Document:

FIRST
      AMENDED AND RESTATED EXCLUSIVE MARKETING AGREEMENT

    

    This
      First Amended and Restated Exclusive Marketing Agreement (the “Agreement”)
      is
      made April 3, 2008 but entered into effective as of November 14, 2007 by and
      between the following parties in Beijing, People’s Republic of China (the
“PRC”):

    

    Party
      A:  Trans
      Pacific Shipping Ltd.,
      a
      wholly
      foreign-owned enterprise duly established and valid existing under the laws
      of
      the PRC. 

    

    
      	
              Registered
                Address:

            	
              Rm.
                1208b Tower D Yeqing Building

            
	 	
              No.9
                Wangjingbeilu

            
	 	
              Chaoyang
                District, Beijing

            

    

    

    Party
      B:  Sino-Global
      Shipping Agency Ltd.,
      a
      limited liability company duly established and valid existing under the laws
      of
      the PRC. 

    

    
      	
              Registered
                Address:

            	
              Rm.
                1208 Tower D Yeqing Building

            
	 	
              No.9
                Wangjingbeilu

            
	 	
              Chaoyang
                District, Beijing

            

    

    

    WHEREAS, Party
      A
      owns resources and customer advantages unparalleled in the field of Party B’s
      business.

    

    WHEREAS,
      Party A
      and Party B previously entered into that Exclusive
      Marketing Agreement effective as of November 14, 2007 and desire to amend and
      restate such agreement to accurately reflect the intentions and actions of
      the
      parties with respect to the subject matter thereof.

    

    WHEREAS,
      both
      parties agree to enter this Agreement in
      accordance with the terms and conditions described below.
      

    

    NOW
      THEREFORE, through
      mutual negotiation, the Parties hereto agree as follows:

    

    ARTICLE
      I

    

    CUSTOMER
      AND FINANCIAL SUPPORT

    

    (a) Party
      A
      shall provide customer and financial support to Party B as follows:

    

    (i) Party
      A
      shall provide Party B with world-wide customer resource services.

    

    (ii) Party
      A
      shall provide Party B with financial support if Party B meets difficulty in
      obtaining funds for operation (relevant terms and conditions will mutually
      agreeable to both Parties).

    

    (iii) Party
      A
      shall offer Party B business opportunities by extending Party B’s business
      propaganda and visiting potential and existing customers.

    

    (iv) Party
      A
      shall offer Party B opportunities to join trade societies and organizations,
      including ASBA (Association of Ship Brokers and Agents, (U.S.A.) Inc.) and
      MA
      (Connecticut Maritime Association), etc.

     

    (b) Party
      A
      shall be the exclusive provider of marketing services to Party B. Party B shall
      not accept all or any of the marketing services provided by Party A from any
      other third party without the prior written consent of Party A. 

    

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    ARTICLE
      II

    

    SERVICE
      FEES

    

    (a) As
      consideration for the services provided by Party A under Article I(a) of this
      Agreement, Party B shall pay a service fee to Party A in accordance with Article
      II(b) of this Agreement. 

    

    (b) During
      the term of this Agreement, Party B shall pay Party A a service fee equal to
      85%
      of Party B’s annual net profit. 

    

    (c) Party
      B
      shall pay in advance such service fees to Party A on a quarterly basis, with
      any
      over- or underpayment by Party B to be reconciled once the annual net profit
      of
      Party B is determined at Party B’s fiscal year end. During the term of this
      Agreement, Party B shall make advance payments to Party A’s appointed bank
      account within 15 working days after the beginning of each new quarter, and
      the
      parties shall complete any reconciliation payment within 15 days after the
      determination described in this Article II(c). Party B shall send Party A a
      written report of service fees on a quarterly basis. Party B shall fax or mail
      the copies of the remittance.

    

    ARTICLE
      III

    

    REPRESENTATIONS
      AND WARRANTIES

    

    (a) Representations
      and Warranties of Party A

    

    Party
      A hereby represents and warrants as follows:

     

    (i) Party
      A
      is a company duly registered and validly existing under the laws of the PRC
      and
      is authorized to enter into this Agreement.

     

    (ii) Party
      A
      has the power to execute and perform this Agreement in accordance with its
      constitutional documents and has taken all necessary action to obtain all
      consents and approval to execute and perform this Agreement. The execution
      and
      performance of this Agreement by Party A do not and will not result in any
      violation of enforceable or effective laws or contractual
      limitations.

     

    (iii) Upon
      the
      execution of this Agreement, this Agreement shall constitute a legally binding
      document of Party A, enforceable against it in accordance with its terms.

     

    (b) Representations
      and Warranties of Party B

     

    Party
      B hereby represents and warrants as follows:

     

    (i) Party
      B
      is a company duly registered and valid existing under the laws of the PRC and
      is
      authorized to enter into this Agreement. 

     

    (ii) Party
      B
      has the power to execute and perform this Agreement in accordance with its
      constitutional documents and has taken all necessary action to obtain all
      consents and approval to execute and perform this Agreement. The execution
      and
      performance of this Agreement by Party B do not and will not result in any
      violation of enforceable or effective laws or contractual limitations.

     

    (iii) Upon
      the
      execution of this Agreement, this Agreement shall constitute a legally binding
      obligation of Party B, enforceable against it in accordance with its terms.
      

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

       

    

    ARTICLE
      IV

    

    CONFIDENTIALITY

    

    (a) If
      any
      confidential information exists in the documents provided hereunder by either
      Party to the other Party, the disclosing party shall mark such documents with
      the following: “Strictly Confidential. Disclosing, Reproducing or Transferring
      This Information to any Third Party Without Permission is
      Prohibited.”

     

    (b) Each
      Party shall protect and maintain the confidentiality of the other Party’s
      confidential information and shall not make use of any confidential information
      of the other Party unless otherwise stipulated in this Agreement and for the
      purpose of this Agreement.

     

    (c) This
      Agreement shall not grant any Party any rights, benefits or qualifications
      to
      the other Party’s confidential information. 

     

    (d) Pursuant
      to this Agreement, the term “confidential information” shall mean any technology
      information or business operation information which is unknown to the public,
      can bring about economic benefits, has practical utility and about which a
      Party
      has adopted secret-keeping measures.

     

    ARTICLE
      V

     

    INTELLECTUAL
      PROPERTY

     

    Party
      A
      shall be the sole and exclusive owner of all right, title and interest to any
      and all intellectual property rights arising from the performance of this
      Agreement (including but not limited to, copyrights, patent, know-how,
      commercial secrets and others).

    

    ARTICLE
      VI

    

    INDEMNITIES

    

    Party
      B
      shall indemnify Party A against any loss, damage, liability or expenses suffered
      or incurred by Party A as a result of or arising from any litigation, claim
      or
      compensation request relating to the marketing provided to Party B.

     

    ARTICLE
      VII

    

    EFFECTIVENESS
      AND TERM OF THIS AGREEMENT

    

    (a) This
      Agreement shall be executed and come into effect as of the date first set forth
      above. The term of this Agreement shall be twenty-five (25) years from the
      date
      hereof unless earlier terminated as set forth in this Agreement or upon the
      mutual agreement of the Parties. 

     

    (b) This
      Agreement may be extended prior to termination for one or more twenty-five
      (25)
      year terms upon written notice by Party A, provided such extension is permitted
      by law and subject to the approval of the registration administration for the
      extension of Party B’s business duration. The parties will cooperate to renew
      this Agreement if such renewal is legally permitted at the time.

     

    ARTICLE
      VIII

    

    TERMINATION
      OF THE AGREEMENT

    

    (a) The
      Agreement shall automatically terminate on the day that is the twenty-fifth
      (25th)
      anniversary of the date hereof unless otherwise extended in accordance with
      this
      Agreement. 

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

       

    

    (b) During
      the term of this Agreement, Party B may not terminate this Agreement except
      in
      the case of gross negligence, fraud action, or other illegal action or
      bankruptcy of Party A. Notwithstanding the above, Party A may terminate this
      Agreement upon thirty (30) days’ prior written notice to Party B. 

    

    (c) The
      rights and obligations of the both Parties under Article IV and Article V of
      this Agreement shall survive the termination of this Agreement. 

    

    ARTICLE
      IX

    

    NOTICES

    

    Any
      notice provided by either Party hereto shall be in writing. Where such notice
      is
      delivered personally, the time of notice shall be the time when such notice
      is
      received by the addressee. Where such notice is transmitted by telex or
      facsimile, the time of notice shall be the time when such notice is transmitted.
      If such notice does not reach the addressee on business date or reaches the
      addressee after business hours, the date of notice shall be the next business
      day. The place of proper delivery shall be the address first written above
      for
      each of the Parties or such other address as a Party may provide to the other
      in
      writing. Written delivery shall include fax and telefax. 

     

    ARTICLE
      X

    

    ASSIGNMENT

    

    Party
      B
      may not assign or transfer its rights or obligations under this Agreement to
      any
      third party without prior written consent of Party A.

     

    ARTICLE
      XI

     
      

    SEVERABILITY

    

    If
      any of
      the terms of this Agreement is deemed to be invalid, illegal or unenforceable,
      the validity and enforceability of the other terms hereof shall nevertheless
      remain unaffected.

     

    ARTICLE
      XII

    

    AMENDMENTS
      AND SUPPLEMENTS

    

    Any
      amendment or supplement to this Agreement shall be effective only if it is
      made
      in writing and signed by both of the Parties hereto. Any amendment or supplement
      duly executed by the Parties shall be part of this Agreement and shall have
      the
      same legal effect as this Agreement.

    

    ARTICLE
      XIII

    

    DISPUTE
      SETTLEMENT

    

    (a) Friendly
      Consultation

    

    The
      Parties shall strive to settle any disputes or claims arising from this
      Agreement or in connection with this Agreement through mediation. 

    

    (b) Arbitration

    

    In
      the
      event no settlement can be reached through consultation within sixty (60) days
      of the first written request of one Party for such consultation, either Party
      may submit such matter to the China International Economic and Trade Arbitration
      Committee for arbitration. The arbitration shall be held in Beijing, PRC.

    

    
      
         

      

      
        4

        
          

        

      

      
         

      

       

    

    ARTICLE
      IV

    

    GOVERNING
      LAW

    

    This
      Agreement shall be governed by, construed in all respects and performed in
      accordance with the laws of the PRC.

    

    ARTICLE
      XV

    

    LANGUAGES

    

    This
      Agreement is executed both in Chinese and English. The Chinese version will
      prevail in the event of any inconsistency between the English and any Chinese
      translations thereof.

    

    [Remainder
      of Page Left Intentionally Blank - Signature Page
      Follows]

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF,
      both
      Parties executed this Agreement effective as of the date first above
      written.

    

    
      	
               

            	
              Party
                A: Trans
                Pacific
                Shipping Ltd.

            
	
               

            	
               

            
	
              (seal)

            	
              /s/
                Cao Lei

            
	
               

            	
              Legal
                Representative 

            
	
               

            	
               

            
	
               

            	
              Party
                B: Sino-Global
                Shipping Agency Ltd.

            
	
               

            	
               

            
	
              (seal)

            	
              /s/
                Cao Lei           
                

            
	
               

            	
              Legal
                Representative

            

    

     

    
      
         

      

      
        620-F

Exhibit 4.1  

AGREEMENT AND PLAN OF
MERGER 

by and among 

GALACTIC HOLDINGS LTD., 

GALACTIC ACQUISITION
COMPANY LTD. 

and 

GILAT SATELLITE
NETWORKS LTD. 

Dated as of March 31, 2008 

TABLE OF CONTENTS 

			Page
	 		
			
			
			
	ARTICLE I	DEFINITIONS	2 
	         Section 1.1	         Definitions	2 
	         Section 1.2	         Other Terms	7 
	 
	ARTICLE II	THE MERGER	10 
	         Section 2.1	         The Merger	10 
	         Section 2.2	         Closing	10 
	         Section 2.3	         Effective Time	10 
	         Section 2.4	         Articles of Association	11 
	         Section 2.5	         Directors and Officers	11 
	 
	ARTICLE III	EFFECT OF THE MERGER ON SHARE CAPITAL; PAYMENT	11 
	         Section 3.1	         Effect on Share Capital	11 
	         Section 3.2	         Exchange of Certificates	12 
	         Section 3.3	         Stock Options	14 
	         Section 3.4	         Lost Certificates	15 
	         Section 3.5	         Transfers; No Further Ownership Rights	15 
	         Section 3.6	         Withholding Tax	15 
	 
	ARTICLE IV	REPRESENTATIONS AND WARRANTIES OF THE COMPANY	16 
	         Section 4.1	         Organization; Qualification	16 
	         Section 4.2	         Capitalization	17 
	         Section 4.3	         Authority	18 
	         Section 4.4	         Consents and Approvals; No Violations; Voting	18 
	         Section 4.5	         SEC Reports and Financial Statements	20 
	         Section 4.6	         Absence of Certain Changes or Events	21 
	         Section 4.7	         Information Supplied	21 
	         Section 4.8	         Employee Matters and Benefit Plans	21 
	         Section 4.9	         Contracts	25 
	         Section 4.10	         Litigation	27 
	         Section 4.11	         Compliance with Applicable Law	28 
	         Section 4.12	         Taxes	28 
	         Section 4.13	         Property	30 
	         Section 4.14	         Environmental	30 
	         Section 4.15	         Insurance	31 
	         Section 4.16	         Intellectual Property	32 
	         Section 4.17	         Affiliate Transactions	35 
	         Section 4.18	         Brokers	35 
	         Section 4.19	         Opinion of Financial Advisor	35 
	         Section 4.20	         Board of Directors and Audit Committee Approval	35 
	         Section 4.21	         Inapplicability of Certain Statutes	36 
	         Section 4.22	         Grants, Incentives and Subsidies	36 
	         Section 4.23	         Encryption and Other Restricted Technology	36 
	         Section 4.24	         Effect of Transaction	36 
	         Section 4.25	         Customers and Suppliers	37 
	         Section 4.26	         Warranties	37 
	         Section 4.27	         Foreign Corrupt Practices Act; Certain Business Practices	37 
	         Section 4.28	         No Other Representations or Warranties	38 

i

			
			
	ARTICLE V	REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE MERGER SUB	38 
	         Section 5.1	         Organization, Good Standing and Qualification	38 
	         Section 5.2	         The Purchaser and the Merger Sub.	38 
	         Section 5.3	         Corporate Authority	38 
	         Section 5.4	         The Merger Sub Board Approval	39 
	         Section 5.5	         Share Ownership	39 
	         Section 5.6	         Governmental Filings; No Violations; Etc	39 
	         Section 5.7	         Brokers and Finders	40 
	         Section 5.8	         Available Funds	40 
	         Section 5.9	         Interest in Competitors	41 
	         Section 5.10	         Information Supplied	41 
	         Section 5.11	         Acknowledgement of Disclaimer of Other Representations and Warranties	41 
	 
	ARTICLE VI	CONDUCT PRIOR TO THE EFFECTIVE TIME AND ADDITIONAL AGREEMENTS	41 
	         Section 6.1	         Conduct of Business by the Company	41 
	         Section 6.2	         Specific Activities	42 
	         Section 6.3	         No Control of Other Party's Business	45 
	         Section 6.4	         Access to Information; Confidentiality; Financing	45 
	         Section 6.5	         No Solicitation	47 
	         Section 6.6	         Merger Proposal	50 
	         Section 6.7	         Shareholders Approval	51 
	         Section 6.8	         Filings; Other Actions; Notification	52 
	         Section 6.9	         Publicity	53 
	         Section 6.10	         Israeli Tax Ruling	53 
	         Section 6.11	         Notification of Certain Matters	54 
	         Section 6.12	         Directors' and Officers' Insurance; Indemnification Agreements	55 
	         Section 6.13	         The Merger Sub Obligations	56 
	         Section 6.14	         Employee Matters	56 
	         Section 6.15	         Property	58 
	 
	ARTICLE VII	CONDITIONS PRECEDENT	58 
	         Section 7.1	         Conditions to Each Party's Obligation to Effect the Merger	58 
	         Section 7.2	         Conditions to Obligations of the Purchaser and the Merger Sub to Effect the Merger	58 
	         Section 7.3	         Conditions to Obligations of the Company to effect the Merger	59 
	         Section 7.4	         Frustration of Closing Conditions	59 
	 
	ARTICLE VIII	TERMINATION	60 
	         Section 8.1	         Termination or Abandonment	60 
	         Section 8.2	         Termination Fees and Expenses	61 

ii

			
			
	ARTICLE IX	MISCELLANEOUS	64 
	         Section 9.1	         Amendment	64 
	         Section 9.2	         Governing Law; Jurisdiction; Service of Process	64 
	         Section 9.3	         Extension; Waiver	65 
	         Section 9.4	         Notices	65 
	         Section 9.5	         Interpretation	67 
	         Section 9.6	         Counterparts	67 
	         Section 9.7	         Entire Agreement: Third-Party Beneficiaries	67 
	         Section 9.8	         Severability	67 
	         Section 9.9	         Other Remedies; Specific Performance	67 
	         Section 9.10	         Assignment	68 
	         Section 9.11	         Non-Survival of Representations, Warranties and Agreements	68 

EXHIBIT INDEX 

	         Exhibit  A	
Form of Limited Guaranty 

	         Exhibit B 	
Irrevocable Proxy and Unilateral Undertaking 

	         Exhibit C 	
Merger Proposal 

iii

AGREEMENT AND PLAN OF
MERGER 

        AGREEMENT
AND PLAN OF MERGER, dated as of March 31, 2008, by and among GALACTIC HOLDINGS LTD., an
Israeli company (the “Purchaser”), GALACTIC ACQUISITION COMPANY LTD., an
Israeli company and a subsidiary of the Purchaser (the “Merger Sub”), and
GILAT SATELLITE NETWORKS LTD., an Israeli company (the “Company”). The
Purchaser, the Merger Sub and the Company are each referred to herein as a
“Party,” and collectively as the “Parties.” 

RECITALS 

     	A.	
          The Parties hereto intend to enter into a transaction whereby the Merger Sub
          will merge with and into the Company (the “Merger”) by way and
          upon the terms and conditions set forth in this Agreement and in accordance with
          the provisions of Sections 314-327 of the Companies Law 5759-1999 of the State
          of Israel (the “Companies Law”), following which, the Merger
          Sub will cease to exist, the Company will become a Subsidiary of the Purchaser,
          and the Company Shares (as defined below) will be exchanged for the right to
          receive the Aggregate Merger Consideration (as defined below). 

          

     	B.	
          The Board of Directors has: (i) determined that this Agreement, the Merger and
          the other transactions contemplated by this Agreement (collectively, the
          “Transactions”) are fair to, and in the best interests of, the
          Company and its shareholders, and that, considering the financial position of
          the merging companies, no reasonable concern exists that the Surviving Company
          will be unable to fulfill the obligations of the Company to its creditors, (ii)
          approved this Agreement, the Merger and the Transactions, and (iii) determined
          to recommend to the shareholders of the Company the approval of this Agreement,
          the Merger and the Transactions. 

