ORDINARY SHARES AND WARRANTS PURCHASE AGREEMENT



         This ORDINARY SHARES AND WARRANTS PURCHASE AGREEMENT (this "Agreement")
is dated as of the 27th day of  February,  2002  (the  "Agreement  Date") by and
between  Commtouch  Software  Ltd., a  corporation  organized  under the laws of
Israel (the  "Company"),  and the investors  listed on Exhibit A attached hereto
(each an "Investor" and together the "Investors").

         The parties hereto agree as follows:

                              ARTICLE I Definitions

                  Section 1.1 Definitions.

                  (a) "Closing" shall have the meaning  assigned to such term in
Section 2.2 hereof.

                  (b)  "Commission"  shall  mean  the  Securities  and  Exchange
Commission.

                  (c)  "Effective  Date"  shall  mean the date the  Registration
Statement of the Company covering the Shares being subscribed for hereby and the
Ordinary Shares issuable upon exercise of the Warrants is declared  effective by
the Commission.

                  (d) "Exchange Act" shall mean the  Securities  Exchange Act of
1934, as amended,  and the rules and  regulations of the Commission  promulgated
thereunder.

                  (e) "Registrable  Securities"  shall have the meaning assigned
to such term in Section 3.1(a).

                  (f)  "Registration  Statement" shall have the meaning assigned
to such term in Section 3.1(a).

                  (g) "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission promulgated thereunder.

                  (h)  "Shares"  shall mean the  Ordinary  Shares of the Company
that may be purchased hereunder.

                  (i) "Trading Day" shall mean (a) any day on which the Ordinary
Shares are traded on the Nasdaq National  Market,  or (b) if the Ordinary Shares
are not then listed or quoted for trading on the Nasdaq National Market,  then a
day on which  trading  occurs on the New York Stock  Exchange (or any  successor
thereto).

                  (j) "Warrants" shall have the meaning assigned to such term in
Section 2.1.

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ARTICLE II Purchase and Sale of Shares and Warrants; Representations of Company

                  Section 2.1 Purchase and Sale of Shares.  Subject to the terms
and  conditions  of this  Agreement,  each  Investor  agrees,  severally and not
jointly, to purchase at the Closing, and the Company agrees to issue and sell to
each Investor, that number of Ordinary Shares of Company, 0.05 NIS par value per
share (the "Ordinary Shares"),  indicated with respect to the investment amounts
corresponding  to each such Investor on Exhibit A attached  hereto at a purchase
price  ("Purchase  Price") equal to the average of the regular  session  closing
sale prices of an Ordinary Share as published by Bloomberg Financial LP for each
of the twenty (20) Trading Days prior to the Agreement Date hereof.  Against the
payment of the investment proceeds by the Investors to the Company,  the Company
shall issue a Stock Certificate to each Investor indicating the number of Shares
purchased by such  Investor.  In addition,  each Investor will receive,  and the
Company agrees to issue to each such Investor,  a warrant  substantially  in the
form attached hereto as Exhibit B (the "Warrants") to purchase up to:

     I)           20%  (twenty   percent)  of  the  number  of  Ordinary  Shares
                  purchased by Investor at Closing at a price per Ordinary Share
                  of 125% of the Purchase Price, plus

     II)          20%  (twenty   percent)  of  the  number  of  Ordinary  Shares
                  purchased by Investor at Closing at a price per Ordinary Share
                  of $1.00 (One United States Dollar), plus


     III)         20%  (twenty   percent)  of  the  number  of  Ordinary  Shares
                  purchased by Investor at Closing at a price per Ordinary Share
                  of $2.00 (Two United States Dollars).

The Ordinary Shares, the Warrants,  and the Ordinary Shares issued upon exercise
of the Warrants shall be hereinafter  referred to as the  "Securities."

                  Section 2.2 Closing.  The purchase and sale of the  Securities
shall take place at the offices of  McCutchen,  Doyle,  Brown & Enersen,  LLP, 3
Embarcadero  Center,  San  Francisco,  CA 94111  ("McCutchen")  within three (3)
business  days upon  attainment  of all of the  following:  (a) the  receipt  of
approvals from the Chief Scientist of Israel and the Israel  Investment  Center;
(b) the receipt of approval  of the  shareholders  of the Company if required by
the Nasdaq;  (c) deposit by the Investors in escrow with  McCutchen of the total
Purchase Price within fourteen (14) days of the Agreement Date and (d) any other
necessary  approvals in  connection  with this  Agreement  and the  transactions
contemplated thereunder (the "Closing"). Each party shall deliver all documents,
funds,  instruments and writings required to be delivered by such party pursuant
to this Agreement at or prior to the Closing. If the Closing has not occurred by
the date 60 days from the Agreement  Date, the Company's  obligation to sell and
the  Investors'  obligation  to purchase  the  Securities  will  terminate.  The
Investors  will not be  obligated  to  purchase  the  Securities  if,  after the
Agreement  Date and before the  Closing,  there  shall have  occurred a material
adverse effect upon the business,  financial  condition,  results of operations,
assets, properties or business prospects of the Company.

                  Section 2.3 Representations and Warranties of the Company. The
Company hereby represents and warrants as follows:

                  (a) The  Company is a company  duly  incorporated  and validly
existing  under  the  laws of  Israel.  This  Agreement  constitutes,  or  shall
constitute  when executed and delivered,  a valid and binding  obligation of the
Company  enforceable  against the Company in accordance with its terms.  Without
limiting the generality of the foregoing, the Company knows of no

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reason  why it will  not be able  to  register  the  Registrable  Securities  as
provided in Article III below.

                  (b) The  Company  is  authorized  to  issue  the  Shares,  the
Warrants and the Ordinary Shares issuable upon exercise of the Warrants pursuant
to this  Agreement,  and the same shall be issued  free and clear of any and all
liens,  encumbrances,  security interests and claims of any kind and nature, and
no third party holds any right or interest (beneficial,  voting or otherwise) in
the Shares or Warrants.  The Shares when issued and paid for as provided  herein
and the Ordinary  Shares issuable upon exercise of the Warrants when issued upon
exercise thereof will be fully-paid and non-assessable.

                  (c) The Company has full power and authority to enter into and
consummate the transactions  contemplated by this Agreement,  and the consent of
not other party or entity is necessary for the  consummation of the transactions
contemplated herein other than as set forth herein.

                  (d) The Company meets the eligibility requirements for the use
of Form  F-3 for the  registration  of  securities  in a  transaction  involving
secondary offerings.

     ARTICLE III Registration and Accredited Investor Rights and Obligations

                  Section 3.1 Registration Statement.

                  (a) Filing and Effectiveness. The Company will file as soon as
commercially  practicable  a Form F-3 (or if not  eligible  at such time to file
Form  F-3,  a  Form  F-1)  registration   statement  with  the  Commission  (the
"Registration  Statement"),  for non-underwritten resale into the open market of
the Shares and the Ordinary  Shares  issuable upon exercise of the Warrants (the
"Registrable  Securities").  Once filed,  the Company shall take all  reasonable
measures  to cause  such  Registration  Statement  registering  the  Registrable
Securities to be declared  effective.  The Company will notify the Investors and
its transfer agent of the effectiveness of the Registration Statement within ten
(10) Trading Days of such event.

