be paid to Ramkumar Sarma out of the 2010 Payment 

	1	Lior        Israeli

(personally      or through      Dragon Business    Venture Incorporation)
	5% * (P - $2,000,000) - L08 - L09

	2	Ramkumar Sarma
	2.5% * (P - $3,000,000)-R08 - R09

	3	Yossi Shemesh
	25% (P10 - L10-R10)

	4	Dan Galezer
	75% (P10 - L10-R10)











In the event that Yossi and Dan
inform the Purchaser in writing, prior to payment of any Payment, that any of the
Securities Holders does no longer provide services to the Company or the Subsidiary or no
longer employed by the Company or the Subsidiary, and instruct BluePhoenix to refrain from
payment to such Securities Holder, the Purchaser shall comply with such instructions. Dan
and Yossi will indemnify and hold Purchaser harmless from any claim by such Securities
Holder, and the provisions of Article V of the Agreement will apply mutatis mutandis. 



32