          

     	C.	
          The boards of directors of each of the Purchaser and the Merger Sub have
          approved this Agreement, the Merger and the Transactions, and the board of
          directors of the Merger Sub has (i) determined that, considering the financial
          position of the merging companies, no reasonable concern exists that the
          Surviving Company will be unable to fulfill the obligations of the Merger Sub to
          its creditors, and (ii) recommended that the sole shareholder of the Merger Sub
          vote to approve this Agreement, the Merger and the Transactions. 

          

     	D.	
          Concurrently with the execution and delivery of this Agreement, the sole
          shareholder of the Merger Sub has approved this Agreement, the Merger and the
          Transactions. 

          

     	E.	
          Concurrently with the execution and delivery of this Agreement and as a
          condition to and inducement of the Company’s willingness to enter into this
          Agreement, the Sponsors (as defined below) have each entered into a Limited
          Guaranty in the form attached hereto as Exhibit A, dated as of the date
          hereof, in favor of the Company with respect to certain obligations of the
          Purchaser and the Merger Sub under this Agreement (the “Limited
          Guaranty”). 

          

     	F.	
          Concurrently with the execution and delivery of this Agreement and as a
          condition to and inducement of the Purchaser’s willingness to enter into
          this Agreement, certain shareholders of the Company have executed an irrevocable
          proxy and unilateral undertaking in favor of the Purchaser in the form attached
          hereto as Exhibit B, according to which each such shareholder undertook
          to support the approval and adoption of this Agreement, the Merger and the
          Transactions at the Company Shareholders’ Meeting (as defined below). 

          

1

        NOW,
THEREFORE, in consideration of the forgoing premises, and of the representations,
warranties, covenants and agreements contained herein, the Parties hereto, intending to be
legally bound, hereby agree as follows: 

ARTICLE I 

DEFINITIONS 

        Section
1.1 Definitions.  

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

        “102
Trustee” means the trustee appointed by the Company in accordance with the
provisions of the Ordinance, and approved by the Israeli Taxing Authority, with respect to
Company 102 Securities. 

        “Affiliate”
of any Person means another Person that, directly or indirectly, through one or more
intermediaries, Controls, is Controlled by, or is under common Control with such first
Person. 

        “Aggregate
Merger Consideration” shall mean the product of (i) the number of Company Shares
issued and outstanding (other than those shares cancelled pursuant to Section 3.1(a) and
Company Shares held by certain Sponsors or their Affiliates) immediately prior to the
Effective Time multiplied by (ii) the Merger Consideration (as defined below). 

        “Agreement”
means this Agreement, together with all Exhibits and Schedules attached hereto, as the
same may be amended from time to time in accordance with the terms hereof. 

        “Articles
of Association” means the articles of association of the Company as of the date
hereof. 

        “Board
of Directors” means the board of directors of the Company. 

        “Business
Day” means, except as otherwise set forth herein, any day other than Friday,
Saturday or any other day on which banks are legally permitted to be closed in Israel or
Los Angeles, California. 

        “Code”
means the U.S. Internal Revenue Code of 1986, as amended. 

2

        “Company
102 Securities” means (i) Company Stock Options granted under Section 102(b)(2)
of the Ordinance, or granted under Section 102 of the Ordinance prior to January 1, 2003,
and (ii) Company Shares issued upon the exercise of any such Company Stock Options and
held by the 102 Trustee pursuant to the Ordinance. 

        “Company
Employee Plan” means each Plan, including (i) each “employee benefit
plan,” within the meaning of, and subject to, Section 3(3) of ERISA, and (ii) each
International Employee Plan, other than plans, programs and arrangements sponsored or
maintained by Governmental Authorities to which the Company or its Subsidiaries are
legally-mandated to contribute, which is or has been maintained, contributed to, or
required to be contributed to, by the Company or its Subsidiaries, or with respect to
which the Company or its Subsidiaries has or may have, as of the Closing Date, any
liability or obligation, contingent or otherwise. 

        “Company
Intellectual Property Rights” means any Intellectual Property Rights, including
Registered Intellectual Property Rights, that are owned, used or held for use by the
Company or any of its Subsidiaries or necessary for the conduct of the business of the
Company or any of its Subsidiaries. 

        “Company
Product” means any product or service of the Company or any of its Subsidiaries
currently being marketed, sold or licensed by the Company or any of its Subsidiaries. 

        “Company
Shares” means ordinary shares, NIS 0.20 par value per share, of the Company. 

        “Company Stock
Option Plans” means the Company’s 1995 Stock Option Plan, 1995 Section 102
Stock Option Plan, 2003 Stock Option Plan, 2003 Section 102 Stock Option Plan, and 2005
Share Incentive Plan. 

        “Confidentiality
Agreement” means that certain confidentiality agreement, dated as of July 6,
2007, by and between the representative of the Company and The Gores Group, LLC, entered
into in connection with the Transactions, to which agreement the other Sponsors have been
subsequently joined. 

        “Contract”
means any binding written, oral, electronic or other contract, lease, license, sublicense,
instrument, note, bond, indenture, option, warrant, purchase order, undertaking, agreement
or obligation of any nature. 

        “Control”
means the possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a Person, whether through the ownership of voting
securities, by Contract, as trustee or executor, or otherwise. 

        “Employee”
means any current employee or director of the Company or its Subsidiaries. 

        “Employment
Agreement” means each management, employment, severance, change in control,
retention, relocation, repatriation, expatriation or arrangement or other Contract with
respect to which the Company or any of its Subsidiaries has or may have, as of the Closing
Date, any liability or obligation, contingent or otherwise. 

3

        “Encumbrances”
means any liens, charges, security interests, mortgages, pledges, options, preemptive
rights, rights of first refusal or first offer, proxies, levies, voting trusts or
agreements, or other adverse claims or restrictions on title or transfer of any nature
whatsoever. 

        “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended. 

        “ERISA
Affiliate” means any Subsidiary of the Company or other Person or entity under
common Control with the Company, its Subsidiaries or their respective Affiliates within
the meaning of Section 414 (c), (m) or (o) of the Code. 

        “Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder. 

        “GAAP”
means generally accepted accounting principles as in effect in the United States of
America at the time of the preparation of the subject financial statements. 

        “Government
Contract” means any Contract to which the Company is a party with any
Governmental Authority or any Contract to which the Company is a party that is a
subcontract (at any tier) with another Person that holds either a Contract directly with
any Governmental Authority or a subcontract (at any tier) under any such Contract. 

        “Intellectual
Property Licenses” means any Contract including any grant (i) by the Company or
any of its Subsidiaries to any Person of any license, sublicense, right, permission,
consent or non-assertion relating to or under any Intellectual Property Rights of the
Company or any of its Subsidiaries, or (ii) by any Person to the Company or any of its
Subsidiaries of any license, sublicense, right, permission, consent or non-assertion
relating to or under any Intellectual Property Rights. 

        “Intellectual
Property Rights” means any and all intellectual property rights and related
priority rights, arising from or in respect of the following, whether protected, created
or arising under the Laws of the United States or any other jurisdiction (including common
law and statutory rights) or under any international convention, including: (i) all United
States and foreign patents and utility models and applications therefor and all reissues,
divisions, re-examinations, renewals, extensions, provisional applications, continuations
and continuations-in-part thereof, and equivalent rights anywhere in the world in
inventions and discoveries, including invention disclosures (“Patents”),
(ii) all trade secrets and other proprietary rights in know-how and confidential or
proprietary information (including inventions and discoveries, whether patentable or not,
technology research and development, technical information, techniques, methods,
processes, algorithms, schematics, business methods, formulae, specifications, drawings,
prototypes, models, designs, customer lists and supplier lists), in each case excluding
any rights in respect of any of the foregoing that are protected by Patents
(“Trade Secrets”), (iii) all copyrights, published and unpublished works
of authorship (including databases and other compilations of information), copyright
registrations and applications therefor, and mask works and mask work registrations and
applications therefor and all renewals, extensions, restorations and reversions of any of
the foregoing (“Copyrights”), (iv) all uniform resource locators, e-mail
and other internet addresses and domain names and applications and registrations therefor
(“URLs”), (v) all trademarks, service marks, trade names, logos, brand
names, symbols, trade dress, certification marks, collective marks, d/b/a’s, assumed
names, fictitious names and other indicia of origin, common law trademarks and service
marks, trademark and service mark registrations and applications therefor, and all
renewals and extensions of any of the foregoing, and all goodwill associated therewith
(“Trademarks”), and (vi) all “moral” rights of authors and
inventors, however denominated throughout the world. 

4

        “International
Employee Plan” means each Plan and each government-mandated plan or program that
has been adopted or maintained by the Company or its Subsidiaries, whether informally or
formally, or with respect to which the Company or any of its Subsidiaries has, will or may
have, as of the Closing Date, any obligation or liability, contingent or otherwise,
substantially for the benefit of individuals who perform or have performed services to the
Company or its Subsidiaries outside the United States. This shall include, in Israel,
manager’s insurance or other provident or pension funds which are not
government-mandated but were set up to provide for the Company’s legal obligation to
pay statutory severance pay (Pitzuay Piturim) under the Severance Pay Law 5723-1963
(“Severance Pay Law”). 

        “Knowledge”
means the actual knowledge of (i) as to the Company, those officers set forth in Section
1.1 of the Company Disclosure Schedule, and (ii) as to the Purchaser, the directors of the
Purchaser set forth in Section 1.1 of the Purchaser Disclosure Schedule. 

        “Laws”
shall mean any order, any federal, state, provincial, local or other statute, law, rule of
common law, or code of any kind, domestic or foreign, and the rules, regulations,
ordinances and standards promulgated thereunder and, where applicable, any interpretation
thereof by any Governmental Authority having jurisdiction with respect thereto or charged
with the administration thereof. 

        “Material
Adverse Effect” means any change, event, occurrence or effect which, individually
or in the aggregate, did or would reasonably be expected to (a) have a material adverse
effect on the business, results of operations, or financial condition of the Company and
its Subsidiaries taken as a whole or (b) materially impede the ability of the Company and
its Subsidiaries to consummate the Transactions or perform their obligations under this
Agreement, in each case, other than changes, events, occurrences or effects relating to or
arising from: (i) changes in general economic or political conditions or financial credit
or securities markets in general (including changes in interest or exchange rates) in any
country or region in which any of the Company or its Subsidiaries conducts a material
portion of its business, except to the extent such changes affect the Company and its
Subsidiaries in a disproportionate manner as compared to other companies operating in any
such country or region in industries in which the Company or its Subsidiaries operate or
do business, (ii) any event, circumstance, change or effect that affects the industries in
which the Company or its Subsidiaries operate, except to the extent such event,
circumstance, change or effects affect the Company and its subsidiaries in a
disproportionate manner as compared to other participants in the industry, (iii) any
changes in GAAP occurring after the date of this Agreement, (iv) acts of war, armed
hostilities or terrorism, or escalation or worsening thereof, that cause any damage or
destruction to, or render physically unusable, any facility or property of the Company or
any of its Subsidiaries or otherwise disrupt the business or operations of the Company or
any of its material Subsidiaries, (v) the negotiation, announcement or performance of this
Agreement and the Transactions (including the impact thereof on relationships, contractual
or otherwise, with customers, suppliers, vendors or employees) or any action taken by the
Company at the written request of, or with the written consent of, the Purchaser, (vi) any
decline in the market price or decrease or increase in the trading volume of Company
Shares after the date of this Agreement, (vii) any failure to meet internal or published
projections, forecasts, or revenue or earning predictions for any period after the date of
this Agreement, (viii) any litigation arising from allegations of a breach of fiduciary
duty or other violation of applicable Law relating to this Agreement, the Merger or the
other Transactions, or the approval thereof, and (ix) the outcome of any threatened or
actual litigation or contingent liability disclosed in Section 4.5(d) of the Company
Disclosure Schedule unless the Company or any of its Subsidiaries has engaged in fraud or
intentional misrepresentation in connection with the items disclosed in such schedule;
provided, that the exceptions in clauses (vi) and (vii) shall not prevent or
otherwise affect a determination that the underlying cause of any such decline or failure
is a Material Adverse Effect. 

5

        “Memorandum
of Association” means the memorandum of association of the Company as of the date
hereof. 

        “NASDAQ”
means The NASDAQ Global Market. 

        “Permitted
Encumbrance” shall mean (i) any statutory Encumbrance for Taxes not yet due or
payable or the amount or validity of which is being contested in good faith by appropriate
proceedings and for which adequate accruals or reserves have been established on the
financial statements in accordance with GAAP, (ii) Encumbrances securing indebtedness or
liabilities that are reflected in the most recent Company SEC Documents (as defined below)
filed prior to the date hereof, (iii) such non-monetary Encumbrances or other
imperfections of title, if any, that do not individually or in the aggregate, adversely
affect the use of the relevant property or assets, including (A) easements or claims of
easements whether shown or not shown by the public records, boundary line disputes,
overlaps, encroachments and any matters not of record which would be disclosed by an
accurate survey or a personal inspection of the property, (B) rights of parties in
possession, (C) any supplemental Taxes or assessments not shown by the public records, and
(D) title to any portion of the premises lying within the right of way or boundary of any
public road or private road, (iv) Encumbrances disclosed on existing title reports or
existing surveys, (v) Encumbrances imposed or promulgated by Laws with respect to real
property and improvements, including zoning regulations, (vi) Encumbrances under
applicable securities Laws, and (vii) mechanics’, carriers’, workmen’s,
repairmen’s and similar Encumbrances, incurred in the ordinary course of business. 

        “Person”
means any individual, corporation (including not-for-profit), general or limited
partnership, limited liability company, joint venture, estate, trust, association,
organization, Governmental Authority or other entity of any kind or nature. 

        “Plan”
means each material plan, program, policy, contract, agreement or other arrangement, other
than an Employment Agreement, providing for compensation, bonus, incentive, severance,
termination pay, deferred compensation, stock or stock-related awards, including Company
Stock Options welfare benefits, insurance, salary continuation, vacation, leave of
absence, educational assistance, fringe benefits or other employee benefits or
remuneration of any kind, funded or unfunded. 

6

        “Registered
Intellectual Property Rights” means all United States, international and foreign
(i) issued Patents, including pending applications therefor, (ii) registered Trademarks
and pending applications to register Trademarks, including intent-to-use applications,
(iii) Copyright registrations and pending applications to register Copyrights, and (iv)
URL registrations and pending applications to register URLs. 

        “Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder. 

        “Software”
means any and all (i) computer programs, including any and all software implementations of
algorithms, models and methodologies, whether in source code or object code, (ii)
databases and compilations, including any and all data and collections of data, whether
machine-readable or otherwise, (iii) descriptions, flow-charts and other work product used
to design, plan, organize and develop any of the foregoing, screens, user interfaces,
report formats, firmware, development tools, templates, menus, buttons and icons and (iv)
documentation, including user manuals and other training documentation, related to any of
the foregoing. 

        “Sponsors”
means Gores Capital Partners II, L.P., Mivtach Shamir Holdings Ltd., G SAT B Ltd., G
SAT L Ltd., G SAT S Ltd. and DGB Investments, Inc.  

        “Subsidiary”
means, with respect to any Person, any other Person of which at least a majority of the
securities or ownership interests having by their terms ordinary voting power to elect a
majority of the board of directors or other Persons performing similar functions is
directly or indirectly owned or Controlled by such Person or by one or more of its
Subsidiaries. 

        “Tax”
or, collectively, “Taxes,” means (i) any and all United States, federal,
provincial, state and local taxes, Israeli and other foreign taxes, assessments and other
governmental charges, duties, impositions and liabilities, including taxes based upon or
measured by gross receipts, income, profits, sales, use and occupation, and value added,
ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, linkage for inflation, penalties and additions
imposed with respect to such amounts, and (ii) any liability for the payment of any
amounts of the type described in clause (i) as a result of being or ceasing to be a member
of an affiliated, consolidated, combined or unitary group for any period (including any
liability under United States Treas. Reg. Section 1.1502-6 or any comparable provision of
Israeli or other foreign, state or local Laws). 

        Section
1.2 Other Terms.  

        Accounting
terms not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to
the extent not defined, shall have the respective meanings ascribed to them under GAAP. In
addition to the terms defined in Section 1.1, the following terms are defined in the
Sections of this Agreement noted below: 

7

	Defined Term
	Section

	 	
		
		
		
	102 Trust Period	6.10 (b)
	Acquisition Proposal	6.5 (f)
	Aggregate Consideration	3.2 (a)
	Aggregate Option Consideration	3.3 (a)
	Antitrust Requirements	4.4 (a)
	Approved Enterprise	4.12 (d)
	Book-Entry Shares	3.1 (b)
	Certificates	3.1 (b)
	Change of Recommendation	6.5 (d)
	Closing	2.2
	Closing Date	2.2
	Companies Law	Recitals
	Companies Registrar	2.3
	Company	Preamble
	Company Charter Documents	4.1 (a)
	Company Contract	4.9 (b)
	Company Disclosure Schedule	Article IV
	Company Employees	6.14 (a)
	Company Expenses	8.2 (b)
	Company Permits	4.11
	Company SEC Documents	4.5 (a)
	Company Shareholder Approval	4.4 (c)
	Company Shareholders' Meeting	6.7 (a)
	Company Stock Options	3.3 (a)
	Company Termination Fee	8.2 (a)(i)
	Copyrights	1.1
	Debt Commitment Letter	5.8 (a)
	Debt Financing	5.8 (a)
	Effective Time	2.3
	End Date	8.1 (b)
	Environmental Law	4.14 (b)
	Equity Commitment Letter	5.8 (a)
	Equity Financing	5.8 (a)
	Exchange Fund	3.2 (a)
	Financing	5.8 (a)
	Financing Agreements	6.4 (d)
	Financing Commitments	5.8 (a)
	Governmental Authority	4.4 (a)
	Governmental Consents	4.4 (a)
	Grants	4.22
	Hazardous Substance	4.14 (c)
	Indemnitee	6.12 (a)
	Investment Center	4.4 (a)
	IRS	4.8 (b)
	Israeli Employees	4.8 (i)
	Israeli Options Tax Ruling	6.10 (b)
	Israeli Withholding Tax Extension	6.10 (a)(ii)

8

	Defined Term
	Section

	 	
		
		
	Israeli Withholding Tax Ruling	6.10 (a)(ii)
	Jointly Owned Intellectual Property	4.16 (c)
	Limited Guaranty	Recitals
	Maximum Amount	6.12 (d)
	Merger	Recitals
	Merger Certificate	2.3
	Merger Consideration	3.1 (b)
	Merger Proposal	6.6 (a)
	Merger Sub	Preamble
	New Plans	6.14 (b)
	Notice of Superior Proposal	6.5 (d)
	OCS	4.4 (a)
	Open Source	4.16 (g)
	Option Consideration	3.3 (a)
	Option Schedule	3.3 (b)
	Ordinance	3.6
	Party	Preamble
	Patents	1.1
	Paying Agent	3.2 (a)
	Property	4.13 (b)
	Purchaser	Preamble
	Purchaser Affiliate	4.4 (c)
	Purchaser Disclosure Schedule	Article V
	Purchaser Expenses	8.2 (c)
	Purchaser Termination Fee	8.2 (b)(ii)
	Recommendation	4.20 (a)
	Representatives	6.4 (a)
	Restraints	7.1 (e)
	Returns	4.12 (a)
	SEC	4.4 (a)
	Severance Pay Law	1.1
	Subsidiary Shares	4.2 (c)
	Substantial Creditors	6.6 (b)(ii)
	Superior Proposal	6.5 (g)
	Surviving Company	2.1
	Surviving Company Articles	2.4
	Tail Policy	6.12 (b)
	Trademarks	1.1
	Trade Secrets	1.1
	Transactions	Recitals
	URLs	1.1

9

ARTICLE II 

THE MERGER 

        Section
2.1 The Merger.  