                  (b) Liquidated  Damages for Failure to Register.  In the event
that (a) the  Registration  Statement is not filed by the Company within 30 days
from the Closing Date, (b) the Registration  Statement is not declared effective
by the Commission within 90 days from the Closing date, or (c) such Registration
Statement is not maintained as effective by the Company for the period set forth
in Section 3.1(c) below (each a "Registration  Default"),  then the Company will
pay each  Investor  (pro-rata  on a monthly  basis),  except for those listed on
Schedule 3.1(b),  for each  Registration  Default then in effect,  as liquidated
damages and not as a penalty,  during any period in which a Registration Default
is occurring, 5% (five percent) per calendar month or portion thereof of (i) the
aggregate  Purchase Price paid by the Investor for the Securities,  and (ii) the
value of any outstanding  Warrants (valued at the difference between the average
volume  weighted  average  price  [based on a trading day from 9:30 a.m. to 4:00
p.m.] on the NASDAQ National Market as reported by Bloomberg  Financial LP using
the AQR function  [i.e.  volume  weighted  average quote recap] for the Ordinary
Shares for each Trading Day (the  "VWAP")  during the  applicable  month and the
exercise  price  multiplied  by the number of Warrant  Shares the  Warrants  are
exercisable  into,  but in no case less than zero),  held by such Investor until
such corresponding Registration Default no longer exists ("Liquidated Damages").
Such payment of the  Liquidated  Damages  shall be made to the  Investor  upon 5
Trading Days' irrevocable notice to the Investor, in cash or registered Ordinary
Shares  (based on the  average of the closing  sale prices of an Ordinary  Share
during the 5 Trading Days immediately following

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such  irrevocable  notice by the Company of such  issuance),  on the last day of
each month  during  which a  Registration  Default  occurred or was  continuing,
without demand therefor by the Investor;  provided, however, that the payment of
the  Liquidated  Damages shall not relieve the Company from its  obligations  to
register the Securities  pursuant to this Section.  Provided  however that in no
event shall the amount of Liquidated  Damages payable  hereunder to any Investor
exceed 45% (forty-five percent) of the Purchase Price paid by that Investor.

                  (c)  Effectiveness  Period.  The  Company  will  maintain  the
Registration  Statement  effective under the Securities Act until the earlier of
(i) the date that all of the Shares and Ordinary  Shares issued upon exercise of
the Warrants have been sold pursuant to such  Registration  Statement,  (ii) the
date the Investors receive an opinion from counsel to the Company, which counsel
shall be  reasonably  acceptable to the  Investors,  that the Shares may be sold
under the provisions of Rule 144 without limitation as to volume, (iii) the date
that all Shares have been  otherwise  transferred  to persons who may trade such
shares  without  restriction  under the  Securities  Act,  and the  Company  has
delivered a new  certificate  or other evidence of ownership for such Shares not
bearing a  restrictive  legend,  or (iv) eighteen (18) months from the Effective
Date.

                  Section 3.2 Investors Representations.

                  (a) Investor Status  Declaration.  Each Investor declares that
it has such  knowledge and  experience as to be capable of evaluating the merits
and risks of its  investment.  Each  Investor is able to fend for itself and can
bear the economic risk of this investment, including a complete loss.

                  (b) Purchase Entirely for Own Account.  Investor undertakes to
acquire the Shares and Ordinary  Shares  issuable  upon exercise of the Warrants
for investment and for  Investor's own account,  not as a nominee or agent,  and
not with a view to the resale or distribution of any part thereof,  and Investor
has no present intention of selling, granting any participation in, or otherwise
distributing the same, provided that nothing in this section shall constitute an
agreement  by  Investor  to hold or  refrain  from  disposing  of the Shares and
Ordinary  Shares  issuable upon exercise of the Warrants for any amount of time,
provided that any transfer,  sale or other disposition of the Shares by Investor
shall comply in all respects with the  requirements  of the  Securities  Act and
similar provisions of state law. Investor will have sole voting control over the
Shares and Ordinary  Shares  issuable upon exercise of the Warrants for purposes
of Section  13(d) of the Exchange  Act.  Investor  does not  presently  have any
contract,  undertaking,  agreement  or  arrangement  with  any  person  to sell,
transfer  or grant  participation  to such person or to any third  person,  with
respect to any of the Securities.

                  (c)  Restricted  Securities.  Investor  understands  that  the
Shares and the Ordinary  Shares  issuable upon exercise of the Warrants have not
been,  and  will  not at the  time of  sale  and  issuance  by the  Company  be,
registered  under the Securities Act by reason of a specific  exemption from the
registration  provisions of the Securities  Act which depends upon,  among other
things,  the bona fide  nature of the  investment  intent  and the  accuracy  of
Investor's  representations as expressed herein.  Investor  understands that the
Shares and the  Ordinary  Shares  issuable  upon  exercise of the  Warrants  are
"restricted  securities" under applicable U.S. federal and state securities laws
and regulations,  and that pursuant to these laws, Investor must hold the Shares
and the Ordinary  Shares  issuable  upon  exercise of the Warrants  indefinitely
unless the  Securities  are  registered  with the  Commission  and  qualified by
necessary  state   authorities  or  an  exemption  from  such  registration  and
qualification requirements is available.

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Investor  further  acknowledges  that  if  an  exemption  from  registration  or
qualification  is  available,  it may be  conditioned  on  various  requirements
including,  but not limited to, the time and manner of sale,  the holding period
for the Shares and the Ordinary  Shares  issuable upon exercise of the Warrants,
and  requirements  relating to the Company which are outside of Investor control
and which the Company is under no  obligation,  except as set forth  herein,  to
satisfy.

                  (d) Information.  Each Investor  acknowledges  that (i) it has
been  furnished  with all  materials  relating  to the  business,  finances  and
operations  of the Company and  materials  relating to the offer and sale of the
Securities which have been requested by the Investor;  (ii) it has been afforded
the  opportunity  to ask  questions  of the  Company;  (iii) it has sought  such
accounting,  legal and tax  advice  as it has  considered  necessary  to make an
informed  investment decision with respect to its acquisition of the Securities;
(iv) it  understands  that it (and not the  Company)  shall be  responsible  for
Investor's own tax liabilities  that may arise as a result of this investment or
the  transactions  contemplated by this Agreement;  (v) it has had access to the
Company's  Annual  Report on Form 20-F for the year ended  December  31, 2000 as
amended by Amendment No. 1 thereto,  and with Reports on Form 6-K for the months
of January,  May (2 reports),  June, August and November 2001, all as filed with
the SEC;  and (vi) it  understands  that an  investment  in the  Company  may be
considered  as  a  high-risk  investment,  and  the  Investor  nevertheless  has
voluntarily agreed to consummate the investment.

         Section 3.3       Piggy-Back Registration.

                  (a) The Company shall notify the Investors in writing at least
fifteen (15) days prior to filing any registration  statement under the 1933 Act
for  purposes  of  effecting  a public  offering  of  securities  of the Company
(including,  but not limited to,  registration  statements relating to secondary
offerings of securities of the Company,  but excluding  registration  statements
relating to any employee  benefit plan or a corporate  reorganization)  and will
afford the Investors an  opportunity to include in such  registration  statement
all or any part of the Shares or the Ordinary  Shares reserved for issuance upon
exercise  of the  Warrant.  If an  Investor  desires  to  include  in  any  such
registration  statement all or any part of such securities,  the Investor shall,
within  ten (10) days  after  receipt  of the  above-described  notice  from the
Company,  so notify the Company in writing,  and in such notice shall inform the
Company of the number of Shares and Ordinary  Shares  reserved for issuance upon
exercise of the Warrant  that  Investor  wishes to include in such  registration
statement.  If  Investor  decides  not to include  all of the Shares or Ordinary
Shares  issued or reserved for issuance  upon the exercise of the Warrant in any
registration  statement  thereafter  filed by the Company,  the  Investor  shall
nevertheless  continue to have the right to include any such  securities  in any
subsequent  registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities,  all upon the terms and
conditions  set forth herein.  The Company will  cooperate  with the Investor to
facilitate  its  distribution  of securities  pursuant to any such  registration
statement.