        Subject
to the satisfaction or waiver (to the extent permitted hereunder and by Law) of the
conditions set forth in Article VII, at the Effective Time and subject to and upon the
terms and conditions set forth in this Agreement and the applicable provisions of Sections
314 through 327 of the Companies Law, (i) the Merger Sub (as the target company (Chevrat
Ha’Ya’ad)) shall be merged with and into the Company (as the absorbing company
(HaChevra Ha’Koletet)), (ii) the separate corporate existence of the Merger Sub shall
thereupon cease, (iii) the Company shall continue as the surviving company (sometimes
hereinafter referred to as the “Surviving Company”), (iv) the Surviving
Company shall continue to be governed by Israeli Law and shall become a wholly owned
Subsidiary of the Purchaser, and (v) all the properties, rights, privileges and powers of
the Company and the Merger Sub shall vest in the Surviving Company, and all debts,
liabilities and duties of the Company and the Merger Sub shall become the debts,
liabilities and duties of the Surviving Company. 

        Section
2.2 Closing.  

        The
closing of the Merger and the Transactions (the “Closing”) shall take
place, subject to the terms and conditions of this Agreement, at the offices of Weil,
Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153, on the second
Business Day after the satisfaction or waiver (to the extent permitted hereunder and by
Law) of the conditions set forth in Article VII hereof (other than those conditions that
by their nature may only be satisfied at the Closing, but subject to the fulfillment or
waiver of those conditions), or at such other time, date and location as the Parties
hereto shall mutually agree. The date upon which the Closing actually occurs shall be
referred to herein as the “Closing Date.” 

        Section
2.3 Effective Time.  

        As
soon as practicable following the satisfaction or waiver (to the extent permitted
hereunder and by Law) of the conditions set forth in Article VII (other than those
conditions that by their nature may only be satisfied at the Closing, but subject to the
fulfillment or waiver of those conditions), the Merger Sub shall, in coordination with the
Company, deliver (and the Purchaser shall cause the Merger Sub to deliver) to the
Registrar of Companies of the State of Israel (the “Companies Registrar”)
a notice of the contemplated Merger and the proposed date of the Closing on which the
Companies Registrar is requested to issue a certificate evidencing the Merger in
accordance with Section 323(5) of the Companies Law (the “Merger
Certificate”) after notice that the Closing has occurred is served to the
Companies Registrar. The Merger shall become effective upon issuance of the Merger
Certificate by the Companies Registrar (the “Effective Time”). 

        Section
2.4 Articles of Association.  

        The
parties hereto shall take all actions necessary so that the articles of association of the
Company as in effect immediately prior to the Effective Time shall be the articles of
association of the Surviving Company (the “Surviving Company Articles”),
until duly amended as provided therein or by applicable Law. 

10

        Section
2.5 Directors and Officers.  

         (a)       
          The Parties shall take all actions necessary so that the directors of the Merger
          Sub at the Effective Time shall, from and after the Effective Time, be appointed
          and serve as the directors of the Surviving Company until their successors shall
          have been duly elected or appointed and qualified or until their removal or
          resignation in accordance with the Surviving Company Articles. 

         (b)       
          The Parties shall take all actions necessary so that the current officers of the
          Company shall remain the officers of the Surviving Company until their
          successors shall have been duly elected or appointed or qualified or until their
          removal or resignation in accordance with the Surviving Company Articles. 

ARTICLE III 

EFFECT OF THE MERGER
ON SHARE CAPITAL; PAYMENT 

        Section
3.1 Effect on Share Capital.  

        At
the Effective Time, by virtue of, and simultaneously with, the Merger and without any
action on the part of the Company, the Merger Sub or the holders of any securities of the
Company or the Merger Sub: 

         (a)       
          Cancellation of Company Shares. Each of the Company Shares held by the
          Company as dormant shares or held by the Purchaser or the Merger Sub immediately
          prior to the Effective Time shall automatically be cancelled, retired and shall
          cease to exist, and no consideration or payment shall be delivered in exchange
          therefor or in respect thereof. 

         (b)       
          Conversion of Company Shares. Except as otherwise provided in this
          Agreement, each Company Share issued and outstanding immediately prior to the
          Effective Time (other than shares cancelled pursuant to Section 3.1(a) hereof,
          and Company Shares held by certain Sponsors or one of their Affiliates), shall
          be automatically converted into the right to receive $11.40 in cash (such per
          share amount, the “Merger Consideration”), without interest.
          All Company Stock Options shall be treated in accordance with Section 3.3
          hereof. Each Company Share to be converted into the right to receive the Merger
          Consideration as provided in this Section 3.1(b) shall be automatically
          cancelled and shall cease to exist, and the holders of certificates (the
          “Certificates”), which immediately prior to the Effective Time
          represented outstanding Company Shares, or non-certificated Company Shares
          represented by book-entry (“Book-Entry Shares”) shall cease to
          have any rights with respect to such Company Shares other than the right to
          receive, upon surrender of such Certificates or Book-Entry Shares, in accordance
          with Section 3.2 of this Agreement, the Merger Consideration, without interest. 

11

         (c)       
          Conversion of the Merger Sub Capital Stock. At the Effective Time, by
          virtue of the Merger and without any action on the part of the holder thereof,
          each ordinary share, par value of NIS 1.00 per share, of the Merger Sub issued
          and outstanding immediately prior to the Effective Time shall be converted into
          and become fully paid ordinary shares, par value NIS 0.20 per share, of the
          Surviving Company as shall be issued and outstanding as of the Effective Time
          and such ordinary shares shall constitute the only outstanding shares of the
          Surviving Company. 

         (d)       
          Adjustments. Without limiting the other provisions of this Agreement, if
          at any time during the period between the date of this Agreement and the
          Effective Time, any change in the number of outstanding Company Shares shall
          occur as a result of a reclassification, recapitalization, stock split
          (including a reverse stock split), or combination, exchange or readjustment of
          shares, or any share dividend or distribution with a record date during such
          period, the Merger Consideration as provided in Section 3.1(b) shall be
          equitably adjusted to reflect such change; provided that, in no event
          shall the Aggregate Consideration increase as a result of such change. 

        Section
3.2 Exchange of Certificates.  

         (a)       
          Designation of Paying Agent; Deposit of Exchange Fund. Prior to the
          Effective Time, the Purchaser shall designate a paying agent based in the United
          States (the “Paying Agent”) reasonably acceptable to the
          Company for the payment of the Aggregate Merger Consideration as provided in
          Section 3.1(b). Concurrently with the scheduled date of issuance of the Merger
          Certificate by the Companies Registrar, the Purchaser shall deposit, or cause to
          be deposited with the Paying Agent for the benefit of holders of Company Shares
          and Company Stock Options cash constituting an amount equal to (i) the sum of
          the Aggregate Merger Consideration plus (ii) the Aggregate Option Consideration
          (the “Aggregate Consideration,” and such Aggregate
          Consideration as deposited with the Paying Agent, the “Exchange
          Fund”). In the event the Exchange Fund shall be insufficient to make
          the payments contemplated by Section 3.1(b) and Section 3.3, the Purchaser shall
          promptly deposit, or cause to be deposited, additional funds with the Paying
          Agent in an amount which is equal to the deficiency in the amount required to
          make such payment. The Paying Agent shall cause the Exchange Fund to be (i) held
          in trust for the benefit of the holders of Company Shares and Company Stock
          Options, and (ii) applied promptly to making the payments in accordance with
          this Agreement. In the event that a portion of the Aggregate Consideration will
          not be disbursed immediately to Israeli residents while a request for a tax
          exemption is pending, such funds shall be placed in an interest bearing account
          and the interest earned thereon shall be paid to the recipients. The Exchange
          Fund shall not be used for any purpose other than to fund payments in accordance
          with this Agreement. 

         (b)       
          As promptly as practicable following the Effective Time, and, in the case of
          holders of record of Book-Entry Shares and only with respect to such
          holders’ Book-Entry Shares, not later than the first Business Day
          thereafter, the Surviving Company shall cause the Paying Agent to mail or
          otherwise transmit (or to make available for collection by hand) to each holder
          of record of a Certificate or Book-Entry Share, which immediately prior to the
          Effective Time represented outstanding Company Shares (i) a letter of
          transmittal, which shall specify that delivery shall be effected, and risk of
          loss and title to the Certificates or Book-Entry Shares, as applicable, shall
          pass, only upon proper delivery of the Certificates (or affidavits of loss in
          lieu thereof) or Book-Entry Shares to the Paying Agent and which shall be in the
          form and have such other provisions as the Purchaser and the Company may
          reasonably specify, (ii) instructions for use in effecting the surrender of the
          Certificates or Book-Entry Shares in exchange for the Merger Consideration into
          which the number of Company Shares previously represented by such Certificate or
          Book-Entry Shares shall have been converted pursuant to this Agreement (which
          instructions shall provide that at the election of the surrendering holder,
          Certificates or Book-Entry Shares may be surrendered, and the Merger
          Consideration in exchange therefor collected, by hand delivery to the extent
          permitted by the Paying Agent) and (iii) a declaration form in which the holder
          of record of a Certificate or Book-Entry Share states whether such holder is a
          resident of Israel as defined in the Ordinance (as defined below) at the time of
          mailing to such holder any information statement in connection with approval of
          the Merger, including any other declarations that may be required for Israeli
          Tax purposes. 

12

         (c)       
          Upon surrender of a Certificate (or affidavit of loss in lieu thereof) or
          Book-Entry Share for cancellation to the Paying Agent, together with a letter of
          transmittal duly completed and validly executed in accordance with the
          instructions thereto, and such other documents as may be required pursuant to
          such instructions, the holder of such Certificate or Book-Entry Share shall be
          entitled to receive in exchange therefor the Merger Consideration, without
          interest, for each Company Share formerly represented by such Certificate or
          Book-Entry Share, to be mailed (or made available for collection by hand if so
          elected by the surrendering holder and permitted by the Paying Agent) as soon as
          practicable, and, in the case of holders of record of Book-Entry Shares and only
          with respect to such holders’ Book-Entry Shares, not later than the one (1)
          Business Day, following the Paying Agent’s receipt of such Certificate (or
          affidavit of loss in lieu thereof) or Book-Entry Share. The Certificate (or
          affidavit of loss in lieu thereof) or Book-Entry Share so surrendered shall be
          forthwith cancelled. The Paying Agent shall accept such Certificates (or
          affidavits of loss in lieu thereof) or Book-Entry Shares upon compliance with
          such reasonable terms and conditions as the Paying Agent may impose to effect an
          orderly exchange thereof in accordance with normal exchange practices. No
          interest shall be paid or accrued for the benefit of holders of the Certificates
          or Book-Entry Shares on the Merger Consideration. 

         (d)       
          Termination of Exchange Fund. Any portion of the Exchange Fund that
          remains undistributed to the holders of the Certificates, Book-Entry Shares or
          Company Stock Options for eighteen (18) months after the Effective Time shall be
          delivered to the Purchaser, upon demand, and any such holders prior to the
          Merger who have not theretofore complied with this Article III shall thereafter
          look only to the Purchaser, as general creditors thereof, for payment of their
          claim for cash, without interest, to which such holders may be entitled. 

         (e)       
          No Liability. None of the Purchaser, the Merger Sub, the Company, the
          Surviving Company or the Paying Agent shall be liable to any Person in respect
          of any cash held in the Exchange Fund delivered to a public official pursuant to
          any applicable abandoned property, escheat or similar Law. If any Certificates
          or Book-Entry Shares are not surrendered prior to two (2) years after the
          Effective Time (or immediately prior to such earlier date on which any cash in
          respect of such Certificate or Book-Entry Share would otherwise escheat to, or
          become the property of, any Governmental Authority), any such cash in respect of
          such Certificate or Book-Entry Share shall, to the extent permitted by
          applicable Law, become the property of the Purchaser, free and clear of all
          claims, rights or interest of any Person previously entitled thereto. 

         (f)       
          Investment of Exchange Fund. The Paying Agent shall invest the Exchange
          Fund as directed by the Purchaser or, after the Effective Time, the Surviving
          Company; provided that, (i) no such investment shall relieve the
          Purchaser or the Paying Agent from making the payments required by this Article
          III, (ii) no such investment shall have maturities that could prevent or delay
          payments to be made pursuant to this Agreement, and (iii) such investments shall
          be in short-term obligations of the United States of America with maturities of
          no more than thirty (30) days or guaranteed by the United States of America and
          backed by the full faith and credit of the United States of America or in
          commercial paper obligations rated A-I or P-1 or better by Moody’s
          Investors Service, Inc. or Standard & Poor’s Corporation, respectively.
          Any interest or income produced by such investments will be payable to the
          Surviving Company or the Purchaser, as the Purchaser directs. 

13

        Section
3.3 Stock Options.  

         (a)       
          As of the Effective Time, each option to purchase Company Shares (each a
          “Company Stock Option”) that is outstanding and unexercised
          immediately prior to the Effective Time shall be accelerated and cancelled by
          virtue of the Merger and without any action on the part of any holder of any
          Company Stock Options, in consideration for the right to receive in accordance
          with, and subject to, the Israeli Options Tax Ruling, if applicable, as promptly
          as practicable following the Effective Time, an amount in cash equal to the
          product of (i) the number of Company Shares previously subject to such Company
          Stock Options and (ii) the excess, if any, of the Merger Consideration over the
          exercise price per Company Share previously subject to such Company Stock
          Options, less any required withholding Taxes and applicable commissions and fees
          (the “Option Consideration” and the sum of all such payments,
          the “Aggregate Option Consideration”). As of the Effective
          Time, all Company Stock Options shall no longer be outstanding and shall
          automatically cease to exist, and each holder of a Company Stock Option shall
          cease to have any rights with respect thereto, except the right to receive the
          Option Consideration, without interest. Prior to the Effective Time, the Company
          shall take all actions necessary to effectuate this Section 3.3, including
          providing holders of Company Stock Options with notice of their rights with
          respect to any such Company Stock Options as provided herein. 

         (b)       
          As promptly as practicable following the Effective Time, the Paying Agent shall
          transfer to the account designated by the plan administrator, under the
          applicable Company Stock Option Plan, the portion of the Aggregate Option
          Consideration that holders of Company Stock Options (other than Company 102
          Securities) are entitled to receive pursuant to Section 3.3(a). As soon as
          reasonably practicable thereafter, the applicable plan administrator, in
          coordination with the Surviving Company, shall pay to each holder of Company
          Stock Options (other than holders of Company 102 Securities) the amounts
          contemplated by Section 3.3(a), less applicable deductions and withholding at
          the time of payment. All payments with respect to Company 102 Securities, as set
          forth on a schedule to be mutually agreed upon by the Purchaser and the Company
          on or prior to the Closing Date (the “Option Schedule”), shall
          be delivered by the Paying Agent to the 102 Trustee, as soon as practicable
          after the Effective Time, to be held and distributed pursuant to the agreement
          with the 102 Trustee and applicable Laws (including the provisions of Section
          102 of the Ordinance and the regulations and rules promulgated thereunder). The
          102 Trustee shall comply with any applicable Israeli Tax withholding
          requirements with respect to the payment in respect to Company 102 Securities
          and with such procedures as may be required by the Israeli Options Tax Ruling,
          if obtained. 

14

        Section
3.4 Lost Certificates.  

        If
any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and,
if required by the Surviving Company, the posting by such Person of a bond, in such
reasonable and customary amount as the Surviving Company may direct, as indemnity against
any claim that may be made against the Surviving Company with respect to such Certificate,
the Paying Agent will issue in exchange for such lost, stolen or destroyed Certificate the
applicable Merger Consideration to which the holder thereof is entitled pursuant to this
Article III. 

        Section
3.5 Transfers; No Further Ownership Rights.  

         (a)       
          The Merger Consideration paid in respect of Company Shares upon the surrender
          for exchange of Certificates or Book-Entry Shares in accordance with the terms
          of this Article III shall be deemed to have been paid in full satisfaction of
          all rights pertaining to the Company Shares represented by such Certificates or
          Book-Entry Shares, and at the Effective Time, the share transfer books shall be
          closed and thereafter there shall be no further registration of transfers on the
          share transfer books of the Surviving Company of Company Shares that were
          outstanding immediately prior to the Effective Time. From and after the
          Effective Time, the holders of Certificates or Book-Entry Shares that evidence
          ownership of Company Shares outstanding immediately prior to the Effective Time
          shall cease to have any rights with respect to such Company Shares, except as
          otherwise provided herein or by applicable Law. If valid Certificates or
          Book-Entry Shares are presented to the Surviving Company for transfer following
          the Effective Time, they shall be cancelled against delivery of the applicable
          Merger Consideration, as provided for in Section 3.1(b) hereof, for each Company
          Share formerly represented by such Certificates. 

         (b)       
          If, at any time after the Effective Time, any further action is necessary or
          desirable to carry out the purposes of this Agreement to vest the Purchaser with
          control over, and to vest the Surviving Company with full right, title and
          possession to, all assets, property, rights, privileges, powers and franchises
          of the Company, the officers and directors of the Surviving Company and the
          Purchaser shall, in the name of their respective corporations or otherwise, be
          fully authorized to take all such lawful and necessary action to the extent not
          inconsistent with the terms of this Agreement or the rights of the holders of
          Company Shares or Company Stock Options. 

        Section
3.6 Withholding Tax.  

        Each
of the Purchaser, the Surviving Company, the 102 Trustee, the Paying Agent and
Subsidiaries of the Surviving Company shall be entitled to deduct and withhold from the
consideration otherwise payable to any holder of Company Shares or Company Stock Options
pursuant to this Agreement the amounts required to be deducted and withheld from any
payment pursuant to this Agreement under the Code, the Israeli Income Tax Ordinance New
Version, 1961, as amended and the rules and regulations promulgated thereunder (the
“Ordinance”), or any other applicable state or local Tax Law, or Israeli or
foreign Tax Law, provided, however, that (i) in the event the Israeli Withholding
Tax Ruling and/or the Israeli Options Tax Ruling, as applicable is obtained, deduction and
withholding of any amounts under the Ordinance or any other provision of Israeli Law or
requirement, if any, shall be made only in accordance with the provisions of such rulings,
(ii) in the event the Israeli Withholding Tax Extension is obtained, the parties shall
fully comply with the provisions of any such Israeli Withholding Tax Extension, and (iii)
in the event any holder of record of Company Shares or Book-Entry Shares provides the
Purchaser or the Surviving Company with a valid approval or ruling issued by the
applicable Governmental Authority regarding the withholding (or exemption from
withholding) of Israeli Tax from the Merger Consideration in a form reasonably
satisfactory to the Purchaser, then the deduction and withholding of any amounts under the
Ordinance or any other provision of Israeli law or requirement, if any, from the Merger
Consideration payable to such holder of record of Company Shares shall be made only in
accordance with the provisions of the applicable approval. To the extent that amounts are
withheld by the Paying Agent, the Surviving Company, the 102 Trustee, applicable plan
administrator or the Purchaser, as the case may be, such withheld amounts (i) shall be
remitted by the Purchaser, the Surviving Company, the Paying Agent, the 102 Trustee,
applicable plan administrator or Subsidiaries of the Surviving Company, as applicable, to
the applicable Governmental Authority, and (ii) shall be treated for all purposes of this
Agreement as having been paid to the holder of Company Shares in respect of which such
deduction and withholding was made by the Purchaser, the Surviving Company, the Paying
Agent, the 102 Trustee, applicable plan administrator or Subsidiaries of the Surviving
Company, as the case may be.  

15

ARTICLE IV 

REPRESENTATIONS AND
WARRANTIES OF THE COMPANY 

        The
Company represents and warrants to the Purchaser and the Merger Sub that, except as set
forth in the disclosure schedule (the “Company Disclosure Schedule”)
delivered by the Company to the Purchaser prior to the execution and delivery of this
Agreement (such disclosures being considered to be made for purposes of the specific
Section of the Company Disclosure Schedule in which they are made and for purposes of all
other Sections to the extent the relevance of such disclosure is reasonably apparent on
its face): 

        Section
4.1 Organization; Qualification.  

         (a)       
          The Company and each of its Subsidiaries is a corporation or a limited liability
          company, duly organized, validly existing and, in jurisdictions where such
          concept is recognized, in good standing under the laws of the jurisdiction of
          its organization and has all requisite corporate or limited liability company
          power and authority to own, license, use, lease and operate its assets and
          properties and to carry on its business as it is now being conducted and as
          currently proposed by management to be conducted. The Company has made available
          to the Purchaser true and complete copies of its Memorandum of Association and
          Articles of Association (together, the “Company Charter
          Documents”) and the certificate of incorporation and bylaws (or similar
          organizational documents) of Spacenet Inc. The Company Charter Documents and the
          certificate of incorporation and bylaws (or similar organizational documents) of
          each of its Subsidiaries are in full force and effect and neither the Company
          nor any of its Subsidiaries is in violation of any of their respective
          provisions. The Company has made available to the Purchaser correct and complete
          copies of the minutes of all meetings of shareholders, the Board of Directors
          and each committee of the Board of Directors of the Company and Spacenet Inc. in
          each case since January 1, 2005, other than any such minutes related to the
          Transactions. 

16

         (b)       
          The Company and each of its Subsidiaries is duly qualified or licensed to do
          business and in good standing (in jurisdictions where such concept is
          recognized) in each jurisdiction in which failure to be so duly qualified or
          licensed and in good standing would have a Material Adverse Effect. 

        Section
4.2 Capitalization.  

         (a)       
          The registered and authorized share capital of the Company consists of
          60,000,000 Company Shares. As of March 27, 2008, (i) 39,749,429 Company Shares
          were issued and outstanding, (ii) 2,062,407 Company Shares were available for
          issuance under the Company Stock Option Plans and 4,089,010 Company Shares were
          issuable upon the exercise of outstanding Company Stock Options to purchase
          Shares under the Company Stock Option Plans, and (iii) 866,161 Company Shares
          were issuable upon the conversion of outstanding convertible notes. Each of the
          issued and outstanding Company Shares have been duly authorized and validly
          issued and are fully paid and nonassessable, have not been issued in violation
          of any preemptive or similar rights and were issued in compliance in all
          material respects with applicable Law. Except as set forth above in this Section
          4.2(a), and except for changes since the above date resulting from the exercise
          of Company Options or the conversion of convertible notes of the Company
          outstanding on such date, there are no outstanding (i) shares of registered
          authorized share capital or other voting securities of the Company, (ii)
          securities of the Company convertible into or exchangeable for shares of
          registered and authorized share capital or other securities of the Company, or
          (iii) subscriptions, options, warrants, puts, calls, phantom stock rights, stock
          appreciation rights, stock-based performance units, agreements, understandings,
          claims or other commitments or rights of any type granted or entered into by the
          Company or any of its Subsidiaries relating to the issuance, sale, repurchase or
          transfer of any securities of the Company or that give any Person the right to
          receive any economic benefit or right similar to or derived from the economic
          benefits and rights of securities of the Company. There are no outstanding
          obligations of the Company or any of the Company’s Subsidiaries to
          repurchase, redeem or otherwise acquire any securities of the Company or any of
          the Company’s Subsidiaries or to vote or to dispose of any shares of
          registered and authorized share capital of the Company or any of the
          Company’s Subsidiaries. 

         (b)       
          Section 4.2(b) of the Company Disclosure Schedule lists each outstanding Company
          Option, the Plan under which such Options were granted, the holder thereof, the
          number of Company Shares issuable thereunder and the exercise price thereof.
          Except as disclosed in Section 4.2(b) of the Company Disclosure Schedule,
          neither the Company nor any Subsidiary has agreed to register any securities
          under the Securities Act, any state securities Law or any other applicable
          securities Law or granted registration rights to any individual or entity. 

17

         (c)       
          Section 4.2(c) of the Company Disclosure Schedule lists each Subsidiary of the
          Company, and its shareholders, directors and officers. Each of the issued and
          outstanding shares of capital stock of each of the Subsidiaries (the
          “Subsidiary Shares”) has been duly authorized and validly
          issued and are fully paid and nonassessable, have not been issued in violation
          of any preemptive or similar rights and were issued in compliance in all
          material respects with applicable Law, and, except as set forth in Section
          4.2(c) of the Company Disclosure Schedule, the Company owns, directly or
          indirectly, one hundred percent (100%) of all Subsidiary Shares. Except as
          disclosed in Section 4.2(c) of the Company Disclosure Schedule, there are no (i)
          securities convertible into or exchangeable for shares of share capital or other
          securities of any Subsidiary of the Company, or (ii) subscriptions, options,
          warrants, puts, calls, phantom stock rights, stock appreciation rights,
          stock-based performance units, agreements, understandings, claims or other
          commitments or rights of any type granted or entered into by the Company or any
          of its Subsidiaries relating to the issuance, sale, repurchase or transfer of
          any securities of any Subsidiary of the Company or that give any Person the
          right to receive any economic benefit or right similar to or derived from the
          economic benefits and rights of securities of any Subsidiary of the Company.
          Except for the capital stock of its Subsidiaries, the Company does not own,
          directly or indirectly, any ownership interest in any Person other than
          investments having a carrying amount, in each case, less than $250,000. The
          Company is not subject to any obligation or requirement to provide funds to, or
          make any investment (in the form of a loan, capital contribution or otherwise),
          in any Person except its Subsidiaries. 

        Section
4.3 Authority.  

        The
Company has all requisite corporate power and authority to execute and deliver this
Agreement and to perform and consummate this Agreement, the Merger and the Transactions.
The execution, delivery and performance of this Agreement and the consummation by the
Company of the Merger and the Transactions have been duly authorized by all necessary
corporate action on the part of the Company and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or to consummate the
Transactions, other than the Company Shareholder Approval. This Agreement has been duly
executed and delivered by the Company and constitutes a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors’ rights and to general
principles of equity. 

        Section
4.4 Consents and Approvals; No Violations; Voting.  

         (a)       
          The execution, delivery and performance by the Company of this Agreement and the
          consummation by the Company of the Merger and the Transactions do not and will
          not require any filing or registration with, notification to, or authorization,
          permit, consent or approval of, or other action by or in respect of, any
          foreign, domestic, state or local governmental body, self-regulatory
          organization, court, agency, commission, official or regulatory or other
          authority (collectively, “Governmental Authority”) other than
          (i) filing of the Merger Certificate, (ii) notice to the Office of the Chief
          Scientist of the Israeli Ministry of Trade, Industry & Labor
          (“OCS”) of the change in ownership of the Company to be
          effected by the Merger, (iii) filings with, and approval by, the Investment
          Center of the Israeli Ministry of Trade, Industry & Labor (the
          “Investment Center”) of the change in ownership of the Company
          to be effected by the Merger, (iv) compliance with the rules and regulations of
          NASDAQ, (v) obtaining the Israeli Withholding Tax Ruling and the Israeli Options
          Tax Ruling, (vi) notices to the Israeli Ministry of Defense, (vii) any consent,
          approval, authorization, waiver or permit of, or filing with or notification to,
          any Governmental Authority under applicable U.S. or foreign competition,
          antitrust, merger control or investment laws (“Antitrust
          Requirements”) (clauses (i) through (vii), collectively, the
          “Governmental Consents”), (viii) those consents set forth in
          Section 4.4(a) of the Company Disclosure Schedule, and (ix) where failure to
          obtain or make such filing or registration with, notification to, or
          authorization, permit, consent or approval of, or other action by, or in respect
          of any Governmental Authority would not have, individually or in the aggregate,
          a Material Adverse Effect. No Subsidiary of the Company is required to make any
          independent filings with the U.S. Securities and Exchange Commission (the
          “SEC”), NASDAQ or any other stock exchange. 

18

         (b)       
          The execution, delivery and performance by the Company of this Agreement and the
          consummation by the Company of the Merger and the Transactions do not and will
          not (i) conflict with or result in any breach of any provision of the Company
          Charter Documents or any similar organizational documents of any of its
          Subsidiaries, (ii) except as set forth in Section 4.4(b) of the Company
          Disclosure Schedule, result in a violation or breach of, or constitute (with or
          without due notice or lapse of time or both) a default under, or give rise to
          any right of termination, amendment, cancellation or acceleration or the
          creation or acceleration of any right or obligation under, or result in the
          creation of any Encumbrance upon, any of the properties or assets of the Company
          or any of its Subsidiaries under any of the terms, conditions or provisions of
          any note, bond, mortgage, indenture, deed of trust, loan, credit agreement,
          lease, license, permit, concession, franchise, purchase order, sales order
          Contract, agreement or other instrument, understanding or obligation, whether
          written or oral, to which the Company or any of its Subsidiaries is a party or
          by which any of their properties or assets may be bound, or (iii) violate any
          judgment, order, writ, preliminary or permanent injunction or decree or any Law
          applicable to the Company, any of its Subsidiaries or any of their properties or
          assets, except in the case of clauses (ii) and (iii) for violations, breaches,
          defaults, terminations, amendments, cancellations or accelerations that would
          not have a Material Adverse Effect. 

         (c)       
          Assuming the accuracy of the representations set forth in Section 5.5 below, the
          affirmative vote (in person or by proxy) of the holders of the majority of the
          Company Shares present and voting at the Company Shareholders’ Meeting, or
          any adjournment or postponement thereof, in favor of the approval of this
          Agreement, the Merger and the Transactions (the “Company Shareholder
          Approval”) is the only vote or approval of the holders of any class or
          series of shares of the Company or any of its Subsidiaries that is necessary to
          approve this Agreement, the Merger and the Transactions. If the Purchaser, the
          Merger Sub or any person or entity holding twenty-five percent (25%) or more of
          either the voting rights or the right to appoint directors of the Purchaser or
          the Merger Sub (any such person or entity is described in this paragraph as a
          “Purchaser Affiliate”) holds shares in the Company (as set
          forth in Section 5.5 of the Purchaser Disclosure Schedule), then the Company
          Shareholder Approval shall also include the additional requirement that a
          majority of the voting power present and voting at the Company
          Shareholders’ Meeting in person or by proxy (excluding abstentions, the
          Purchaser, the Merger Sub, the Purchaser’s Affiliates, or anyone acting on
          their behalf, including their family members or entities under their control)
          shall not have voted against the Merger. 

        Section
4.5 SEC Reports and Financial Statements.  

         (a)       
          The Company has filed with, or furnished to, the SEC, on a timely basis, all
          forms, reports, schedules, statements and other documents required to be filed
          by it since January 1, 2006 (collectively, the “Company SEC
          Documents”). The Company SEC Documents, as of their respective dates
          (or if amended prior to the date of this Agreement, as of the date of such
          amendment) (i) do not contain any untrue statement of a material fact or omit to
          state a material fact required to be stated therein or necessary in order to
          make the statements therein, in light of the circumstances under which they were
          made, not misleading, and (ii) comply in all material respects with the
          applicable requirements of the Exchange Act and the Securities Act, as the case
          may be, and the applicable rules and regulations of the SEC thereunder. 

19

         (b)       
          As of their respective dates (or if amended prior to the date of this Agreement,
          as of the date of such amendment), the financial statements of the Company
          included in the Company SEC Documents, including any related notes thereto, (i)
          comply in all material respects with applicable accounting requirements and with
          the published rules and regulations of the SEC with respect thereto, (ii) have
          been prepared in accordance with GAAP applied on a consistent basis during the
          periods involved (except as may be set forth in the notes thereto and subject,
          in the case of the unaudited statements, to normal, recurring audit adjustments
          not material in amount), and (iii) fairly present in all material respects the
          consolidated financial position of the Company and its consolidated Subsidiaries
          as at the dates thereof and the consolidated results of their operations and
          cash flows for the periods indicated. 

         (c)       
          Solely as applicable to a foreign private issuer, the Company has established
          and maintains internal controls over financial reporting and disclosure controls
          and procedures (as such terms are defined in Rule 13a-15 and Rule 15d-15 under
          the Exchange Act). Such disclosure controls and procedures are designed to
          ensure that material information relating to the Company, including its
          Subsidiaries, required to be disclosed by the Company in the reports that it
          files or furnishes under the Exchange Act is accumulated and communicated to the
          Company’s chief executive officer and chief financial officer as
          appropriate to allow timely decisions regarding required disclosure and to make
          the certifications required pursuant to Sections 302 and 906 of the
          Sarbanes-Oxley Act of 2002, as amended, and such disclosure controls and
          procedures are effective to ensure that information required to be disclosed by
          the Company in the reports that it files or submits under the Exchange Act is
          recorded, processed, summarized and reported within the time periods specified
          in the rules and forms promulgated by the SEC. Such internal controls over
          financial reporting are effective in providing reasonable assurance regarding
          the reliability of financial reporting and the preparation of financial
          statements for external purposes in accordance with GAAP, including policies and
          procedures that (i) pertain to the maintenance of records that, in reasonable
          detail, accurately and fairly reflect the transactions and dispositions of the
          assets of the Company and its Subsidiaries, (ii) provide reasonable assurance
          that transactions are recorded as necessary to permit preparation of financial
          statements in accordance with GAAP, and that receipts and expenditures of the
          Company and its Subsidiaries are being made only in accordance with appropriate
          authorizations of management and the board of directors of the Company, and
          (iii) provide reasonable assurance regarding prevention or timely detection of
          unauthorized acquisition, use or disposition of the Company’s assets that
          could have a material effect on the financial statements of the Company and its
          Subsidiaries. As of the date hereof, the Company has not identified any material
          weaknesses in the design or operation of the internal controls over financial
          reporting except as disclosed in the Company SEC Documents filed prior to the
          date hereof. 

20

         (d)       
          Except (i) as reflected or reserved against in the Company’s financial
          statements (or the notes thereto) included in the Company SEC Documents filed
          with or furnished to the SEC and publicly available prior to the date of this
          Agreement, (ii) for liabilities or obligations incurred in the ordinary course
          of business since the date of such financial statements that would not have a
          Material Adverse Effect, (iii) for liabilities permitted or contemplated by this
          Agreement in connection with the Merger and the Transactions, or (iv) as
          disclosed in Section 4.5(d) of the Company Disclosure Schedule, neither the
          Company nor any of its Subsidiaries has any material liabilities or obligations
          of any nature, whether or not accrued, contingent or otherwise. 

        Section
4.6 Absence of Certain Changes or Events.  

        Except
as set forth in Section 4.6 of the Company Disclosure Schedule, (a) from January 1, 2007
through the date of this Agreement, there has not been any Material Adverse Effect, and
(b) since September 30, 2007, (i) except for the Merger and the Transactions, the business
of the Company and its Subsidiaries has been conducted in all material respects in the
ordinary course, consistent with past practice, and (ii) neither the Company nor any of
its Subsidiaries has taken any action described in Section 6.2 hereof that if taken after
the date hereof and prior to the Effective Time without the prior written consent of the
Purchaser would violate such provision. Without limiting the foregoing, since September
30, 2007, there has not occurred any damage, destruction or loss (whether or not covered
by insurance) of any material asset of the Company or any of its Subsidiaries which
materially affects the use thereof. 

        Section
4.7 Information Supplied.  

        None
of the information supplied by the Company for inclusion or incorporation by reference in
any document to be sent to the Company’s shareholders in connection with the Company
Shareholders’ Meeting at the time furnished (as amended or supplemented) or at the
time of the Company Shareholders’ Meeting in connection with the Transactions will
contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, except that no representation is
made by the Company with respect to statements made therein based on information supplied
by the Purchaser or the Merger Sub in writing for inclusion in any such document. 

        Section
4.8 Employee Matters and Benefit Plans.  

         (a)       
          Section 4.8(a)(i) of the Company Disclosure Schedule contains an accurate and
          complete list, as of the date hereof, of each Company Employee Plan relating to
          employees of the Company in Israel, the United States, Colombia and Peru, and
          Section 4.8(a)(ii) of the Company Disclosure Schedule contains an accurate and
          complete list, as of the date hereof, of each Employment Agreement providing for
          total compensation of $200,000 or more per year in the year ended December 31,
          2007. The Company does not have any plan or commitment to establish any new
          Company Employee Plan, or to modify any such Plan. 

21

         (b)       
          The Company has provided or made available to the Purchaser copies of (i) each
          Company Employee Plan and each Employment Agreement identified in Section
          4.8(a)(i) and Section 4.8(a)(ii) of the Company Disclosure Schedule, including
          all amendments thereto and all related documents, including the form of each
          representative stock option agreement evidencing any outstanding Company Stock
          Options, (ii) the most recent annual actuarial valuations, if any, prepared for
          each Company Employee Plan identified in Section 4.8(a)(i), (iii) the most
          recent annual report (e.g. Form Series 5500 and all schedules and financial
          statements attached thereto), if any, required under ERISA, the Code or other
          applicable Laws in connection with each Company Employee Plan, (iv) the most
          recent summary plan description together with the summaries of material
          modifications thereto, if any, with respect to each Company Employee Plan
          identified in Section 4.8(a)(i), (v) all determination, opinion, notification
          and advisory letters from the United States Internal Revenue Service (the
          “IRS”) or similar non-U.S. Governmental Authority in respect of
          any U.S. Company Employee Plan, (vi) all correspondence since January 1, 2005 to
          or from any Governmental Authority relating to any Company Employee Plan that
          alleges a violation of any Laws in any material respect or relates to a material
          amendment to any such Plan, (vii) all prospectuses prepared in connection with
          each Company Employee Plan identified in Section 4.8(a)(i) or Stock Option Plan,
          and (viii) any approvals held by the Company or its Subsidiaries that enable
          them to employ foreign employees or employees from “territories”
          currently administered by Israel. 