                  (b) All  expenses  incurred by the Company in  complying  with
Section  3.3(a)  (other  than  the  underwriter's  discounts  and  commissions),
including,  without limitation,  all registration and filing fees (including all
expenses incident to filing with the National Association of Securities Dealers,
Inc.),  fees and expenses of complying with securities and blue sky laws (except
for blue  sky  expenses  required  by law to be  borne  by  Investors),  expense
allowances of the  underwriters,  printing  expenses,  fees and disbursements of
counsel or other advisor to the Company,  and of the accountants to Company, are
herein called "Registration  Expenses." All fees and expenses of counsel for any
selling  Investor and all underwriting  discounts and commissions  applicable to
the eligible  securities  covered by any such  registration,  are herein  called
"Selling  Expenses."  The  Company  shall  pay  all  Registration   Expenses  in

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connection  with each  registration  pursuant  to Section  3.3(a).  All  Selling
Expenses  and blue sky  expenses  required  by law to be borne by  Investors  in
connection with each  registration  pursuant to Section 3.3(a) shall be borne by
the  Investor  or  Investors  therein in  proportion  to the number of  eligible
securities included by each in such registration or in such other proportions as
they may agree upon. In the event of any dispute as to how Selling  Expenses are
allocated,  the  Company  shall be  entitled  to  apportion  the  expenses  in a
reasonable manner between the various Investors.

                  (c) The piggy-back registration rights granted in this Section
3.3 shall take effect solely if the Registration  Statement described in Section
3.1(a) above is not declared effective within 90 days of the Closing date.

                  Section 3.4 Indemnification.

                  (a) Indemnification by Company. In the event of a registration
of any Shares  pursuant to this  Article  III,  the Company  will hold  harmless
Investors  and each  officer,  director,  employee  and  advisor  of each of the
foregoing,  against any expenses, losses, claims, damages or liabilities,  joint
or several,  to which Investors may become subject under the Securities Act, any
state  securities law or otherwise,  including any of the foregoing  incurred in
settlement of any litigation, commenced or threatened, insofar as such expenses,
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue  statement  or alleged  untrue  statement of any
material fact  contained,  on the Effective  Date thereof,  in any  registration
statement  under which such Shares are registered  under the Securities Act, any
preliminary  prospectus or final prospectus  contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission  to state  therein a material  fact  required  to be stated  therein or
necessary to make the  statements  therein in light of the  circumstances  under
which they were made not misleading;  provided,  however,  that the Company will
not be liable in any such case to the extent that any such expense, loss, claim,
damage  or  liability  arises  out of or is based  upon an untrue  statement  or
alleged  untrue   statement  or  omission  or  alleged  omission  made  in  such
registration  statement,  said preliminary prospectus or said prospectus or said
amendment  or  supplement  in  reliance  upon  and in  conformity  with  written
information  furnished in writing to the Company by or on behalf of Investors or
specifically for use in the preparation thereof.

                  (b)  Indemnification  by  Investors.   In  the  event  of  any
registration  of any Shares  under the  Securities  Act pursuant to this Article
III, each Investor,  severally and not jointly, will indemnify and hold harmless
the Company,  each officer of the Company who signs the registration  statement,
and each  director of the Company  against  any and all such  expenses,  losses,
claims,  damages  or  liabilities  referred  to in the first  paragraph  of this
Section 3.4, if the statement,  alleged statement,  omission or alleged omission
in respect of which such expense,  loss, claim,  damage or liability is asserted
was made in  reliance  upon and in  conformity  with  information  furnished  in
writing to the Company by or on behalf of such Investor  specifically for use in
connection  with the  preparation of such  registration  statement,  preliminary
prospectus, prospectus, amendment or supplement.

                  (c)   Indemnification   Procedure.   Each  party  entitled  to
indemnification  under this  Section 3.4 (the  "Indemnified  Party")  shall give
notice to the party  required  to  provide  indemnification  (the  "Indemnifying
Party") promptly after such Indemnified  Party has actual knowledge of any claim
as to which indemnity may be sought,  and shall permit the Indemnifying Party to
assume  the  defense  of any such  claim or any  litigation  resulting  thereon,
provided that the  Indemnified  Party may participate in such defense at its own
expense,  and provided further

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that the failure of any  Indemnified  Party to give  notice as  provided  herein
shall not relieve the Indemnifying  Party of its obligations  under this Section
3.4  except to the extent  such  failure  resulted  in actual  detriment  to the
Indemnifying  Party. No Indemnifying  Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement  which does not include as an
unconditional  term  thereof  the giving by the  claimant or  plaintiff  to such
Indemnified  Party of a release  from all  liability in respect to such claim or
litigation.  Each  Indemnified  Party shall furnish such  information  regarding
itself or the claim in question as an Indemnifying  Party may reasonably request
in writing and as shall be  reasonably  required in  connection  with defense of
such claim and litigation resulting therefrom.

                        ARTICLE IV Additional Covenants

                  Section 4.1 Transfer Restrictions.

                  (a)  The  Investors  agree  to the  imprinting,  so long as is
required by this  Section  4.1, of the  following  legend (the  "Legend") on any
certificate evidencing Securities:

         THESE  SECURITIES  HAVE NOT BEEN  REGISTERED  WITH THE  SECURITIES  AND
         EXCHANGE  COMMISSION  OR THE  SECURITIES  COMMISSION  OF ANY  STATE  IN
         RELIANCE UPON AN EXEMPTION FROM  REGISTRATION  UNDER THE SECURITIES ACT
         OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,  ACCORDINGLY,  MAY NOT
         BE  OFFERED  OR  SOLD  EXCEPT  PURSUANT  TO AN  EFFECTIVE  REGISTRATION
         STATEMENT  UNDER  THE  SECURITIES  ACT  OR  PURSUANT  TO  AN  AVAILABLE
         EXEMPTION  FROM, OR IN A TRANSACTION  NOT SUBJECT TO, THE  REGISTRATION
         REQUIREMENTS  OF THE SECURITIES ACT AND IN ACCORDANCE  WITH  APPLICABLE
         STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE
         TRANSFEROR  TO SUCH EFFECT,  THE SUBSTANCE OF WHICH SHALL BE REASONABLY
         ACCEPTABLE TO THE COMPANY.

                  (b)  Certificates  evidencing the Shares shall not contain any
legend  (including the legend set forth in Section  4.1(a)) while a registration
statement covering the resale of such security is effective under the Securities
Act, or (ii) following any sale of such Shares pursuant to Rule 144, or (iii) if
such Shares are eligible  for sale under Rule 144(k),  or (iv) if such legend is
not required  under  applicable  requirements  of the  Securities Act (including
judicial   interpretations  and  pronouncements  issued  by  the  Staff  of  the
Commission).

                  Section 4.2 Rule 144 and 144A Reporting. With a view to making
available to holders of Registrable Securities the benefits of certain rules and
regulations of the SEC which may permit the sale of the  Registrable  Securities
to the public without registration, the Company agrees at all times to: (i) make
and keep public information available, as those terms are understood and defined
in Rule 144 and Rule  144A;  and (ii)  use its  best  efforts  to file  with the
Commission  in a timely manner all reports and other  documents  required of the
Company under the Securities Act and the Exchange Act.

                  (a) For purposes of facilitating  sales pursuant to Rule 144A,
so long as the Company is not subject to the reporting  requirements  of Section
13 or 15(d) of the Exchange

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Act, each holder of Registrable Securities and any prospective purchaser of such
holder's  securities  shall  have the right to  obtain  from the  Company,  upon
request of the holder prior to the time of sale, a brief statement of the nature
of the business of the Company and the products and services it offers;  and the
Company's  most recent  balance sheet and profit and loss and retained  earnings
statements,  and similar financial statements for the two preceding fiscal years
(the year end financial  statements  should be audited to the extent  reasonably
available).

                  (b) In the event that the  Company  does not  comply  with the
provisions of this Section 4.2,  then the  Investors  shall be entitled to treat
any period of  non-compliance as if it were a Registration  Default,  subject to
the penalties set out in Section 3.1(b) above.