         (c)       
          The Company and its Subsidiaries have performed in all material respects all
          obligations required to be performed by it under, are not in default or
          violation of, and have no Knowledge of any material default or violation by any
          other party to, each Company Employee Plan, Employment Agreement and consulting
          agreement, and each Company Employee Plan, Employment Agreement or consulting
          agreement has been established and maintained in all material respects in
          accordance with its terms and in material compliance with applicable Laws.
          Except as disclosed in Section 4.5(d) of the Company Disclosure Schedule, as of
          the date hereof, (i) there are no actions, suits or claims pending, or, to the
          Company’s Knowledge, threatened or reasonably anticipated against any
          Company Employee Plan, the Company or its Subsidiaries with respect to any
          Employment Agreement or against the assets of any Company Employee Plan, except
          for claims that would not reasonably be expected to be material to the Company
          and its Subsidiaries, and (ii) there are no audits, inquiries or proceedings
          pending or, to the Company’s Knowledge, threatened by the IRS, United
          States Department of Labor or any other Governmental Authority with respect to
          any Company Employee Plan. Except as disclosed in Section 4.8(c) of the Company
          Disclosure Schedule and except as required by Law, no condition exists that
          would prevent the Surviving Company, its Subsidiaries or the Purchaser from
          terminating or amending any Company Employee Plan at any time for any reason
          without liability to the Surviving Company (other than ordinary administration
          expenses or routine claims for benefits). 

         (d)       
          None of the Company, its Subsidiaries or their respective ERISA Affiliates has
          ever maintained, established, sponsored, participated in, contributed to, or is
          obligated to contribute to, or otherwise incurred any obligation or liability
          (including any contingent liability) under any “multiemployer plan,”
          as defined in Section 3(37) of ERISA, any plan subject to Title IV of ERISA or
          Section 412 of the Code, any multiple employer plan (as defined in ERISA or the
          Code), or any “funded welfare plan” within the meaning of Section 419
          of the Code. Any Company Employee Plan intended to be qualified under Section
          401(a) of the Code and each trust intended to qualify under Section 501(a) of
          the Code has either timely applied for or obtained a favorable determination,
          notification, advisory and/or opinion letter, as applicable, as to its qualified
          status from the IRS. For each Company Employee Plan that is intended to be
          qualified under Section 401(a) of the Code, to the Company’s Knowledge,
          there has been no event, condition or circumstance that has adversely affected
          or is likely to adversely affect such qualified status, except such events,
          conditions or circumstances which could be corrected without the Company
          incurring a material liability. 

22

         (e)       
          No Company Employee Plan provides, or reflects or represents any liability
          material to the Company or its Subsidiaries, taken as a whole, to provide
          post-termination life, health or other welfare benefits to any Person for any
          reason, except as may be required by Section 601 through 608 of ERISA or other
          applicable Law. 

         (f)       
          The Company and its Subsidiaries (i) are not liable for any arrears of wages or
          penalties with respect thereto, and (ii) are not liable for any payment to any
          trust or other fund governed by or maintained by or on behalf of any
          Governmental Authority, with respect to unemployment compensation benefits,
          social security or other benefits or obligations for individuals who perform or
          who have performed services for the Company or its Subsidiaries (other than
          routine payments to be made in the ordinary course of business and consistent
          with past practice). Except as set forth in Sections 4.5(d) and 4.8(f) of the
          Company Disclosure Schedule, there are no complaints, charges or claims against
          the Company or its Subsidiaries pending, or to the Knowledge of the Company,
          threatened to be brought, with any Governmental Authority, arbitrator or court
          based on, arising out of, in connection with, or otherwise relating to the
          employment or termination of employment or failure to employ by the Company or
          its Subsidiaries of any individual that would be material to the Company and its
          Subsidiaries taken as a whole. The Company and its Subsidiaries are in
          compliance in all material respects with all Laws relating to the employment of
          labor, including all such Laws relating to wages, hours, the Fair Labor
          Standards Act, the Worker Adjustment and Retraining Notification Act and any
          similar state of local “mass layoff” or “plant closing” law,
          collective bargaining, extension orders, discrimination, civil rights, safety
          and health, workers’ compensation and the collection and payment of
          withholding and/or social security Taxes and any similar Tax. 

         (g)       
          As of the date hereof, no work stoppage or labor strike against the Company or
          its Subsidiaries is pending, or to the Knowledge of the Company, threatened. The
          Company does not have Knowledge of any material activities or proceedings of any
          labor union to organize any Employees. None of the Company or its Subsidiaries
          has engaged in any material unfair labor practices within the meaning of the
          National Labor Relations Act. Except as set forth in Section 4.8(g) of the
          Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is
          presently, and has not in the preceding five years been, a party to, or bound
          by, any collective bargaining agreement, extension order or union contract and
          no collective bargaining agreement is being negotiated by the Company or any of
          its Subsidiaries. 

         (h)       
          Each International Employee Plan has been established, maintained and
          administered in material compliance with its terms and conditions and with the
          requirements prescribed by Laws that are applicable to such International
          Employee Plan. Except as disclosed in Section 4.8(h) of the Company Disclosure
          Schedule, no International Employee Plan has unfunded liabilities, with respect
          to all current or former participants in such plan according to the actuarial
          assumptions and valuations most recently used to determine employer
          contributions to such International Employee Plan, that as of the Effective
          Time, will not be offset by insurance or fully accrued, in accordance with
          normal accounting practices, except such liabilities for severance payments
          required under local Law in the event of a non-voluntary termination of
          employment. 

23

         (i)       
          Solely with respect to Employees who reside or work in Israel or whose
          employment is otherwise subject to Israeli Law (“Israeli
          Employees”) and except as set forth in Section 4.8(i) of the Company
          Disclosure Schedule, (i) the Company is not a party to any collective bargaining
          contract, collective labor agreement or other contract or arrangement with a
          labor union, trade union or other organization or body involving any of its
          Israeli Employees, or is otherwise required under any legal requirement (except
          as set forth in personal Employment Agreements) to provide benefits or working
          conditions beyond the minimum benefits and working conditions required by
          Israeli Law or pursuant to extension orders applicable to all employees in
          Israel, which have not been accrued by the Company and which, if paid, could
          have a Material Adverse Effect; (ii) the Company has not recognized or received
          a demand for recognition from any collective bargaining representative with
          respect to any of its Israeli Employees; (iii) the Company is not subject to,
          and no Israeli Employee of the Company benefits from, any extension order
          (tzavei harchava) except for extension orders applicable to all employees in
          Israel; (iv) all of the Israeli Employees are “at will” employees
          subject to the termination notice provisions included in the respective
          Employment Agreements or applicable Law, and all Contracts between the Company
          and any of its Israeli Employees or directors can be terminated by the Company
          by up to ninety (90) days notice without giving rise to a claim for damages or
          compensation (except for statutory payments); (v) all amounts that the Company
          is legally or contractually required to pay to Employees and/or to Governmental
          Authorities (whether under (vii) below or otherwise) are fully funded or accrued
          on the Financial Statements as of the date of such Financial Statements, and the
          Company is in compliance with the requirements of the general authorization
          (heter) given by the Ministry of Labor in connection with Section 14 of the
          Severance Pay Law, (vi) except as disclosed in Section 4.5(d) of the Company
          Disclosure Schedule, there is no pending or, to the Company’s Knowledge,
          threatened claim by a current or former Israeli Employee for compensation due to
          termination of employment (beyond the statutory payments to which employees are
          entitled); (vii) all amounts that the Company is legally or contractually
          required to either (A) deduct from its Israeli Employees’ salaries or to
          transfer to such Israeli Employees’ pension or provident, life insurance,
          incapacity insurance, continuing education fund or other similar funds, or (B)
          withhold from their Israeli Employees’ salaries and benefits and to pay to
          any Governmental Authority as required by the Israeli Income Tax Ordinance
          and/or Israeli National Insurance Law or otherwise, in either case, have been
          duly deducted, transferred, withheld and paid, and the Company does not have any
          outstanding obligation to make any such deduction, transfer, withholding or
          payment (other than routine payments, deductions or withholdings to be timely
          made in the ordinary course of business and consistent with past practice);
          (viii) the Company is in compliance in all material respects with all applicable
          legal requirements and contracts relating to employment, employment practices,
          wages, bonuses and other compensation matters and terms and conditions of
          employment related to its Israeli Employees, including the Israeli Prior Notice
          to the Employee Law 2002, the Israeli Notice to Employee (Terms of Employment)
          Law 2002, the Israeli Prevention of Sexual Harassment Law 1998, and the Israeli
          Employment by Human Resource Contractors Law 1996; and (ix) as of the date
          hereof, the Company has not engaged any Israeli Employees whose employment would
          require special licenses or permits, and there are no unwritten Company policies
          or customs which, by extension, could entitle Israeli Employees to benefits in
          addition to what they are entitled by Law or contract. 

24

         (j)       
          Consultants providing services to the Company or its Subsidiaries are subject to
          agreements that state that there is no employer-employee relationship between
          the Company or any of its Subsidiaries, on the one hand, and a consultant, on
          the other hand. 

        Section
4.9 Contracts.  

         (a)       
          Except as disclosed in Section 4.9(a) of the Company Disclosure Schedule,
          neither the Company nor any of its Subsidiaries is a party to or is bound by any
          of the following Contracts: 

		    (i)        any
Contract whereby the Company or any of its Subsidiaries has assumed any
          obligation of, or duty to warrant, indemnify, reimburse, hold harmless or
          guarantee any obligation or liability of any other Person (including with
          respect to the infringement or misappropriation by the Company or any of its
          Subsidiaries or such other Person of the Intellectual Property Rights of any
          Person other than the Company or any of its Subsidiaries) in excess of
          $1,000,000, other than any Contract entered into in connection with the sale or
          license of products or services, or Intellectual Property Rights related
          thereto, or any Contract with advisors entered into in the ordinary course of
          business consistent with past practice;  

		    (ii)        any
Contract containing any covenant limiting in any respect the right of the
          Company or any of its Subsidiaries to engage in any line of business or to
          compete with any Person, granting any exclusive rights (including any exclusive
          license or right to use any Intellectual Property Rights) or “most favored
          nation” status or limiting, in any material respect, the Company’s
          right to acquire material assets, securities or services of any third parties;  

		    (iii)        any
Contract relating to the disposition or acquisition by the Company or any of
          its Subsidiaries of assets having a fair market value or a purchase price in
          excess of $1,000,000 not in the ordinary course of business or pursuant to
which           the Company or any of its Subsidiaries has or will have any ownership
interest           in any corporation, partnership, joint venture or other business
enterprise           other than the Company’s Subsidiaries, in each case, containing
material           covenants, indemnities or other obligations that are still in effect;  

		    (iv)        any
Contract involving payments in excess of $1,000,000 with any third party to
          manufacture, reproduce, sell or distribute any Company Products, except
          Contracts with manufacturers, distributors, customers or sales representatives
          in the ordinary course of business cancelable by the Company or the applicable
          Subsidiary without penalty upon ninety (90) days’ notice or less;  

		    (v)        any
mortgages, indentures, bank guarantees, loans or credit agreements, security
          agreements or other Contracts relating to the borrowing of money or extension
of           credit in excess of $1,000,000, other than trade payables or extensions of
          credit by or to the Company incurred in the ordinary course of business
          consistent with past practice, or any Contract under which the Company or any
of           its Subsidiaries acts as guarantor, surety, co-signer, endorser, co-maker,
          indemnitor or otherwise in respect of the obligation for borrowed money or
other           indebtedness of any Person (other than the Company or its Subsidiaries);  

25

		    (vi)        any
settlement agreement requiring payment of a sum in excess of $1,000,000           under
which the Company or any of its Subsidiaries has ongoing obligations;  

		    (vii)        each
real property lease and each lease for personal property in each case           involving
payments by the Company or any of its Subsidiaries in excess of           $250,000
annually (including capitalized leases);  

		    (viii)        any
royalty Contracts, Intellectual Property Licenses and other Contracts           relating
to any Intellectual Property Rights that are integral to the business           of the
Company and its Subsidiaries taken as a whole (excluding any shrink-wrap,
          click-through or other end-user license agreements on reasonable terms for
          Software available through commercial distributors or in consumer retail stores
          for a license fee of no more than $50,000) or pursuant to which the
          Company’s commitment for future payment is in excess of $500,000 in the
          aggregate or any settlement agreement related to Intellectual Property Rights
          entered into since January 1, 2001;  

		    (ix)        any
other Contract pursuant to which the Company and its Subsidiaries have
          aggregate remaining payment obligations in excess of $500,000, other than
          Contracts entered into in the ordinary course of business consistent with past
          practice; and  

		    (x)        any
commitment or agreement to enter into any of the foregoing.  

         (b)       
          None of the Company, any of its Subsidiaries, or, to the Company’s
          Knowledge, any other party to any Contract required to be disclosed in Section
          4.9(a) or 4.17 of the Company Disclosure Schedule (any such Contract, a
          “Company Contract”), is in material breach, violation or
          default under, and neither the Company nor any of its Subsidiaries has received
          written notice that it has materially breached, violated or defaulted under, any
          Company Contract. Each Company Contract is a legal, valid and binding obligation
          of the Company or the Subsidiary that is a party thereto, enforceable against
          the Company and such Subsidiary, and to the Company’s Knowledge, the other
          parties thereto in accordance with its terms. The Company has made available to
          the Purchaser true and complete copies of all Company Contracts and all other
          Contracts that are material to the Company and its Subsidiaries, taken as a
          whole, that are in effect on the date of this Agreement. 

         (c)       
          Solely with respect to Government Contracts to which a U.S. Governmental
          Authority is a party: 

		    (i)        Neither
the Company nor any of its controlling shareholders, officers or           directors has
been debarred, suspended, deemed non-responsible or otherwise           excluded from
participation in any Government Contract or for any reason listed           on the List
of Parties Excluded from Federal Procurement and Nonprocurement           Programs or any
similar list nor, to the Knowledge of the Company, has any           debarment,
suspension or exclusion proceeding been initiated against the Company           or any of
its predecessors, controlling shareholders, officers or directors.  

		    (ii)        There
have been no legal proceedings involving or related to the Company or, to           the
Knowledge of the Company, any of its predecessors, controlling shareholders,
          officers or directors with respect to an alleged or potential violation of a
          Contract requirement or any applicable Law pertaining to any Government
          Contract. No Person has filed or, to the Knowledge of the Company, threatened
to           file a protest with any Governmental Authority challenging a Government
Contract           award to the Company.  

26

		    (iii)        Except
as set forth on Section 4.9(c)(iii) of the Company Disclosure Schedule,           there
have been no audits, there are no ongoing audits and, to the Knowledge of           the
Company, there are no audits impending or expected under or related to any
          Government Contract. The Company maintains systems of internal controls that
are           in material compliance with all requirements of all Government Contracts
and of           applicable Law.  

		    (iv)        The
Company has not conducted any internal investigation in connection with           which
the Company has engaged any outside legal counsel, auditor, accountant or
          investigator, or has made any disclosure to any Governmental Authority or other
          customer or contractor or subcontractor related to any suspected, alleged or
          possible violation of a contract requirement or violation of any Law with
          respect to any Government Contract.  

		    (v)        All
representations, certifications and statements executed, acknowledged or
          submitted by or on behalf of the Company to a Governmental Authority,
contractor           or subcontractor in connection with any Government Contract (or
change or           modification thereto) were true, complete and correct in all material
respects           as of their respective effective dates and, to the Knowledge of the
Company,           with respect only to any such representations or certifications (or
the portion           thereof) that are continuing in nature, are true, complete and
correct as of the           date hereof.  

		    (vi)        The
Company does not have any pending or anticipated claims, requests for           equitable
adjustment or requests for waiver or deviation from Contract           requirements with
respect to any Government Contract, and the Company has no           Knowledge of any
material claim or threatened claim against the Company by any           customer agency
with respect to any Government Contract, including any claim for           a reduction in
price under any Government Contract.  

		    (vii)        Except
as set forth in Section 4.9(c)(iii) of the Company Disclosure Schedule,           with
respect to any Government Contracts, there is no request by any           Governmental
Authority for a Contract price adjustment.  

        Section
4.10 Litigation.  

        Except
as provided in Section 4.10 of the Company Disclosure Schedule, as of the date of this
Agreement, there is no suit, claim, action, proceeding or investigation pending before any
Governmental Authority or arbitrator or, to the Knowledge of the Company, threatened by or
against the Company or any of its Subsidiaries that seeks to enjoin any activities of the
Company or any of its Subsidiaries, restrain the consummation of the Merger or which
could, if adversely determined, reasonably be expected to result in losses, damages or
liabilities incurred by the Company or any of its Subsidiaries in excess of $500,000
individually. Neither the Company nor any of its Subsidiaries is (a) subject to any
outstanding order, writ, judgment, decree or injunction of, or settlement with, any
Governmental Authority or (b) engaged in any suit, claim, action or proceeding to recover
monies due to it or for damages or losses sustained by it that, if the Company failed to
collect such monies due it, would have a Material Adverse Effect. 

27

        Section
4.11 Compliance with Applicable Law.  

        The
Company and its Subsidiaries hold all permits, licenses, authorizations, certificates,
variances, exemptions, orders and approvals of all Governmental Authorities necessary for
the lawful conduct of their respective businesses as presently conducted and to own their
assets and properties (the “Company Permits”), except for failures to
hold any such Company Permits that would not be material to the Company and its
Subsidiaries taken as a whole. The Company and its Subsidiaries are in material compliance
with the terms of the Company Permits. The businesses, properties and operations of the
Company and its Subsidiaries have not been and are not being conducted in violation of any
Law applicable to the Company and its Subsidiaries, except for any violations which would
not reasonably be expected to result in losses, damages or liabilities incurred by the
Company or any of its Subsidiaries in excess of $500,000, individually. Neither the
Company nor any of its Subsidiaries has received written notice to the effect that a
Governmental Authority (a) claimed or alleged that the businesses, properties or
operations of the Company or any of its Subsidiaries were not in compliance with all
applicable Laws or (b) was considering the amendment, termination, revocation or
cancellation of any Company Permit. The consummation of the Merger and the Transactions,
in and of themselves, will not cause the revocation or cancellation of any Company Permit. 

        Section
4.12 Taxes.  

        Except
as disclosed in Section 4.12 of the Company Disclosure Schedule, 

         (a)       
          the Company and each of its Subsidiaries has filed, or has caused to be filed on
          its behalf, all material U.S. federal, state or local returns, or Israeli and
          other foreign returns, estimates, declarations, information statements and
          reports relating to Taxes (“Returns”) required to be filed by
          the Company and each of its Subsidiaries with any Tax authority, and such
          Returns are true and correct in all material respects. The Company and each of
          its Subsidiaries have paid all material Taxes shown on such Returns that are
          due; 

         (b)       
          the Company and each of its Subsidiaries (i) has paid or accrued all material
          Taxes it is required to pay or accrue and (ii) has withheld from each payment or
          deemed payment made to its past or present employees, officers, directors and
          independent contractors, suppliers, creditors, shareholders or other third
          parties all material Taxes and other material deductions required to be withheld
          and has, within the time and in the manner required by law, paid such withheld
          amounts to the proper Governmental Authorities; 

         (c)       
          no material Tax deficiency is outstanding, proposed or assessed in writing
          against the Company or any of its Subsidiaries, nor has the Company or any of
          its Subsidiaries executed any waiver of any statute of limitations on or
          extensions of the period for the assessment or collection of any material Tax; 

         (d)       
          no audit or other examination of any material Return of the Company or any of
          its Subsidiaries is currently in progress, neither the Company nor any of its
          Subsidiaries has been notified in writing of any request for such an audit or
          other examination, and no Tax authority (including for these purposes the
          Investment Center with respect to the Company’s status as an
          “Approved Enterprise” under the Israeli Law for the
          Encouragement of Capital Investment, 5719-1959) has asserted in writing, or to
          the Company’s Knowledge, threatened in writing to assert, against the
          Company or any of its Subsidiaries any claim for material Taxes; 

28

         (e)       
          no material adjustment that is still pending relating to any Returns filed by
          the Company or any of its Subsidiaries has been proposed in writing by any Tax
          authority. No written claim that could give rise to material Taxes has been made
          within the last five (5) years in a jurisdiction in which the Company or any of
          its Subsidiaries does not file Returns that the Company or any of its
          Subsidiaries may be subject to taxation in that jurisdiction; 

         (f)       
          neither the Company nor any of its Subsidiaries (i) has ever been a member of an
          affiliated group filing a consolidated Return, (ii) is a party to any Tax
          sharing or Tax allocation agreement, arrangement or understanding (other than
          customary tax indemnifications contained in credit or other commercial
          agreements the primary purpose of which agreements does not relate to Taxes), or
          (iii) is liable for the Taxes of any other Person under United States Treasury
          Regulation Section 1.1502-6 (or any similar provision of state or local Laws, or
          Israeli or other foreign Laws), as a transferee or successor, by Contract or
          otherwise; 

         (g)       
          there are no Encumbrances on the assets of the Company or any of its
          Subsidiaries relating to or attributable to Taxes, except for Encumbrances for
          Taxes not yet due and payable or the amount or validity of which is being
          contested in good faith by appropriate proceedings; 

         (h)       
          neither the Company nor any of its Subsidiaries has constituted either a
          “distributing corporation” or a “controlled corporation” in
          a distribution of shares qualifying for tax-free treatment under Section 355 of
          the Code (i) in the two (2) years prior to the date of this Agreement, or (ii)
          in a distribution which could otherwise constitute part of a “plan” or
          “series of related transactions” (within the meaning of Section 355(e)
          of the Code) in conjunction with the Merger; 

         (i)       
          certain facilities of the Company have been granted Approved Enterprise status
          under the Israeli Law for the Encouragement of Capital Investment, (5719-1959)
          in the “alternative route.” To the Company’s Knowledge, such
          facilities are in compliance in all material respects with all terms and
          conditions stipulated by such Law, regulations published thereunder and the
          instruments of approval for the specific investments in the “approved
          enterprise”; and 

         (j)       
          Section 4.12(j) of the Company Disclosure Schedule lists each Tax incentive,
          subsidy or benefit granted to and currently enjoyed by the Company and its
          Subsidiaries under the Laws of the State of Israel, the period for which such
          Tax incentive, subsidy or benefit applies, and the nature of such Tax incentive.
          The Company and its Subsidiaries have complied in all material respects with all
          Israeli Laws to be entitled to claim such incentives, subsidies or benefits. To
          the Company’s Knowledge, subject to receipt of the approval of the
          Investment Center and other Governmental Consents required as explicitly set
          forth herein, consummation of the Merger will not in any material respect affect
          the continued qualification for the incentives, subsidies or benefits or the
          terms or duration thereof or except as set forth in Section 4.12(j) of the
          Company Disclosure Schedule, require any recapture of any previously claimed tax
          incentive, subsidy or benefit, and no consent or approval of any Governmental
          Authority is required prior to the consummation of the Merger in order to
          preserve the rights of the Surviving Company or its Subsidiaries to any such
          incentive, subsidy or benefit currently enjoyed by the Company and its
          Subsidiaries under the Laws of the State of Israel, other than such rights the
          scope of which depends on the identity of the beneficial owners of the
          Purchaser. 

29

        Section
4.13 Property.  

         (a)       
          The Company and each of its Subsidiaries has marketable title to, or in the case
          of leased properties and assets, valid leasehold interests in, all of their
          properties and assets that are material to the Company and its Subsidiaries
          taken as a whole, free and clear of all Encumbrances except for Permitted
          Encumbrances. The representations and warranties set forth in this Section 4.13
          do not apply to Intellectual Property Rights or other intellectual property
          assets or rights. All leases pursuant to which the Company or any of its
          Subsidiaries leases from others material real or personal property are valid and
          effective in accordance with their respective terms, and there is not, under any
          of such leases, any existing material default or event of default of the Company
          or any of its Subsidiaries or, to the Company’s Knowledge, any other party
          (or any event which with notice or the lapse of time, or both, would constitute
          a default and in respect of which the Company or any of its Subsidiaries has not
          taken adequate measures to prevent such default from occurring) that, in each
          case would be material to the Company and its Subsidiaries taken as a whole. 

         (b)       
          The Company has the sole right to be registered at the Land Registry as the
          owner of premises of 29,851 square meters located in Block 6640, Parcel 115 in
          Kiryat Arye (the “Property”), such registration to occur upon the
          registration of such premises as a condominium. The manner of such registration
          is currently disputed and such dispute will not have a Material Adverse Effect. 

         (c)       
          Section 4.13(c) of the Company Disclosure Schedule sets forth a true and
          complete list of (i) each interest in real property owned by the Company or any
          of its Subsidiaries and identifies the owner thereof and (ii) each lease under
          which the Company or any of its Subsidiaries is a lessee of real property. 

        Section
4.14 Environmental.  

         (a)       
          Except for those matters that, individually or in the aggregate, have not had
          and could not reasonably be expected to have a Material Adverse Effect, (i) the
          Company and each of its Subsidiaries are in compliance with applicable
          Environmental Law, (ii) no Hazardous Substances are present at, or have been
          disposed on, or released or discharged from, onto or under, any of the
          properties currently owned, leased, operated or otherwise used by the Company or
          its Subsidiaries (including soils, groundwater, surface water, buildings or
          other structures), (iii) no Hazardous Substances were present at or disposed on,
          or released or discharged from, onto or under, any of the properties formerly
          owned, leased, operated or otherwise used by the Company or its Subsidiaries
          during the period of ownership, lease, operation or use by Company or its
          Subsidiaries, (iv) neither the Company nor any of its Subsidiaries is subject to
          any liability or obligation in connection with Hazardous Substances present at
          any location owned, leased, operated or otherwise used by any third party, (v)
          neither the Company nor any of its Subsidiaries has received any written notice,
          demand, letter, claim or request for information alleging that the Company or
          any of its Subsidiaries is or may be in violation of or liable under any
          Environmental Law, (vi) there is no investigation, suit, claim, action or
          proceeding relating to or arising under any Environmental Law that is pending
          or, to the Knowledge of the Company, threatened against or affecting the Company
          or any of its Subsidiaries or any real property currently or, to the Knowledge
          of the Company, formerly owned, operated or leased by the Company or any of its
          Subsidiaries, and (vii) neither the Company nor any of its Subsidiaries is
          subject to any order, decree, injunction or other directive of any Governmental
          Authority or is subject to any indemnity agreement with any Person relating to
          Hazardous Substances. 

30

         (b)       
          As used herein, the term “Environmental Law” means any
          international, national, provincial, regional, federal, state, municipal or
          local law, regulation, order, judgment, decree, permit, authorization, opinion,
          common or decisional law (including principles of negligence and strict
          liability) or agency requirement relating to the protection, investigation or
          restoration of the environment (including natural resources) or the health of
          human or other living organisms, including the manufacture, introduction into
          commerce, export, import, handling, use, presence, disposal, release or
          threatened release of any Hazardous Substance or noise, odor, wetlands,
          pollution, contamination or any injury or threat of injury to Persons or
          property. 

         (c)       
          As used herein, the term “Hazardous Substance” has the same
          meaning as such term is defined in the U.S. Comprehensive Environmental Response
          Compensation and Liability Act, 42 U.S.C. Section 9601(14). 

        Section
4.15 Insurance.  

        Section
4.15 of the Company Disclosure Schedule sets forth a list of all insurance policies held
by or on behalf of the Company, Spacenet Inc. and all the entities within the Spacenet
Rural business unit, and a brief description of such policies, including the names of the
insurers, the principal insured and each named insured, the policy number and period of
coverage, the annual premiums and a brief description of the interests insured by such
policies. The insurance policies listed in Section 4.15 of the Company Disclosure Schedule
include all policies of insurance that are required by applicable Law and Contracts
relating to the Company, Spacenet Inc, and all the entities within the Spacenet Rural
business unit in the amounts required thereby. Each Subsidiary of the Company has
insurance policies in place which are sufficient to comply with applicable Law and any
Contract to which it is a party. The insurance policies listed in Section 4.15 of the
Company Disclosure Schedule (a) have been issued by insurers which, to the Knowledge of
the Company, are reputable and financially sound, (b) provide coverage for the operations
conducted by the Company and its Subsidiaries of a scope and coverage consistent with
customary practice in the industries in which the Company and its Subsidiaries operate,
and (c) are in full force and effect. All premiums due and payable on the insurance
policies listed in Section 4.15 of the Company Disclosure Schedule have been paid and no
written notice of cancellation or termination has been received with respect to any such
policy. With the exception of the directors’ and officers’ insurance policy,
which will be amended prior to Closing, the insurance policies referred to in this Section
4.15 will remain in full force and effect and will not in any way be affected by or
terminate by reason of the Merger or any of the Transactions. 

31

        Section
4.16 Intellectual Property.  

         (a)       
          Section 4.16(a) of the Company Disclosure Schedule sets forth a true and
          complete list as of the date of this Agreement of all Registered Intellectual
          Property Rights owned by the Company or any of its Subsidiaries. 

         (b)       
          Except as set forth in Section 4.16(b) of the Company Disclosure Schedule, the
          Company or one of its Subsidiaries, as applicable, is the sole and exclusive
          owner of, or has valid and continuing rights (pursuant to written Intellectual
          Property Licenses) to use and otherwise exploit, the Company Intellectual
          Property Rights, free and clear of all Encumbrances other than Permitted
          Encumbrances or any obligations under the Intellectual Property Licenses set
          forth in Section 4.9(a)(viii) of the Company Disclosure Schedule. The Company
          Intellectual Property Rights include all Intellectual Property Rights necessary
          and sufficient to enable the Company and each of its Subsidiaries to conduct its
          business. To the Knowledge of the Company, the Company Intellectual Property
          Rights are valid and enforceable. 

         (c)       
          Section 4.16(c) of the Company Disclosure Schedule sets forth a true and
          complete list of all Intellectual Property Rights jointly owned by the Company
          or any of its Subsidiaries and any other Person(s) (“Jointly Owned
          Intellectual Property”), and specifies with respect to each item of
          Jointly Owned Intellectual Property the joint owners of such item. Except as set
          forth in Section 4.16(c) of the Company Disclosure Schedule with respect to
          Jointly Owned Intellectual Property, (i) all Intellectual Property Rights in
          works of authorship and all other materials subject to copyright protection (A)
          were either created by employees of the Company or its Subsidiaries within the
          scope of their employment or are otherwise works made for hire, or all right,
          title and interest in and to such works of authorship or other materials subject
          to copyright protection have been legally and fully assigned and transferred in
          writing to the Company or one of its Subsidiaries, as applicable, or (B) are
          licensed from third parties pursuant to a written Intellectual Property License
          for use and other exploitation as currently used and otherwise exploited by the
          Company and its Subsidiaries, (ii) all Intellectual Property Rights in all
          inventions and discoveries made, developed, created, conceived and/or reduced to
          practice by any employee, consultant or independent contractor of the Company or
          any of its Subsidiaries within the scope of their employment (or other
          retention) by the Company or such Subsidiary, as applicable, or that are the
          subject of one or more issued Patents or pending Patent applications, have been
          assigned in writing to the Company or such Subsidiary, as applicable, to the
          extent that sole and exclusive ownership of any such Intellectual Property
          Rights does not vest automatically in the Company or such Subsidiary, as
          applicable, by operation of Law, and (iii) all employees, consultants and
          independent contractors of the Company or any of its Subsidiaries involved in
          the creation or development of any products, services, technology or
          Intellectual Property Rights or in other material development activities have
          signed written documents assigning to the Company or such Subsidiary, as
          applicable, all Intellectual Property Rights made, written, developed, created,
          conceived and/or reduced to practice by them within the scope of their
          employment (or other retention) by the Company or such Subsidiary, as
          applicable, to the extent that sole and exclusive ownership of any such
          Intellectual Property Rights does not automatically vest in the Company or such
          Subsidiary, as applicable, by operation of Law. 

32

         (d)       
          The Company and each of its Subsidiaries have taken reasonable precautions to
          protect the secrecy, confidentiality and value of material Trade Secrets, and no
          such Trade Secrets have been authorized to be disclosed or have been actually
          disclosed by the Company or any of its Subsidiaries other than pursuant to a
          written non-disclosure agreement restricting the disclosure and use of such
          Trade Secrets. Former and current employees, consultants and independent
          contractors of the Company and its Subsidiaries involved in the creation or
          development of any products, services, technology or Intellectual Property
          Rights or in other material development activities have executed written
          agreements with the Company or one of its Subsidiaries designed to protect the
          confidentiality of the Company Intellectual Property Rights, and, to the
          Company’s Knowledge, no employee, consultant or independent contractor of
          the Company or any of its Subsidiaries is in violation or breach of any term of
          any such written agreement that would impair any of the Company Intellectual
          Property Rights. 

         (e)       
          To the Company’s Knowledge, none of the Intellectual Property Rights owned
          by the Company or any of its Subsidiaries, the use by the Company or any of its
          Subsidiaries of any of the Company Intellectual Property Rights or the conduct
          of the business of the Company or any of its Subsidiaries (including the
          manufacturing, licensing, marketing, importation, exportation, offer for sale,
          sale or use of any products or services in connection with such business)
          infringes, constitutes the misappropriation of or violates any valid
          Intellectual Property Rights of any other Person or, to the extent that any such
          claims of infringement, misappropriation or violation are made or asserted
          against the Company or any of its Subsidiaries, the Company has valid and
          reasonable counterclaims thereto of infringement of a material Patent(s) that
          the Company has the valid right to assert or enforce. Except as set forth in
          Section 4.16(e) of the Company Disclosure Schedule, none of the Company
          Intellectual Property Rights is being infringed, misappropriated or violated by
          any other Person or its property. Neither the Company nor any of its
          Subsidiaries has received during the past twelve (12) months any written claim,
          any cease and desist or equivalent letter or any other written notice of any
          allegation that any of the Company Intellectual Property Rights, the use by the
          Company or any of its Subsidiaries of any of the Company Intellectual Property
          Rights or the conduct of the business of the Company or any of its Subsidiaries
          (including the manufacturing, licensing, marketing, importation, exportation,
          offer for sale, sale or use of any products or services in connection with such
          business) infringes, constitutes the misappropriation of or violates the
          Intellectual Property Rights of any third party. To the Company’s
          Knowledge, except as set forth in Section 4.16(e) of the Company Disclosure
          Schedule, there has been no unauthorized use by, unauthorized disclosure by or
          to, or infringement, misappropriation or other violation by any third party
          and/or any current or former officer, employee, independent contractor,
          consultant or any other agent of the Company or any of its Subsidiaries of any
          of the Company Intellectual Property Rights. No written claims of such
          unauthorized use, unauthorized disclosure or infringement, misappropriation or
          other violation of any of the Company Intellectual Property Rights have been
          made against any Person by the Company or any of its Subsidiaries. (A) None of
          the Company Intellectual Property Rights is currently the subject of any suit,
          action, or written claim or demand of any third party and no action or
          proceeding, whether judicial, administrative, before an arbitration panel, a
          dispute resolution proceeding or otherwise, has been instituted and is pending
          or, to the Company’s Knowledge, threatened, that challenges or affects the
          Intellectual Property Rights of the Company or any of its Subsidiaries or the
          ownership, use, validity or enforceability of any such Intellectual Property
          Rights and, to the Company’s Knowledge, there is no such claim, demand,
          action, suit or proceeding by a third party that is pending but unasserted
          against the Company or any of its Subsidiaries with respect to any of the
          Company Intellectual Property Rights, and (B) neither the Company nor any of its
          Subsidiaries has requested or received during the past two (2) years any formal
          written opinions of counsel (outside or inside) relating to infringement,
          invalidity or unenforceability of any Intellectual Property Rights. 

33

         (f)       
          (i) All registrations with and applications to Governmental Authorities in
          respect of the Registered Intellectual Property Rights owned, filed or applied
          for by the Company or any of its Subsidiaries that are material to the Company
          or any of its Subsidiaries are in full force and effect and, to the Knowledge of
          the Company, valid, (ii) the Company and each of its Subsidiaries is in
          compliance with all material applicable government regulations regarding the
          manufacture, advertising, sale, import and export of the Company Intellectual
          Property Rights and products incorporating or made using the Company
          Intellectual Property Rights, and (iii) except as set forth in Section 4.16(f)
          of the Company Disclosure Schedule, there are no restrictions on the direct or
          indirect transfer of any Intellectual Property License, or other Contract or
          agreement pursuant to which the Company or any of its Subsidiaries has been
          granted a right, to use Company Intellectual Property Rights, or any interest
          therein, held by and material to the Company and its Subsidiaries. 

         (g)       
          Except as set forth in Section 4.16(g) of the Company Disclosure Schedule,
          neither the Company nor any of its Subsidiaries (i) has licensed or provided to
          any third party, or otherwise permitted any third party to access or use, any
          source code or related materials for any Software developed by or for the
          Company or any of its Subsidiaries or (ii) is currently a party to any source
          code escrow Contract or any other Contract (or a party to any Contract
          obligating the Company or any of its Subsidiaries to enter into a source code
          escrow Contract or other Contract) requiring the deposit of source code or
          related materials for any such Software. Except as set forth in Section 4.16(g)
          of the Company Disclosure Schedule, neither the Company nor any of its
          Subsidiaries has incorporated any “open source,” “freeware,”
          “shareware” or other Software having similar licensing or distribution
          models (“Open Source”) in, or used any Open Source in
          connection with, any Software developed, licensed, distributed or otherwise
          exploited by or for the Company or any of its Subsidiaries in a manner that
          requires the contribution or disclosure to any third party, including the Open
          Source community, of any portion or source code of such Software developed,
          licensed, distributed or otherwise exploited by or for the Company or any of its
          Subsidiaries. 

         (h)       
          The consummation of the transactions contemplated hereby will not result in the
          loss or impairment of the right of Purchaser, Merger Sub, the Company or any of
          its Subsidiaries to own or use any Company Intellectual Property Rights. Neither
          this Agreement nor any transaction contemplated by this Agreement will result in
          the grant by the Company or any of its Subsidiaries to any third party of any
          license or right with respect to any Company Intellectual Property Rights
          pursuant to any Contract to which the Company or any of its Subsidiaries is a
          party or by which any assets or properties of the Company or any of its
          Subsidiaries are bound. 

34

        Section
4.17 Affiliate Transactions.  