                  Section  4.3 The  Company  will use best  efforts  to list the
Shares and Ordinary Shares obtained upon exercise of the Warrants for trading on
the Nasdaq system or any relevant market or system,  if applicable.  The Company
will continue to take all action necessary to continue the listing or trading of
its Ordinary  Shares on the Nasdaq  National  Market or any  relevant  market or
system,  if  applicable,  and will  comply in all  respects  with the  Company's
reporting,  listing or other  obligations under the rules of the Nasdaq National
Market or any relevant market or system.

                            ARTICLE V Miscellaneous

                  Section 5.1 Fees and Expenses.

                  (a) The Company  agrees to reimburse  the  Investors for their
legal costs  incurred in connection  with this  Agreement in an amount up to and
including  $5,000  plus VAT as  required  by  applicable  law.  Apart  from such
reimbursement,  each  party  will pay its own fees and  expenses  related to the
transactions contemplated by this Agreement.

                  Section 5.2 Consent to Jurisdiction and Governing Law.

                  Each of the  Company  and  Investors  (i)  hereby  irrevocably
submit to the exclusive  jurisdiction  of the United States  District  Court and
other courts of the United  States  sitting in the State of  California  for the
purposes of any suit,  action or  proceeding  arising out of or relating to this
Agreement  and (ii)  hereby  waives,  and agrees not to assert in any such suit,
action  or  proceeding,  any  claim  that it is not  personally  subject  to the
jurisdiction of such court, that the suit, action or proceeding is brought in an
inconvenient  forum or that the  venue of the  suit,  action  or  proceeding  is
improper. Each of the Company,  Investors consent to process being served in any
such suit,  action or  proceeding by mailing a copy thereof to such party at the
address in effect for  notices to it under this  Agreement  and agrees that such
service  shall  constitute  good and  sufficient  service of process  and notice
thereof.  Nothing  in this  Section  shall  affect  or limit  any right to serve
process in any other manner  permitted by law. This Agreement  shall be governed
by  and  construed  in  accordance  with  the  internal  laws  of the  State  of
California, without giving effect to the choice of law provisions thereof.

                  Section  5.3  Entire  Agreement;   Amendment.  This  Agreement
contains  the entire  understanding  of the parties  with respect to the matters
covered hereby and, except as specifically set forth herein, neither the Company
nor Investors makes any representations,  warranty, covenant or undertaking with
respect to such matters.  The parties hereto may not amend this Agreement or any
rights or obligations hereunder without the prior written consent of the Company
and Investors.

                                       8
<PAGE>

                  Section 5.4 Notices. Any notice,  demand,  request,  waiver or
other  communication  required or  permitted to be given  hereunder  shall be in
writing and shall be effective (a) upon hand delivery,  by telecopy or facsimile
at the address or number designated below (if delivered on a business day during
normal  business  hours  where  such  notice  is to be  received),  or the first
business day following such delivery (if delivered  other than on a business day
during normal  business hours where such notice is to be received) or (b) on the
second business day following the date of dispatch by express  courier  service,
fully  prepaid,  addressed  to such  address,  or upon  actual  receipt  of such
dispatch,  whichever  shall first occur.  The addresses for such  communications
shall be:


If to the Company:             Commtouch Software Ltd.
                               c/o Commtouch Inc.
                               2029 Stierlin Court
                               Mountain View, CA 94043-4655

                               Tel. No.:  (650) 864-2000
                               Fax No.:   (650) 864-2007
                               Attention: Gideon Mantel, Chief Executive Officer


If to the Investors:           To the address and fax number indicated on the
                               signature page hereof.


With a copy (which shall not   Yigal Arnon & Co.
constitute notice) to:         22 Rivlin Street
                               Jerusalem 91000, Israel
                               Attention: Barry Levenfeld
                               Fax No.:  (972-2) 623-9236

         Any party  hereto may from time to time  change its address for notices
by giving at least ten (10) days written  notice of such changed  address to the
other party hereto.

                  Section 5.5 Waivers.  No provision  of this  Agreement  may be
waived  other  than by a written  instrument  signed by the party  against  whom
enforcement  of any such  waiver is  sought.  No  waiver by either  party of any
default  with  respect  to any  provision,  condition  or  requirement  of  this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provisions,  condition or requirement  hereof,  nor shall any delay or
omission of any party to exercise any right  hereunder in any manner  impair the
exercise of any such right accruing to it thereafter.

                  Section 5.6  Headings.  The  article,  section and  subsection
headings in this Agreement are for  convenience  only and shall not constitute a
part of this Agreement for any other purpose and shall not be deemed to limit or
affect any of the provisions hereof.

                  Section 5.7 Successors  and Assigns.  Investors may not assign
this  Agreement to any person  without the prior  consent of the Company,  which
consent will not be unreasonably withheld.  This Agreement shall be binding upon
and inure to the  benefit of the  parties  and their  successors  and  permitted
assigns.

                                       9
<PAGE>

                  Section 5.8  Counterparts.  This  Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument.

                  Section 5.9 Severability. The provisions of this Agreement are
severable  and,  in the event  that any court of  competent  jurisdiction  shall
determine  that  any  one or more of the  provisions  or part of the  provisions
contained  in this  Agreement  shall,  for any  reason,  be held to be  invalid,
illegal  or  unenforceable  in  any  respect,  such  invalidity,  illegality  or
unenforceability  shall not affect any other provision or part of a provision of
this  Agreement,  and this Agreement  shall be reformed and construed as if such
invalid or illegal or unenforceable  provision,  or part of such provision,  had
never been contained herein,  so that such provisions would be valid,  legal and
enforceable to the maximum extent possible.

                  Section  5.10 Further  Assurances.  From and after the date of
this  Agreement,  upon the request of the Investors or the Company,  each of the
Company and the Investors shall execute and deliver such instruments,  documents
and other  writings as may be  reasonably  necessary or desirable to confirm and
carry out and to effectuate fully the intent and purposes of this Agreement.

                  Section  5.11  Corporate  Securities  Laws.  THE  SALE  OF THE
SECURITIES  WHICH ARE THE SUBJECT OF THIS  AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE  COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
THE  SECURITIES  OR THE  PAYMENT  OR  RECEIPT  OF ANY PART OF THE  CONSIDERATION
THEREFOR PRIOR TO THE  QUALIFICATION IS UNLAWFUL,  UNLESS THE SALE OF SECURITIES
IS  EXEMPT  FROM  THE  QUALIFICATION  BY  SECTION  25100,  25102 OR 25105 OF THE
CALIFORNIA  CORPORATIONS  CODE.  THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY  CONDITIONED UPON THE QUALIFICATION  BEING OBTAINED UNLESS THE SALE IS
SO EXEMPT.

                  [remainder of page intentionally left blank]

                                       10
<PAGE>

        [ORDINARY SHARES AND WARRANTS PURCHASE AGREEMENT SIGNATURE PAGE]

IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be duly
executed  by their  respective  authorized  officer as of the date  first  above
written.


<TABLE>
<CAPTION>
<S>                                                          <C>
                                                             COMMTOUCH SOFTWARE LTD.