        Except
as set forth in Section 4.17 of the Company Disclosure Schedule, no material relationship,
agreements or arrangements, direct or indirect, exist between or among the Company or its
Subsidiaries on the one hand and the directors, officers, or shareholders of the Company
or their Affiliates, on the other hand, other than in the ordinary course of the
Company’s business. No office holder, executive officer or director of the Company or
its Subsidiaries or member of his or her immediate family is indebted to the Company or
its Subsidiaries, nor is the Company or its Subsidiaries indebted (or committed to make
loans or extend or guarantee credit) to any of them. Neither the Company’s nor its
Subsidiaries’ office holders, executive officers or directors or any member of their
family or their Affiliates has any direct or indirect ownership interest in any firm or
corporation that competes directly with the Company its Subsidiaries or the Company’s
or its Subsidiaries’ business as currently conducted or as proposed to be conducted.
No office holder, executive officer or director of the Company or its Subsidiaries, or any
of their family or their Affiliates, is, or has been, directly or indirectly interested in
any Contract with the Company or its Subsidiaries, or has derived, received, or was
entitled to, any interest, incentive, or other form of benefit in connection with the
Company’s or its Subsidiaries’ business, or any of the Contracts and/or
commercial arrangements to which the Company or any of its Subsidiaries is a party. 

        Section
4.18 Brokers.  

        No
broker, investment banker or financial advisor or other Person, other than UBS Securities
LLC (“UBS”), the fees and expenses of which will be paid by the Company pursuant
to the engagement letter dated May 21, 2007, a true and correct copy of which has been
provided to the Purchaser, is entitled to any broker’s, finder’s, financial
advisor’s or other similar fee or commission in connection with the Transactions
based upon arrangements made by or on behalf of the Company or any of its Subsidiaries. 

        Section
4.19 Opinion of Financial Advisor.  

        The
Board of Directors has received the opinion of UBS, dated as of the date hereof (a true
and correct copy of which will be made available to the Purchaser by the Company solely
for informational purposes promptly following its receipt by the Company), to the effect
that, as of the date of such opinion, and subject to the various assumptions and
qualifications set forth therein, the Merger Consideration to be received by the holders
of Company Shares (other than as set forth in such opinion) pursuant to the Merger is
fair, from a financial point of view, to such holders. 

        Section
4.20 Board of Directors and Audit Committee Approval.  

         (a)       
          The Board of Directors has (i) determined that this Agreement, the Merger and
          the Transactions are fair to, and in the best interests of, the Company and its
          shareholders, and that, considering the financial position of the merging
          companies, no reasonable concern exists that the Surviving Company will be
          unable to fulfill the obligations of the Company to its creditors, (ii) approved
          this Agreement, the Merger and the Transactions, and (iii) subject to the
          provisions of this Agreement, determined to recommend that the shareholders of
          the Company approve this Agreement, the Merger and the Transactions (the
          “Recommendation”). 

         (b)       
          The audit committee of the Board of Directors has approved this Agreement, the
          Merger and the Transactions prior to the approval of the Board of Directors. 

35

        Section
4.21 Inapplicability of Certain Statutes.  

        Other
than as set forth in the Companies Law and as required under any applicable Antitrust
Requirement, the Company is not subject to any business combination, control share
acquisition, fair price or similar statute that applies to the Merger or any other
Transaction. 

        Section
4.22 Grants, Incentives and Subsidies.  

        The
Company has made available to the Purchaser copies of all documents evidencing all
material pending and outstanding grants, incentives, exemptions and subsidies from the
government of the State of Israel or any agency thereof, or from any other Governmental
Authority, granted to the Company or any of its Subsidiaries, including the grant of
Approved Enterprise Status from the Investment Center and grants from the OCS
(collectively, “Grants”) and of all related material letters of approval,
certificates of completion, and supplements and amendments thereto, granted to the
Company, and all material correspondence related thereto for the period after January 1,
2006. Each of the Company and the applicable Subsidiaries is in compliance, in all
material respects, with the terms and conditions of all Grants which have been approved
and has duly fulfilled, in all material respects, all the undertakings required thereby. 

        Section
4.23 Encryption and Other Restricted Technology.  

        Except
as disclosed in Section 4.23 of the Company Disclosure Schedule, the Company’s and
its Subsidiaries’ businesses as currently conducted do not involve the use or
development of, or engagement in, encryption technology, or other technology whose
development, commercialization or export, requires the Company or any of its Subsidiaries
to obtain a license from the Israeli Ministry of Defense or an authorized body thereof
pursuant to Section 2(a) of the Declaration Regarding the Control of Commodities and
Services (Engagement in Encryption Means), 1974, as amended, or other legislation
regulating the development, commercialization or export of technology. 

        Section
4.24 Effect of Transaction.  

         (a)       
          Except as set forth in Section 4.24(a) of the Company Disclosure Schedule, the
          execution of this Agreement and the consummation of the Transactions (either
          alone or together with any other event) will not (i) constitute an event under
          any Company Employee Plan, Employment Agreement, consulting agreement, trust,
          loan or other agreement or arrangement that will or might result in any
          severance payments or any acceleration of vesting, forgiveness of indebtedness,
          distribution, increase in benefits or obligation to fund benefits with respect
          to any Employee or consultant, or (ii) result in any payment, acceleration or
          vesting with respect to any other security issued by the Company or any of its
          Subsidiaries. 

         (b)       
          Except as set forth in Section 4.24(b) of the Company Disclosure Schedule, no
          payment or benefit which will or may be made by the Company, its Subsidiaries or
          any of their respective Affiliates with respect to any Employee will be
          characterized as excess “parachute payment,” within the meaning of
          Section 280G(b)(2) of the Code. None of the Company, its Subsidiaries or any of
          their respective Affiliates has an obligation to make any tax gross up payments
          with respect to any such excess parachute payments. 

36

        Section
4.25 Customers and Suppliers.  

         (a)       
          Section 4.25 of the Company Disclosure Schedule sets forth a list of the twenty
          (20) largest customers of the Company and its Subsidiaries and the five (5)
          largest suppliers of each of the Company’s business units, as measured by
          the dollar amount of purchases therefrom or thereby, for the twelve (12) month
          period ended September 30, 2007, showing the approximate total sales by the
          Company and its Subsidiaries to each such customer and the approximate total
          purchases by the Company and its Subsidiaries from each such supplier, during
          such period. 

         (b)       
          No customer or supplier listed in Section 4.25 of the Company Disclosure
          Schedule has terminated its relationship with the Company or any of its
          Subsidiaries and, to the Knowledge of the Company, (i) no customer or supplier
          listed in Section 4.25 of the Company Disclosure Schedule has delivered notice
          to the Company or its Subsidiaries that it intends to terminate its business
          with the Company or any of its Subsidiaries and (ii) no supplier listed in
          Section 4.25 of the Company Disclosure Schedule has delivered notice to the
          Company or its Subsidiaries of a material increase in pricing outside of the
          ordinary course of business. 

        Section
4.26 Warranties.  

        Except
for the customary warranties of the Company and its Subsidiaries or as set forth in
Section 4.26 of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has given any written warranties that are currently in effect with respect to
their products and services. Except as set forth in Section 4.26 of the Company Disclosure
Schedule, there have not been any material deviations from or material modifications to
the customary warranties. 

        Section
4.27 Foreign Corrupt Practices Act; Certain Business Practices.  

        Neither
the Company nor any of its Subsidiaries nor, to the Company’s Knowledge, any
director, officer, agent, employee or other person acting on behalf of the Company or any
of its Subsidiaries, has, in any material respect (a) violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended, (b) is currently targeted by any U.S.
sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury
Department, (c) used any corporate or other funds for unlawful contributions, payments,
gifts or entertainment, or made any unlawful expenditures relating to political activity
to foreign or domestic government officials, employees or others or established or
maintained any unlawful or unrecorded funds in violation of Section 30A of the Exchange
Act, (d) accepted or received any unlawful contributions, payments, gifts or expenditures
or (e) made, offered or authorized any unlawful bribe, rebate, payoff, influence payment,
kickback or other similar unlawful payment. 

        Section
4.28 No Other Representations or Warranties.  

        Except
for the representations and warranties contained in this Article IV, neither the Company
nor any other Person on behalf of the Company makes any express or implied representation
or warranty with respect to the Company or its Subsidiaries or their respective business,
operations, assets, liabilities, condition (financial or otherwise) or prospects,
notwithstanding the delivery or disclosure to the Purchaser or any of its Affiliates or
Representatives of any documentation, forecasts, projections or other information with
respect to any one or more of the foregoing. 

37

ARTICLE V 

REPRESENTATIONS AND WARRANTIES OF

THE PURCHASER AND THE MERGER SUB 

        The
Purchaser and the Merger Sub, jointly and severally, hereby represent and warrant to the
Company that, except as set forth in the disclosure schedule (the “Purchaser
Disclosure Schedule”) delivered by the Purchaser to the Company prior to the
execution and delivery of this Agreement (such disclosures being considered to be made for
purposes of the specific section of the Purchaser Disclosure Schedule in which they are
made and for purposes of all other sections to the extent the relevance of such disclosure
is reasonably apparent on its face): 

        Section
5.1 Organization, Good Standing and Qualification.  

        Each
of the Purchaser and the Merger Sub is a legal entity duly organized, validly existing
and, in jurisdictions where such concept is recognized, in good standing under the Laws of
its respective jurisdiction of organization and has requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on its business
as presently conducted. Neither the Purchaser nor the Merger Sub is in violation of any
provision of its respective organizational documents. 

        Section
5.2 The Purchaser and the Merger Sub.  

        All
of the issued and outstanding shares of the Merger Sub are owned by the Purchaser. Each of
the Purchaser and the Merger Sub were formed solely for the purpose of engaging in the
transactions contemplated by this Agreement, and neither the Purchaser nor the Merger Sub,
nor any of their respective Subsidiaries, has conducted any business prior to the date
hereof and neither has any, and prior to the Effective Time neither will have any, assets,
liabilities or obligations of any nature other than those immaterial assets, liabilities
or obligations incident to its formation and pursuant to this Agreement, the Merger and
the Transactions. 

        Section
5.3 Corporate Authority.  

        Each
of the Purchaser and the Merger Sub has all requisite corporate power and authority and
has taken all corporate action necessary to execute, deliver and perform its obligations
under this Agreement. This Agreement has been duly executed and delivered by each of the
Purchaser and the Merger Sub and is a valid and binding agreement of the Purchaser and the
Merger Sub, enforceable against each of the Purchaser and the Merger Sub in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors’ rights and to general principles of equity. The execution and delivery of
this Agreement by the Purchaser and the Merger Sub and the consummation by the Purchaser
and the Merger Sub of the Merger and the Transactions contemplated hereby, including the
Financing, have been duly and validly authorized by all necessary corporate action of the
Purchaser and the Merger Sub. 

38

        Section
5.4 The Merger Sub Board Approval.  

        The
board of directors of the Merger Sub has unanimously (a) determined that the Merger is
fair to, and in the best interest of, the Merger Sub and its shareholders, and that,
considering the financial position of the merging companies, no reasonable concern exists
that the Surviving Company will be unable to fulfill the obligations of the Merger Sub to
its creditors, (b) approved this Agreement, the Merger and the Transactions, and (c)
resolved to recommend that the sole shareholder of the Merger Sub approve this Agreement,
the Merger and the Transactions pursuant to the terms hereof (which approval has been
obtained simultaneously with the execution of this Agreement). 

        Section
5.5 Share Ownership.  

        Except
as set forth in Section 5.5 of the Purchaser Disclosure Schedule, as of the date of this
Agreement, none of the Purchaser, the Merger Sub or any Person referred to in Section
320(c) of the Companies Law with respect to the Purchaser or the Merger Sub owns any
Company Shares. 

        Section
5.6 Governmental Filings; No Violations; Etc.  

         (a)       
          Other than with respect to procedures under the Companies Law, the necessary
          filings and clearance, if any, under applicable Antitrust Requirements and as
          set forth in Section 5.6(a) of the Purchaser Disclosure Schedule, no notices,
          reports or other filings are required to be made by the Purchaser or the Merger
          Sub with, and no consents, registrations, approvals, permits or authorizations
          are required to be obtained by the Purchaser or the Merger Sub from, any
          Governmental Authority in connection with the execution and delivery of this
          Agreement by the Purchaser and the Merger Sub and the consummation of the Merger
          and the Transactions or in connection with the continuing operation of the
          business of the Purchaser following the Effective Time. 

         (b)       
          The execution, delivery and performance of this Agreement by the Purchaser and
          the Merger Sub do not, and the consummation of the Merger and the Transactions
          will not, (i) constitute or result in (A) a breach or violation of, or a default
          under, the certificate of incorporation or bylaws or comparable organizational
          documents of the Purchaser and the Merger Sub, (B) with or without notice, lapse
          of time or both, a breach or violation of, a termination (or right of
          termination) or a default under, the creation or acceleration of any material
          obligation or the creation of any Encumbrance on any of the assets of the
          Purchaser or the Merger Sub pursuant to, any material Contracts binding on the
          Purchaser or the Merger Sub, or (C) any material change in the rights or
          obligations of any party under any Contract binding on the Purchaser or the
          Merger Sub, or (ii) violate any judgment, order, writ, preliminary or permanent
          injunction or decree or any Law applicable to the Purchaser, the Merger Sub or
          any of their respective Affiliates or any of their properties or assets, except
          in each case, for such breaches, violations, defaults or changes that would not
          have a material adverse effect on the Purchaser or the Merger Sub’s ability
          to timely consummate the Merger and the Transactions. 

39

        Section
5.7 Brokers and Finders.  

        Except
as set forth in Section 5.7 of the Purchaser Disclosure Schedule, no broker, investment
banker, financial advisor or other Person is entitled to any broker’s, finder’s,
financial advisor’s or other similar fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of the Purchaser or the Merger
Sub or any of their respective Affiliates. 

        Section
5.8 Available Funds.  

         (a)       
          Attached to Section 5.8(a) of the Purchaser Disclosure Schedule is a copy of the
          executed commitment letter from Bank Hapoalim (the “Debt Commitment
          Letter”), pursuant to which, and subject to the terms and conditions
          thereof, the lender party thereto has committed to provide the debt financing
          set forth therein to the Purchaser for the purpose of funding the Transactions
          (the “Debt Financing”). Attached to Section 5.8(a) of the
          Purchaser Disclosure Schedule is a copy of the executed commitment letter (the
          “Equity Commitment Letter” and, together with the Debt
          Commitment Letter, the “Financing Commitments”) from the
          Sponsors pursuant to which, and subject to the terms and conditions thereof,
          such Sponsors have committed to the Purchaser to invest the amounts set forth
          therein (the “Equity Financing” and together with the Debt
          Financing, the “Financing”). 

         (b)       
          The Financing Commitments have been executed in the forms attached to Section
          5.8(a) of the Purchaser Disclosure Schedule and, as of the date hereof, have not
          been amended or modified in any respect or supplemented and are in full force
          and effect. Each of the Financing Commitments, in the form so delivered, is a
          legal, valid and binding obligation of the Purchaser and the Merger Sub and, to
          the Knowledge of the Purchaser, the other parties thereto. As of the date
          hereof, there are no other agreements, side letters or arrangements relating to
          the Financing Commitments. As of the date hereof, no event has occurred that,
          with or without notice, lapse of time or both, would constitute a default or
          breach on part of the Purchaser or the Merger Sub under any term or condition of
          the Financing Commitments, and neither the Purchaser nor the Merger Sub has
          reason to believe that it will be unable to satisfy on a timely basis any term
          or condition of closing to be satisfied by it contained in the Financing
          Commitments. The Purchaser or the Merger Sub has fully paid any and all
          commitment fees or other fees required by the Financing Commitments to be paid
          on or prior to the date hereof. The aggregate proceeds from the Financing
          constitute all of the funds necessary for the consummation by the Purchaser and
          the Merger Sub of the Transactions contemplated hereby. The Financing
          Commitments set forth all of the conditions precedent to the obligations of the
          parties thereunder to make the Financing, to the extent contemplated to be
          provided at or prior to the consummation by the Purchaser and the Merger Sub of
          the Transactions contemplated hereby, available to borrowers thereunder on the
          terms therein. 

        Section
5.9 Interest in Competitors.  

        Except
as set forth in Section 5.9 of the Purchaser Disclosure Schedule, none of the Purchaser,
the Merger Sub or any of their respective Affiliates insofar as such affiliate-owned
interests would be attributed to the Purchaser or the Merger Sub under any Antitrust
Requirements, owns any interest in any entity or Person that derives a substantial portion
of its revenues from a line of business within the Company’s principal lines of
business. 

40

        Section
5.10 Information Supplied.  

        None
of the information supplied by the Purchaser for inclusion in any document to be sent to
the Company’s shareholders in connection with the Company Shareholders’ Meeting
at the time furnished (as amended or supplemented) or at the time of the Company
Shareholders’ Meeting in connection with the Transactions will contain any untrue
statement of material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading, except that no representation is made by the
Purchaser or the Merger Sub with respect to statements made therein based on information
supplied by the Company in writing for inclusion in any such document. 

        Section
5.11 Acknowledgement of Disclaimer of Other Representations and Warranties.  

        The
Purchaser and the Merger Sub each acknowledges and agrees that it (a) has had an
opportunity to discuss the business of the Company and its Subsidiaries with the
management of the Company, (b) has had access to (i) the books and records of the Company
and its Subsidiaries, and (ii) the electronic data room maintained by the Company through
IntraLinks for purposes of the Transactions, (c) it has been afforded the
opportunity to ask questions of, and receive answers from, officers of the Company, and
(d) has conducted its own independent investigation of the Company and its Subsidiaries,
their respective businesses and the Transactions, and has not relied on any
representation, warranty or other statement by any Person on behalf of the Company or any
of its Subsidiaries or any other documentation, forecasts or other information, other than
the representations and warranties of the Company expressly contained in this Agreement. 

ARTICLE VI 

CONDUCT PRIOR TO THE EFFECTIVE TIME

AND ADDITIONAL AGREEMENTS 

        Section
6.1 Conduct of Business by the Company.  

        Except
as otherwise expressly contemplated by this Agreement and as required by applicable Law,
as set forth in Section 6.1 of the Company Disclosure Schedule or as consented to in
writing by the Purchaser (which consent shall not be unreasonably withheld, delayed or
conditioned), during the period from the date of this Agreement until the earlier to occur
of the Effective Time or termination of this Agreement pursuant to Article VIII, the
Company shall, and shall cause its Subsidiaries to, carry on their respective businesses
in all material respects in the ordinary course consistent with past practice. To the
extent consistent with the foregoing, the Company shall, and shall cause its Subsidiaries
to, use commercially reasonable efforts to (i) preserve intact their current business
organizations (except that any of the Company’s wholly-owned Subsidiaries may be
merged with or into, or be consolidated with any of the Company’s other wholly-owned
Subsidiaries or may be liquidated into the Company or any of its Subsidiaries), (ii) keep
available the services of their current officers and key employees who are integral to the
operation of their businesses as presently conducted, and (iii) preserve their
relationships with those Persons having business relations with them; provided,
however, that no action by the Company or its Subsidiaries with respect to matters
specifically addressed by any provision of Section 6.2 shall be deemed a breach of this
Section 6.1 unless such action would constitute a breach of such specific provision of
Section 6.2. 

41

        Section
6.2 Specific Activities.  