                                                             By:   ______________________________________
                                                                   Name:
                                                                   Title:


INVESTORS                                                    INVESTORS



By:   ______________________________________                 By:   ______________________________________
      Name: Amir Lev                                               Name: OZF Ltd.
      Title:                                                       Title:

By:   ______________________________________                 By:   ______________________________________
      Name: Ehud Hillman                                           Name: Gideon Mantel
      Title:                                                       Title:

By:   ______________________________________                 By:   ______________________________________
      Name: Gil Agmon                                              Name: Nahum Sharfman
      Title:                                                       Title:

By:   ______________________________________                 By:   ______________________________________
      Name: Jacob Benasayag                                        Name: Victor Amara
      Title:                                                       Title:

By:   ______________________________________                 By:   _______________________________________
      Name: Arie Pundak                                            Name: Shmuel Sagi
      Title:                                                       Title:

By:   ______________________________________                 By:   _______________________________________
      Name: Danitan Nihul Ltd.                                     Name: Origami Ltd.
      Title:                                                       Title:

By:   ______________________________________                 By:   _______________________________________
      Name: McCutchen, Doyle, Brown & Enersen                      Name: Yossi Sela
      Title:                                                       Title:

                                                             By:   _______________________________________
                                                                   Name: Dr. A. I. Mlavsky
                                                                   Title:
</TABLE>

                                       11
<PAGE>

                                    Exhibit A
                   Schedule of Investors and Investment Amount
<TABLE>
<CAPTION>
----------------------------------------- ----------------- ------------- -------------- -------------- --------------
      Name and Address of Investor           Amount of         No. of         No. of        No. of          No. of
                                             Investment       Ordinary         125%          $1.00           $2.00
                                                               Shares       Warrants        Warrants       Warrants
----------------------------------------- ----------------- ------------- -------------- -------------- --------------
<S>                                       <C>               <C>           <C>            <C>            <C>
Ehud Hillman                              $25,000           85,616        17,123         17,123         17,123
I.D. No. 051745818
Amirim 12, Tel-Aviv, Israel - 69357
Tel (W): 972-3-6844531
Fax: 972-3-6844579
Tel (H):  972-3-6490065
Mobile: 972-54-444534
Mail:    udih@ictech.co.il
----------------------------------------- ----------------- ------------- -------------- -------------- --------------
Gil Agmon                                 $25,000           85,616        17,123         17,123         17,123
Barazani 11, Ramat Aviv, Tel Aviv,
Israel
ID No: 570261822
Tel (w): 972-3-5577101
Fax:  972-3-5565840
Tel (H): 972-3-6419026
Mobil: 972-50-247331
e-mail:
g.agmon@delekmotors.co.il
----------------------------------------- ----------------- ------------- -------------- -------------- --------------
Jacob Benasayag                           $25,000           85,616        17,123         17,123         17,123
I.D. No. 16538100
Haduhifat 41, Raanana, Israel
Tel (W):  972-3-5577101
Fax:  972-3-5565840
Tel  (H):  972-9-7718499
Mobile:  972-50-215840
Mail:
j.benasayag@delekmotors.co.il
----------------------------------------- ----------------- ------------- -------------- -------------- --------------
Arie Pundak                               $25,000           85,616        17,123         17,123         17,123
I.D.  No.  065178444
Asher Bar-Lev 5/13 Petach-Tikva, Israel
Tel (W):  972-3-5118214
Fax: 972-3-5161843
Mobile:  972-55620213
Mail:
arie.pundak@il.andersen.com
----------------------------------------- ----------------- ------------- -------------- -------------- --------------
Danitan Nihul Ltd.                        $25,000           85,616        17,123         17,123         17,123
Reg. No.  511718470
Lamerhav 53b', Ramat Hasharon,
Israel - 47226
Tel (W):  972-3-6127733
Fax: 972-3-6127774
Mobile: 972-54-335830
----------------------------------------- ----------------- ------------- -------------- -------------- --------------

                                       12
<PAGE>
----------------------------------------- ----------------- ------------- -------------- -------------- --------------
Mail:  yarkonio@012.net.il
----------------------------------------- ----------------- ------------- -------------- -------------- --------------
Gideon Mantel
516 Hendon Ct.                            $205,000          702,055       140,411        140,411        140,411
Sunnyvale, CA 94087
Tel: 408-859-4944
Cell: 408-859-4944
Mail: gideon.mantel@commtouch.com
----------------------------------------- ----------------- ------------- -------------- -------------- --------------
Amir Lev
Be'er Gan St. 17                          $50,000           171,233       34,247         34,247         34,247
Ein Vered, 40696 Israel
Tel: 972-9-7961110
Cell: 972-53-601799
Mail: amir.lev@commtouch.com
----------------------------------------- ----------------- ------------- -------------- -------------- --------------
Nahum Sharfman
22 Hameyasdim St.                         $170,000          582,192       116,438        116,438        116,438
Karkur, Israel 37064
Cell: 972-54-583166
Mail: nahum@dealtime.com
----------------------------------------- ----------------- ------------- -------------- -------------- --------------
Origami Ltd.                              $100,000          342,466       68,493         68,493         68,493
57 Achad Ha'am St.
Tel Aviv, CA 65207
Tel: 972-3-5665456
Fax: 972-3-5666636
Mail: ori@eisenberg.co.il
----------------------------------------- ----------------- ------------- -------------- -------------- --------------
Dr. A.I. Mlavsky                          $50,000           171,233       34,247         34,247         34,247
c/o Gemini Israel Venture Funds Ltd.
9 Hamenofim Street
Herzliya  46725, Israel
Fax: 09-958-4842
E-mail: ed@gemini.co.il
----------------------------------------- ----------------- ------------- -------------- -------------- --------------
Yossi Sela                                $50,000           171,233       34,247         34,247         34,247
c/o Gemini Israel Venture Funds Ltd.
9 Hamenofim Street
Herzliya  46725, Israel
Fax: 09-958-4842
E-mail:  yossi@gemini.co.il
----------------------------------------- ----------------- ------------- -------------- -------------- --------------
OZF Ltd.                                  $300,000          1,027,397     205,479        205,479        205,479
Tropic Isle Building
Wickhams Cay, P.O. Box 964
Road Town, Tortola, British Virgin
Islands
c/o Tis Prager, Prager Dreifuss,
Muehlebachstr. 6, CH-8008 Zurich,
Switzerland
Fax:  +41 1 254 55 99
Email:  mail@prager-dreifuss.com
----------------------------------------- ----------------- ------------- -------------- -------------- --------------
Victor Amara
Marcus St. 8                              $100,000          342,466       68,493         68,493         68,493
Jerusalem, 97331 Israel
Fax/Tel: 972-2-5660979
----------------------------------------- ----------------- ------------- -------------- -------------- --------------


                                       13
<PAGE>

----------------------------------------- ----------------- ------------- -------------- -------------- --------------
Shmuel Sagi
PO Box 589                                $100,000          342,466       68,493         68,493         68,493
Karkur, 37105 Israel
Tel: 972-54-614592
Fax: 972-4-6377705
----------------------------------------- ----------------- ------------- -------------- -------------- --------------
McCutchen, Doyle, Brown & Enersen         $45,000           154,110       30,822         30,822         30,822
Three Embarcadero Center
San Francisco, CA 94111
Tel: 415-393-2000
Fax: 415-393-2286
Mail: lnuchi@mdbe.com
----------------------------------------- ----------------- ------------- -------------- -------------- --------------
</TABLE>


                                       14
<PAGE>

                                    Exhibit B
                                 Form of Warrant

                                                            Issued _______, 2002

THIS WARRANT AND THE  SECURITIES  ISSUABLE UPON  EXERCISE  HEREOF ARE SUBJECT TO
RESTRICTIONS  ON  TRANSFERABILITY   SET  FORTH  HEREIN.  THIS  WARRANT  AND  THE
SECURITIES  ISSUABLE UPON  EXERCISE  HEREOF HAVE NOT BEEN  REGISTERED  UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. NO SALE
OR  DISPOSITION  MAY BE EFFECTED  EXCEPT  PURSUANT TO AN EFFECTIVE  REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER,  SATISFACTORY
TO THE COMPANY,  THAT SUCH  REGISTRATION  IS NOT REQUIRED UNDER SUCH ACT OR SUCH
STATE LAWS.

THIS  WARRANT MAY NOT BE  EXERCISED  EXCEPT IN  COMPLIANCE  WITH ALL  APPLICABLE
FEDERAL AND STATE SECURITIES LAWS TO THE REASONABLE  SATISFACTION OF THE COMPANY
AND LEGAL COUNSEL FOR THE COMPANY.

                            Void after ________, 2007


                             COMMTOUCH SOFTWARE LTD.

               WARRANT TO PURCHASE UP TO ________ ORDINARY SHARES

                                   ----------

THIS  CERTIFIES  THAT, for value  received,  _____________,  a ________  company
("_______"  or  "Holder"),  is entitled at any time prior to  expiration of this
Warrant to subscribe for and purchase up to __________  shares of the fully paid
and nonassessable ordinary shares, nominal value NIS 0.05, of Commtouch Software
Ltd.,  an  Israeli  company  (the  "Company"),  at the price per share  equal to
___________  (such price and such other price as may result,  from time to time,
from  the   adjustments/restrictions   specified   in  paragraph  4  hereof  are
collectively  referred  to  herein  as  the  "Warrant  Price"),  subject  to the
provisions  and upon the terms and  conditions  hereinafter  set forth.  As used
herein, "Shares" shall mean the ordinary shares of the Company; "Warrant Shares"
shall mean the Shares  issued or issuable  upon  exercise of the  Warrants;  and
"Date of Grant" shall mean ___________, 2002.

1.       TERM.

This Warrant is  exercisable,  in whole or in part, at any time and from time to
time on and after the Date of Grant through ______, 2007.


<PAGE>

2.       METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT.

         (a) The purchase right  represented by this Warrant may be exercised by
the holder  hereof,  in whole or in part, by the surrender of this Warrant (with
the notice of exercise form attached  hereto as Exhibit A duly  executed) at the
principal office of the Company and (i) by the payment to the Company, by check,
of an amount equal to the Warrant  Price per Share  multiplied  by the number of
Shares then being purchased.

         (b) In the event of any exercise of the purchase  right  represented by
this Warrant, certificates for the Shares so purchased shall be delivered to the
holder hereof  within ten business  days of the effective  date of such purchase
and,  unless this  Warrant has been fully  exercised  or expired,  a new Warrant
representing  the portion of the securities,  if any, with respect to which this
Warrant  shall not then have been  exercised  shall also be issued to the holder
hereof within such ten-day period. Upon the effective date of such purchase, the
holder  shall  be  deemed  to  be  the  holder  of  record  of  the  securities,
notwithstanding that certificates  representing the securities shall not then be
actually delivered to such holder or that such securities are not then set forth
on the stock transfer books of the Company.

         (c) In lieu of exercising this Warrant by payment of cash or check, and
provided that the Company's  Ordinary Shares are publicly traded, the Holder may
elect to  receive  shares  equal to the value of this  Warrant  (or the  portion
thereof  being  exercised)  at any time  after the date  hereof  during the term
hereof,  by surrender of this Warrant at the principal  executive  office of the
Company, together with the Notice of Conversion in the form of Exhibit B annexed
hereto,  in which event the Company  shall issue to Holder a number of Shares in
accordance with the following formula:

                                      Y(A-B)
                           X      =   ------
                                        A

             Where,        X    =   the number of Shares to be issued to Holder;

                           Y    =   the number of Shares for which the Warrant
                                    is being exercised;

                           A    =   the fair market value of one Share; and

                           B    =   the Exercise Price.

         For purposes of this Section 2(c),  the fair market value of the Shares
shall mean the price  determined by the Company's Board of Directors,  acting in
good faith upon a review of all relevant factors or, in the event of an exercise
concurrently with (i) a public offering of the Company's stock, the price to the
public for such stock in such  offering  or (ii) an  acquisition,  the per share
price to be received by the holders of Shares.

<PAGE>

3.       SHARES FULLY PAID; RESERVATION OF SHARES.

         (a) All securities  which may be issued upon the exercise of the rights
represented   by  this  Warrant  will,   upon   issuance,   be  fully  paid  and
nonassessable,  and free from all taxes,  liens and charges  with respect to the
issue  thereof.  During the period within which the rights  represented  by this
Warrant may be  exercised,  the Company will at all times have  authorized,  and
reserved  for the  purpose of the issue upon  exercise  of the  purchase  rights
evidenced  by this  Warrant,  a  sufficient  number of Shares to provide for the
exercise of the rights represented by this Warrant.

         (b) The Company will not, by amendment of its memorandum or association
or articles of association,  or through reorganization,  consolidation,  merger,
dissolution,  issue or sale of securities, sale of assets or any other voluntary
action, willfully avoid or seek to avoid the observance or performance of any of
the terms hereof, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such  actions as may be  necessary or
appropriate  in order to protect the rights of Warrant Holder under the Warrants
against such willful actions.  Without limiting the generality of the foregoing,
the  Company:  (i) will not set nor  increase  the par or  nominal  value of any
Warrant  Shares above the amount payable  therefor upon such exercise,  and (ii)
will take all  actions  that are  necessary  or  appropriate  in order  that the
Company  may validly and  legally  issue  fully paid and  nonassessable  Warrant
Shares upon the exercise of the Warrants.

4.       ADJUSTMENTS.

The maximum number of Warrant Shares  issuable upon exercise of this Warrant and
the Warrant Price shall be adjusted if any of the following  events occur before
the holder's exercise of this Warrant:

         (a)      Distributions, Share Dividends and Splits.

                  (i)  In  case  the  Company   declares  a  dividend  or  other
distribution payable in Shares or subdivides its Shares into a greater number of
Shares,  the Warrant Price in effect  immediately  prior to such  declaration or
subdivision shall be proportionately decreased and the number and kind of Shares
purchasable  upon  exercise of this Warrant shall be adjusted so that the holder
thereof  shall be entitled to receive the kind and number of shares or the other
securities of the Company that the holder would have owned or have been entitled
to receive after the happening of any of the events  described in this paragraph
(a)(i) had the Warrant Shares been issued  immediately prior to the happening of
such event or any record date with respect thereto.

                  (ii) In the  case of any  reclassification  or  change  of the
outstanding  securities of the Company or of any  reorganization  of the Company
after  the  date  hereof,  or in  case,  after  such  date,  the  Company  shall
consolidate  with or merge  with or into  another  corporation  or convey all or
substantially all of its assets to another corporation or other entity, then, in
each such case, Warrant Holder,  upon any exercise of this Warrant,  at any time
after  the  consummation  of  such  reclassification,   change,  reorganization,
consolidation,  merger, or conveyance,  shall be entitled to receive, in lieu of
the stock or other securities and property
<PAGE>

receivable  upon the exercise of this Warrant  prior to such  consummation,  the
stock or other  securities  or property to which such Warrant  Holder would have
been  entitled  upon  the   consummation  of  such   reclassification,   change,
reorganization,  consolidation,  merger or  conveyance  if  Warrant  Holder  had
exercised  the  Warrants  immediately  prior  thereto,  all  subject  to further
adjustment  as  provided  in this  Section,  and  the  successor  or  purchasing
corporation or other entity in such  reclassification,  change,  reorganization,
consolidation,  merger or conveyance (if not the Company) shall duly execute and
deliver to Warrant Holder a supplement hereto  acknowledging  such corporation's
or entity's obligations under the Warrants;  and in each such case, the terms of
the Warrants (including the exercisability,  transfer and adjustment  provisions
of the Warrants) shall be applicable to the shares of stock or other  securities
or property  receivable upon the exercise of the Warrants after the consummation
of such  reclassification,  change,  reorganization,  consolidation,  merger  or
conveyance.

                  (iii) An adjustment  made pursuant to this paragraph (a) shall
become effective  immediately after the record date in the case of a dividend or
distribution and shall become immediately  effective after the effective date in
the case of a  subdivision.  If, as a result of an  adjustment  made pursuant to
this paragraph  (a), the holder after exercise shall become  entitled to receive
shares of two or more classes of capital  stock or Shares and any other class of
capital  stock of the  Company,  the Board of  Directors  of the Company  (whose
determination  shall be conclusive and shall be described in a written notice to
the holder promptly after such adjustment) shall determine the allocation of the
adjusted  Warrant Price between or among shares of such classes of capital stock
or Shares and such other classes of capital stock.

                  (iv) In the case of any  adjustment  in the  number of Warrant
Shares  receivable  upon the  exercise  of the  Warrants  pursuant  to the terms
hereof,  the chief  financial  officer of the Company shall promptly  thereafter
compute  such  adjustment  in  accordance  with the terms  hereof and  prepare a
certificate  setting forth such  adjustment and showing in detail the facts upon
which  such  adjustment  is  based.  The  Company  will  provide  copies of such
certificate to Warrant Holder in the manner provided for notices hereunder.

         (b) Record Date. In case the Company shall take a record of the holders
of its  Shares for the  purpose of  determining  holders  entitled  to receive a
dividend or other distribution payable in Shares, then such record date shall be
considered  to be the date of the issue or sale of the  Shares  related  to such
dividend or distribution.

         (c) Stock  Combinations.  In case the Company  shall combine all of the
outstanding  Shares into a smaller number of Shares, the Warrant Price in effect
immediately prior to such combination shall be proportionately increased and the
number of Warrant Shares shall be proportionately decreased.

         (d)  Fractional  Shares.  No fractional  Warrant Shares shall be issued
upon the  exercise  hereof.  Upon  exercise by any holder,  such holder shall be
entitled to receive  the  aggregate  full number of Shares  which the holder may
receive upon exercise.

         (e) The  adjustment to the number of Shares  issuable upon the exercise
hereof and the  adjustments  to the Warrant  Price  described  in this Section 4
shall be made each time any event listed in this Section 4 occurs.

<PAGE>

         (f) If any event occurs of the type  contemplated  by the provisions of
this Section 4, but not expressly provided for by such provisions or definition,
then the Company's  Board of Directors in its reasonable  judgment shall make an
appropriate  adjustment in the number of Warrant Shares obtainable upon exercise
of this Warrant so as to protect the rights of the Warrant Holder.

5.    COMPLIANCE WITH SECURITIES ACT; RESTRICTIONS ON TRANSFER; REPRESENTATIONS.

Holder hereby represents and warrants that:

         (a) Purchase  Entirely  for Own  Account.  This Warrant and the Warrant
Shares issuable upon exercise hereof  (collectively,  the "Securities")  will be
acquired for investment for Holder's own account, not as a nominee or agent, and
not with a view to the resale or  distribution  of any part thereof,  and Holder
has no present intention of selling,  granting any participation in or otherwise
distributing the same. Holder does not have any contract, undertaking, agreement
or arrangement with any person to sell,  transfer or grant  participation to any
person with respect to any of the Securities.

         (b) Investment Experience.  Holder acknowledges that it is able to fend
for itself,  can bear the economic risk of its investment and has such knowledge
and experience in financial or business matters that it is capable of evaluating
the merits and risks of the investment in this Warrant.  Holder also  represents
it has not been organized for the purpose of acquiring this Warrant.

         (c) Accredited Investor.  Holder is (a) an "accredited investor" within
the  meaning  of  Rule  501 of  Regulation  D of  the  Securities  and  Exchange
Commission  (the "SEC"),  as  presently in effect or (b) not a "U.S.  Person" as
defined by Rule 902 of Regulation S promulgated under the Securities Act.

         (d) Restricted  Securities.  Holder understands that the Securities are
characterized  as  "restricted  securities"  under the federal  securities  laws
inasmuch  as they are being  acquired  from the  Company  in a  transaction  not
involving a public offering, and that under such laws and applicable regulations
such securities may be resold without  registration  under the Securities Act of
1933, as amended ("the Securities  Act") only in certain limited  circumstances.
In this  connection,  Holder  represents  that it is familiar  with SEC Rule 144
promulgated  under the Securities  Act, as presently in effect,  and understands
the resale limitations imposed thereby and by the Act.

         (e) Further Limitations on Disposition. Without in any way limiting the
representations  set  forth  above,  Holder  further  agrees  not  to  make  any
disposition  of all or any portion of the  Securities  unless and until there is
then in effect a registration  statement  under the Securities Act covering such
proposed  disposition  and such  disposition  is made in  accordance  with  such
registration  statement,  or (i) Holder  shall have  notified the Company of the
proposed  disposition  and shall  have  furnished  the  Company  with a detailed
statement of the circumstances  surrounding the proposed  disposition,  and (ii)
Holder shall have  furnished the Company with an
<PAGE>

opinion  of  counsel,   reasonably   satisfactory  to  the  Company,  that  such
disposition  will not require  registration  of such shares under the Securities
Act.

         (f)  Authorization.  If the holder is not a natural person,  the holder
hereby represents that its acceptance of this Warrant has been authorized on its
behalf by all appropriate  limited liability  company,  corporate or partnership
action.

         (g) Enforceability. The holder hereby represents that it has full legal
power to accept this Warrant and that its acceptance of this Warrant will result
in  legally  binding  obligations  of  the  holder  enforceable  against  it  in
accordance  with the  terms and  provisions  hereof  except  (i) as  limited  by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general  application  affecting  enforcement  of  creditors'  rights  generally,
and(ii) as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.

         (h) Legend.  This Warrant and all Shares  issued upon  exercise of this
Warrant(unless  registered  under  the  Securities  Act)  shall  be  stamped  or
imprinted with a legend in substantially the following form:

                  "THIS  SECURITY HAS NOT BEEN  REGISTERED  UNDER THE SECURITIES
         ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT
         THE PRIOR  WRITTEN  CONSENT OF THE  COMPANY  AND  WITHOUT AN  EFFECTIVE
         REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE
         HOLDER,  SATISFACTORY  TO THE COMPANY,  THAT SUCH  REGISTRATION  IS NOT
         REQUIRED UNDER SUCH ACT."

         The Company need not register a transfer of this Warrant or the Warrant
Shares unless the conditions specified in such legend are satisfied.  Subject to
the foregoing transfer  restrictions set forth in this Section,  this Warrant is
transferable,  in whole or in part, on the books of the Company,  upon surrender
of this Warrant to the Company, together with a written assignment duly executed
by the Holder.

         (i)  Notwithstanding the foregoing,  the restrictions  imposed upon the
transferability of this Warrant and the Warrant Shares shall cease and terminate
as to this  Warrant or any  particular  shares of capital  stock when,  (i) such
Warrant or Warrant Shares shall have been effectively  registered under the 1933
Act and sold by the holder thereof in accordance with such  registration or (ii)
counsel  for  Holder  provides  an  opinion,  in form and  substance  reasonably
satisfactory  to the  Company  (or in  lieu of an  opinion  of  counsel,  Holder
provides the Company with other evidence satisfactory to the Company), that such
restrictions are no longer required in order to ensure  compliance with the 1933
Act. If and whenever the  restrictions  imposed  hereunder shall terminate as to
this Warrant (or to any Warrant Shares) as hereinabove provided,  Holder may and
the Company shall, as promptly as practicable  upon the request of Holder and at
the  Company's  expense,  cause to be stamped or otherwise  imprinted  upon this
Warrant or such shares of capital stock a legend in substantially  the following
form:

         "The  restrictions on the  transferability  of [this] [these] [Warrant]
         [securities]  terminated  on  _______________,  _____,  and  are  of no
         further force or effect"
<PAGE>

         or take such other action as to effectively  remove the restrictions on
the transferability of the Warrant and the Warrant Shares.

         Any  Warrant   issued  upon  the   split-up,   combination,   exchange,
substitution,  transfer  or loan of the  Warrants  entitled  to bear such legend
shall have a similar legend endorsed thereon.  Whenever the restrictions imposed
hereunder  shall  terminate  as to any  Warrant  or as to any  shares of capital
stock, as hereinabove provided,  the Holder thereof shall be entitled to receive
from the Company without  expense,  a new Warrant or new shares of capital stock
not bearing the restrictive legend set forth hereon or above, respectively.

         (j) The  Company  shall  cause all  Warrant  Shares  covered by a valid
registration  statement to be listed on any  securities  exchange upon which the
Shares are then listed.

6.       RIGHTS OF SHAREHOLDERS.

         No holder of the  Warrant  or  Warrants  shall be  entitled  to vote or
receive  dividends  or be deemed  the  holder  of  Shares,  nor  shall  anything
contained  herein be  construed  to confer upon the holder of this  Warrant,  as
such, any of the rights of a shareholder of the Company or any right to vote for
the election of directors or upon any matter  submitted to  shareholders  at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization,  issuance of stock, reclassification of stock, change
of par  value  or  change  of  stock  to no par  value,  consolidation,  merger,
conveyance,  or  otherwise)  or to  receive  notice of  meetings,  or to receive
dividends until the Warrant or Warrants shall have been exercised and the Shares
shall have become deliverable, as provided herein.

7.       PIGGY-BACK REGISTRATION RIGHTS

         (a) The Company shall notify Warrant Holder in writing at least fifteen
(15) days  prior to filing  any  registration  statement  under the 1933 Act for
purposes of effecting a public offering of securities of the Company (including,
but not limited to,  registration  statements relating to secondary offerings of
securities of the Company, but excluding registration statements relating to any
employee  benefit plan or a corporate  reorganization)  and will afford  Warrant
Holder an opportunity to include in such registration  statement all or any part
of the Warrant  Shares  issued or reserved for  issuance to Warrant  Holder upon
exercise  of this  Warrant.  If  Warrant  Holder  desires to include in any such
registration  statement all or any part of such Warrant  Shares,  Warrant Holder
shall, within ten (10) days after receipt of the above-described notice from the
Company,  so notify the Company in writing,  and in such notice shall inform the
Company of the number of Warrant Shares Warrant Holder wishes to include in such
registration  statement.  If Warrant  Holder  decides  not to include all of the
shares of Ordinary Shares issued or reserved for issuance to Warrant Holder upon
the exercise of this Warrant in any registration  statement  thereafter filed by
the Company,  Warrant  Holder shall  nevertheless  continue to have the right to
include  any such  Warrant  Shares  any  subsequent  registration  statement  or
registration statements as may be filed by the Company with respect to offerings
of its  securities,  all upon the terms and  conditions  set forth  herein.  The
Company will cooperate with Warrant  Holder to facilitate  its  distribution  of
Warrant Shares pursuant to any such registration statement.
<PAGE>

         (b) The Company  agrees to indemnify and hold harmless  Warrant  Holder
and its directors,  officers,  employees, agents, partners, members, controlling
persons and affiliates from and against any expenses, losses, claims, damages or
liabilities they may incur arising out of any untrue or alleged untrue statement
of material fact contained in such registration  statement,  or any amendment or
supplement  thereto,  or arising  out of or based upon the  omission  or alleged
omission  to state  therein a material  fact  required  to be stated  therein or
necessary to make the statements  therein not misleading,  or arising out of any
violation of the 1933 Act or the Securities Exchange Act of 1934, as amended, in
connection therewith,  provided, however, that the Company will not be liable in
any such  case to the  extent  that any such  expense,  loss,  claim,  damage or
liability  arises out of or is based upon an untrue  statement or alleged untrue
statement or omission or alleged omission made in such  registration  statement,
or amendment thereto in reliance upon and in conformity with written information
furnished  in writing to the Company by or on behalf of the Holder  specifically
for use in the  preparation  thereof.,  and,  provided  that  Warrant  Holder is
entitled to  indemnification  hereunder,  will reimburse  Warrant Holder and its
directors,  officers,  employees, agents, controlling persons and affiliates for
any legal or other expenses reasonably incurred in connection with investigating
or defending any such action or claim as such expenses are incurred.

         (c) All expenses incurred by the Company in complying with Section 7(a)
(other than the  underwriter's  discounts and commissions),  including,  without
limitation, all registration and filing fees (including all expenses incident to
filing with the National  Association  of Securities  Dealers,  Inc.),  fees and
expenses of  complying  with  securities  and blue sky laws (except for blue sky
expenses  required by law to be borne by  sellers),  expense  allowances  of the
underwriters,  printing  expenses,  fees and  disbursements  of counsel or other
advisor to the Company,  and of the  accountants  to Company,  are herein called
"Registration  Expenses."  All fees and  expenses  of  counsel  for any  selling
Warrant Holder and all underwriting  discounts and commissions applicable to the
eligible securities covered by any such registration, are herein called "Selling
Expenses."

         (d) The Company shall pay all Registration  Expenses in connection with
each  registration  pursuant to Section 7(a). All Selling  Expenses and blue sky
expenses  required  by law to be  borne  by  sellers  in  connection  with  each
registration  pursuant  to Section  7(a) shall be borne by the seller or sellers
therein in proportion to the number of eligible  securities  included by each in
such  registration  or in such other  proportions as they may agree upon. In the
event of any dispute as to how Selling Expenses are allocated, the Company shall
be entitled to apportion the expenses in a reasonable manner between the various
sellers.

         (e) The piggy-back registration rights granted in this Section 6 are in
addition  to, and not in lieu of, any other  registration  rights the Holder may
have by virtue of other contractual arrangements with the Company.

8.       GOVERNING LAW.

The terms and  conditions  of this Warrant shall be governed by and construed in
accordance with the laws of the State of California.

<PAGE>

9.       MISCELLANEOUS.

The headings in this Warrant are for purposes of convenience and reference only,
and shall not be deemed to  constitute a part  hereof.  Neither this Warrant nor
any term hereof may be changed, waived, discharged or terminated orally but only
by an  instrument  in writing  signed by the Company and the  registered  holder
hereof. All notices and other  communications  from the Company to the holder of
this Warrant  shall be mailed by  first-class  registered  or certified  mail or
recognized commercial courier service, postage prepaid, to the address furnished
to the  Company  in writing by the last  holder of this  Warrant  who shall have
furnished an address to the Company in writing.


_______, 2002                       COMMTOUCH SOFTWARE LTD.


                                    ____________________________________
                                    Gideon Mantel, Chief Executive Officer

<PAGE>

                                    EXHIBIT A
                               NOTICE OF EXERCISE


TO:        COMMTOUCH SOFTWARE LTD.




         1. The  undersigned  hereby  elects to purchase  ___________  Shares of
Commtouch  Software  Ltd.  pursuant to the terms of the  attached  Warrant,  and
tenders herewith payment of the purchase price of such Shares in full,  together
with all applicable transfer taxes, if any.

         2. The  undersigned  represents  that the Shares are being acquired for
the account of the  undersigned  for  investment  and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares.




         3. Please issue a certificate or certificates  representing said Shares
in the name of the undersigned or in such other name as is specified below:




                        _________________________________
                                     (Name)
                        _________________________________
                        _________________________________
                                    (Address)


                                             ___________________________________
                                             Name of Warrant holder

                                             ___________________________________
                                             Signature of Authorized Signatory

                                             ___________________________________
                                             Print Name and Title

                                             ___________________________________
                                             Date

<PAGE>


                                    EXHIBIT B
                              NOTICE OF CONVERSION

TO:     COMMTOUCH SOFTWARE LTD.

         1. The undersigned  hereby elects to convert the attached  Warrant into
such number of Ordinary  Shares (the "Shares") of Commtouch  Software Ltd. as is
determined  pursuant to Section 2(c) of such Warrant,  which conversion shall be
effected pursuant to the terms of the attached Warrant.

         2. Please issue a certificate or certificates  representing  the Shares
in the name of the undersigned or in such other name as is specified below:

                      ___________________________________
                                  (Print Name)
                      ___________________________________
                                    (Address)
                      ___________________________________
                                    (Address)

         3. The  undersigned  represents  that the Shares are being acquired for
the account of the  undersigned  for  investment  and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares.

(Date)                                   (Signature)

                                         (Print Name)
<PAGE>


                                 Schedule 3.1(b)


-----------------------------------------

Gideon Mantel
-----------------------------------------

Amir Lev
-----------------------------------------

Nahum Sharfman
-----------------------------------------