        Without
limiting the generality of Section 6.1, during the period from the date of this Agreement
until the earlier to occur of the Effective Time or termination of this Agreement pursuant
to Article VIII, except as otherwise expressly contemplated by this Agreement, as set
forth in Section 6.2 of the Company Disclosure Schedule and as required by applicable Law,
or as consented to in writing by the Purchaser (which consent shall not be unreasonably
withheld, delayed or conditioned), provided that the Purchaser shall be deemed to
have consented if the Purchaser does not object within three (3) Business Days in Los
Angeles, California, after a request for such consent is delivered by the Company to the
individuals set forth in Section 6.2 of the Purchaser Disclosure Schedule), the Company
shall not, and shall not permit any of its Subsidiaries to: 

         (a)       
          cause, permit or propose any amendments to the Company Charter Documents; 

         (b)       
          (i) except for transactions among the Company and its wholly-owned Subsidiaries
          or among the Company’s wholly-owned Subsidiaries, declare or pay any
          dividends on or make other distributions in respect of any of its share capital,
          (ii) adopt a plan of complete or partial liquidation or reorganization, or a
          resolution providing for or authorizing such liquidation or reorganization,
          (iii) split, combine or reclassify any of its shares or any other security or
          interest therein, or (iv) repurchase, redeem or otherwise acquire any shares, or
          any other securities thereof or any rights, warrants or options to acquire any
          such shares or other securities other than the acquisition of restricted shares
          upon forfeiture thereof; 

         (c)       
          issue, deliver, sell, pledge or encumber, or authorize or propose the issuance,
          delivery, sale, pledge or Encumbrance of, any shares or any other security or
          interest therein, including any rights, warrants or options to purchase any
          shares of capital stock, or any securities or rights convertible into,
          exchangeable or exercisable for, or evidencing the right to subscribe for, any
          shares of capital stock other than the issuance of Company Shares upon the
          exercise of Company Stock Options outstanding on the date of this Agreement and
          in accordance with the existing terms of such Company Stock Options or upon
          conversion of the Company’s convertible notes; 

    (d)        acquire
or agree to acquire any material assets of (including securities), or           merge or
consolidate with, any Person or engage in any similar transaction;  

    (e)        make
any loans, advances or capital contributions to, or investments in, any           other
Person outside of the ordinary course of business consistent with past           practice
other than any amounts expressly reflected in the Company’s           budgets for
2007and 2008 provided to the Purchaser;  

42

         (f)       
          sell, lease, license, pledge, encumber or otherwise dispose of any of its
          material assets or any interest therein, other than in the ordinary course of
          business consistent with past practice; 

         (g)       
          incur or suffer to exist any indebtedness for borrowed money or guarantee any
          such indebtedness, guarantee any debt of others, enter into any
          “keep-well” or other agreement to maintain any financial statement
          condition of another Person or enter into any arrangement having the economic
          effect of any of the foregoing, except for working capital borrowings incurred
          in the ordinary course of business consistent with past practice pursuant to
          credit agreements or facilities in existence on the date hereof; 

         (h)       
          make or rescind any material Tax election, or agree to pay, settle or compromise
          any material Tax liability or consent to any extension or waiver of any
          limitation period with respect to Taxes, or request, negotiate or agree to any
          Tax rulings, or Tax sharing arrangement or agreement (except as provided
          herein); 

         (i)       
          amend, in any material respect, any Tax return, change an annual Tax accounting
          period, adopt or change any material Tax accounting method (except as required
          by applicable Law or, solely with respect to accounting periods or methods, as
          required by GAAP) or execute or consent to any waivers extending the statutory
          period of limitations with respect to the collection or assessment of any
          material Taxes; 

         (j)       
          make or agree to make any capital expenditures in excess of the amount
          contemplated by the Company’s budgets for 2007 or 2008 provided to the
          Purchaser; 

         (k)       
          pay, discharge, settle or satisfy any claims, liabilities or obligations
          (absolute, accrued, asserted or unasserted, contingent or otherwise), or propose
          to pay, discharge, settle or satisfy such claims, liabilities or obligations, in
          each case outside of the ordinary course of business that (i) involve
          non-monetary relief that would materially restrict the operations of the
          Company, or (ii) requires the payment of amounts after the Closing in excess of
          $500,000 individually; 

         (l)       
          (i) modify or amend in any material respect any credit agreement or facility, or
          (ii) modify or amend in any material respect or terminate any Company Contract
          or any other Contract that is material to the Company and its Subsidiaries,
          taken as a whole; 

         (m)       
          terminate or otherwise discontinue the services without cause of the
          Company’s and its Subsidiaries current officers and key employees who are
          integral to the operation of their businesses as presently conducted; 

43

         (n)       
          except (i) as required pursuant to existing written agreements in effect on the
          date hereof, Company Employee Plans in effect as of the date hereof, or written
          agreements for newly hired employees or extensions of employment agreements (on
          substantially similar terms as in effect on the date hereof), all in the
          ordinary course of business consistent with past practice, (ii) as otherwise
          required by Law, (iii) as provided pursuant to existing Employment Agreements or
          in compensation committee directives in effect on the date hereof, or (iv) as
          set forth in Section 6.2 of the Company Disclosure Schedule, (A) increase the
          compensation or benefits of any director, officer or employee, except for, in
          the cases of non-officer employees, increases in the ordinary course of business
          that are consistent with past practice (including, for this purpose, the normal
          salary, bonus and equity compensation review process conducted each year and
          changes relating to positions or title), (B) adopt or amend in any material
          respect any Company Employee Plan (any such amendment being required to comply
          in all respects with the other provisions of this Section 6.2), (C) amend or
          modify in any material respect any Employment Agreement or enter into any
          Employment Agreement with an Employee providing for compensation and benefits in
          excess of $200,000 per year; 

         (o)       
          make any material change in accounting methods, principles or practices, except
          as required (i) by GAAP, Regulation S-X of the Exchange Act, any Governmental
          Authority or the Financial Accounting Standards Board (or similar organization),
          or (ii) by change in applicable Law; 

         (p)       
          enter into any transaction with any of its Affiliates other than pursuant to
          arrangements in effect on the date hereof or in connection with transactions
          between or among the Company and wholly-owned Subsidiaries or Affiliates of the
          Company controlled by the Company; 

         (q)       
          transfer or license to any Person (other than with respect to inter-company
          transactions) or otherwise extend, amend or modify in any material respect, any
          material rights of such other Person or entity to Company Intellectual Property
          Rights, or enter into any agreements or make other commitments or arrangements
          to grant, transfer or license, to any Person future patent right, in each case
          other than non-exclusive licenses the granting of which are advisable in
          connection with, or to the sale or distribution of, any product by the Company
          or any of its Subsidiaries, in each case in the ordinary course of business
          consistent with past practice; provided that in no event shall the
          Company or any Subsidiary of the Company (i) license on an exclusive basis
          (other than supply and distribution agreements in the ordinary course of
          business consistent with past practice) or sell any Company Intellectual
          Property Rights that are material to the Company or any of its Subsidiaries, or
          (ii) enter into any agreement limiting in any material respect the right of the
          Surviving Company or any of its Subsidiaries to engage in any line of business
          or to compete with any Person; 

         (r)       
          enter into any Company Contract or series of related Contracts outside the
          ordinary course of business (except as expressly permitted under other
          provisions of this Agreement); or 

         (s)       
          authorize any of, or commit or agree to take any of, the foregoing actions. 

        Section
6.3 No Control of Other Party's Business.  

        Nothing
contained in this Agreement is intended to give the Purchaser, directly or indirectly, the
right to control or direct the Company’s or its Subsidiaries’ operations prior
to the Effective Time, and to give the Company, directly or indirectly, the right to
control or direct the Purchaser’s operations. Prior to the Effective Time, each of
the Purchaser and the Company shall exercise, consistent with the terms and conditions of
this Agreement, complete control and supervision over its and its Subsidiaries respective
operations. 

44

        Section
6.4 Access to Information; Confidentiality; Financing.  

         (a)       
          Prior to the Effective Time, except as required by applicable Law, the Company
          shall, and shall cause each of its Subsidiaries to, afford the Purchaser and its
          officers, employees, accountants, counsel, financial advisors and other
          representatives (collectively, “Representatives”) at their own
          expense, with reasonable access during normal business hours and upon reasonable
          notice to all the properties, books, Contracts, commitments, personnel
          (including management team) and records of the Company and its Subsidiaries so
          that the Purchaser and the Merger Sub may obtain all information concerning the
          business as they may reasonably request; provided that, the Purchaser and
          its Representatives shall conduct any such activities in such a manner as not to
          unreasonably interfere with the business or operations of the Company, and
          during such period, the Company shall, and shall cause each of its Subsidiaries
          to, furnish promptly to the Purchaser and the Merger Sub: 

		    (i)        a
copy of each report, schedule, registration statement and other document filed
          by it during such period pursuant to the requirements of U.S. federal or state
          or Israeli securities Laws; and  

		    (ii)        all
other information concerning its business, properties and personnel as the
          Purchaser may reasonably request; provided, however, that the Company
          shall not be required to provide access to any information or documents which
          would, in the reasonable judgment of the Company, (A) breach any agreement with
          any third party, or (B) constitute a waiver of, or result in an impairment of,
          the attorney-client or other privilege held by the Company.  

         (b)       
          Any information obtained by any Person pursuant to this Section 6.4 shall be
          subject to the Confidentiality Agreement. Without limiting the generality of the
          foregoing, the Purchaser and the Merger Sub shall not, and shall cause their
          Representatives not to, use information obtained pursuant to this Section 6.4
          for any purpose unrelated to the consummation of the Merger and the
          Transactions. No review or information obtained pursuant to this Section 6.4
          shall limit the Purchaser’s or the Merger Sub’s reliance on or the
          enforceability of any representation or warranty made by the Company herein. 

         (c)       
          Subject to Section 6.4(d), the Company shall and shall cause its Subsidiaries
          to, at the Purchaser’s sole expense, cooperate in connection with the
          arrangement of the Financing (or any alternative financing) as may be
          reasonably requested by the Purchaser (provided that, such requested
          cooperation is not prohibited by applicable Law and does not unreasonably
          interfere with the ongoing operations of the Company and its
          Subsidiaries). Such cooperation by the Company shall include, at the reasonable
          request of the Purchaser, subject to Sections 6.4(a) and 6.4(b), (i) using
          reasonable best efforts to provide any lenders or other sources providing such
          Financing (or any alternative financing) with financial and other information
          regarding the Company, requested by the Purchaser or its lenders including all
          financial statements and financial and other data of the type required by
          Regulation S-X (other than Item 3-10 of Regulation S-X) and Regulation S-K under
          the Securities Act for registered offerings of debt securities, and of the type
          and form customarily included in offering documents used in private placements
          under Rule 144A of the Securities Act, to consummate the offerings of any debt
          securities contemplated by such Financing (or any alternative financing) at the
          time during the Company’s fiscal year any such offerings will be made, (ii)
          making the Company’s senior executive officers available to reasonably
          assist any lenders or other sources participating in such Financing (or any
          alternative financing), (iii) assisting with the preparation of materials for
          prospective lenders and other financing sources, rating agencies, road shows and
          similar documents and presentations, (iv) causing the Company’s
          Representatives to cooperate with the reasonable requests of the Purchaser and
          its Representatives in connection with any such Financing (or any alternative
          financing), (v) executing and delivering, or causing to be executed and
          delivered, certain agreements and certificates related to any such Financing (or
          any alternative financing) and (vi) otherwise reasonably cooperating in
          connection with the consummation of any such Financing (or any alternative
          financing). 

45

         (d)       
          Each of the Purchaser and the Merger Sub shall use, and shall cause their
          Affiliates to use, their reasonable best efforts to (i) obtain the Financing on
          the terms and conditions described in the Financing Commitments (or terms no
          less favorable to the Purchaser or the Company), and (ii) enter into definitive
          agreements with respect thereto on the terms and conditions contained in the
          Financing Commitments (or terms no less favorable to the Purchaser or the
          Company), and to satisfy the conditions thereto that are within its control. In
          the event that the Purchaser or the Merger Sub become aware that any portion of
          the Financing has become unavailable in the manner or from the sources
          contemplated in the Financing Commitments, (A) the Purchaser shall promptly
          notify the Company, and (B) the Purchaser and the Merger Sub shall use their
          reasonable best efforts to arrange to obtain any such unavailable portion from
          alternative sources as promptly as reasonably practicable following the
          occurrence of such event, including entering into definitive agreements with
          respect thereto (such definitive agreements entered into pursuant to the first
          or second sentence of this Section 6.4(d) being referred to as the
          “Financing Agreements”). Any Financing contemplated by the
          foregoing sentence shall not cause the Board of Directors of the Company to
          reasonably determine that such Financing would prevent it from approving the
          Transactions pursuant to Section 315 of the Companies Law, such determination to
          be made after consultation with counsel and an internationally recognized
          investment bank regarding the Company’s ability to fulfill its financial
          obligations. The Purchaser shall (1) furnish executed copies of the Financing
          Agreements to the Company promptly upon their execution, and (2) otherwise keep
          the Company reasonably informed of the status of its efforts to arrange the
          Financing (or any replacement thereof). 

         (e)       
          The Company hereby consents to the use of its and its Subsidiaries’ logos
          in connection with the Financing (or any alternative financing); provided,
          however, that such logos are used solely in a manner that is not intended to
          or reasonably likely to harm or disparage the Company or any of its
          Subsidiaries. The Purchaser shall promptly, upon request by the Company,
          reimburse the Company for all reasonable out-of-pocket costs and expenses
          incurred by the Company or any of its Subsidiaries in connection with the
          cooperation of the Company and its Subsidiaries as contemplated by this Section
          6.4. The Purchaser acknowledges and agrees that the Company and its Affiliates
          and their respective directors, officers, employees, agents and Representatives
          shall not have any responsibility for, or incur any liability to, any Person
          under the Financing or any cooperation provided pursuant to this Section 6.4 and
          that the Purchaser and the Merger Sub shall indemnify and hold harmless the
          Company and its Affiliates and their respective directors, officers and
          employees from and against any and all losses, damages, claims, costs or
          expenses suffered or incurred by any of them as a result of any action carried
          out by them under Section 6.4(d) prior to the Effective Time. 

46

        Section
6.5 No Solicitation.  

         (a)       
          Subject to Section 6.5(c) through (e), the Company agrees that, neither it nor
          any of its Subsidiaries shall, and that it shall cause its and their respective
          Representatives not to, directly or indirectly, (i) solicit, initiate, propose
          or encourage or take any other action to facilitate any inquiry, discussion,
          offer or request that constitutes, or may reasonably be expected to lead to, an
          Acquisition Proposal, or the making, submission or announcement of, any
          Acquisition Proposal, (ii) participate or otherwise engage in any negotiations
          regarding an Acquisition Proposal with, or furnish any nonpublic information to,
          or afford access to the property, books or records of the Company or its
          Subsidiaries to, any person that has made or, to the Company’s Knowledge,
          is considering making an Acquisition Proposal or grant any waiver or release
          under any standstill agreement, (iii) engage in discussions regarding an
          Acquisition Proposal with any Person that has made or, to the Company’s
          Knowledge, is considering making an Acquisition Proposal, except to notify such
          Person as to the existence of the provisions of this Section 6.5, (iv) approve,
          endorse or recommend any Acquisition Proposal, or (v) enter into any letter of
          intent or agreement in principle or any agreement or other arrangement providing
          for any Acquisition Proposal (except for confidentiality agreements permitted
          under Section 6.5(c)). The Company shall, and shall cause its Representatives
          to, immediately cease and cause to be terminated any existing discussions with
          any Person that relate to any Acquisition Proposal as of the date of this
          Agreement. 

         (b)       
          The Company shall promptly (and in any event within twenty-four (24) hours after
          receipt) notify the Purchaser, orally and in writing, of the receipt of any
          Acquisition Proposal, or of any inquiries, proposals or offers received by, any
          request for information from, or any negotiations sought to be initiated or
          continued with, either the Company or its Representatives concerning an
          Acquisition Proposal or that would reasonably be expected to lead to an
          Acquisition Proposal and disclose the identity of the other party and the
          material terms of such inquiry, offer, proposal or request and, in the case of
          written materials provided to the Company provide the Purchaser copies of such
          materials as promptly as reasonably practicable. The Company shall keep the
          Purchaser informed on a prompt basis of the status, terms and substance of any
          discussions or negotiations (including amendments and proposed amendments) of
          any such Acquisition Proposal or other inquiry, offer, proposal or request
          concerning an Acquisition Proposal. 

         (c)       
          Notwithstanding the limitations set forth in Section 6.5(a), if at any time
          prior to obtaining the Company Stockholder Approval, the Company receives an
          Acquisition Proposal which (i) constitutes a Superior Proposal or (ii) the Board
          of Directors determines in good faith could reasonably be expected to result in
          a Superior Proposal, the Company may take the following actions (A) furnish
          nonpublic information to the third party making such Acquisition Proposal, if,
          and only if, prior to so furnishing such information, the Company receives from
          the third party an executed confidentiality agreement on terms no less favorable
          in any material respect to the Company than the terms of the Confidentiality
          Agreement and provided that, any such information must be provided to the
          Purchaser as promptly as is reasonably practicable after its provision to such
          third party to the extent not previously made available to the Purchaser and (B)
          engage in discussions or negotiations with the third party with respect to the
          Acquisition Proposal, if, but only if, in the case of both clause (A) and (B) if
          the Board of Directors has concluded in good faith, after consultation with the
          Company’s outside legal advisors, that the failure of the Board of
          Directors to furnish such information or engage in such discussions or
          negotiations would be inconsistent with the directors’ exercise of their
          fiduciary obligations to the Company’s shareholders under applicable Law. 

47

         (d)       
          Subject to compliance with the other terms of this Section 6.5(d), in response
          to the receipt of a Superior Proposal that has not been withdrawn, prior to
          obtaining the Company Stockholder Approval, the Board of Directors may withdraw,
          modify or qualify the Recommendation (a “Change of
          Recommendation”) or approve or recommend a Superior Proposal if the
          Board of Directors has concluded in good faith, after consultation with the
          Company’s outside legal advisors, that the failure of the Board of
          Directors to effect a Change of Recommendation or approve or recommend a
          Superior Proposal, as applicable, would be inconsistent with the directors’
          exercise of their fiduciary obligations to the Company’s shareholders under
          applicable Law. The Company shall not be entitled to effect a Change in
          Recommendation with respect to a Superior Proposal or approve or recommend a
          Superior Proposal unless and until (i) after the third Business Day following
          the Purchaser’s receipt of a written notice (a “Notice of Superior
          Proposal”) from the Company advising the Purchaser that the Company
          intends to take such action and describing the material terms and conditions of
          the Superior Proposal that is the basis of such action in such Notice of
          Superior Proposal and as promptly as practicable thereafter providing a copy of
          the relevant proposed transaction agreements with the party making such Superior
          Proposal and other material documents, and stating that the Company intends to
          effect a Change in Recommendation (it being understood and agreed that (A) the
          Company shall, and shall cause its financial and legal advisors to, during such
          three (3) – Business Day period, negotiate with the Purchaser and Merger
          Sub in good faith (to the extent the Purchaser and Merger Sub desire to
          negotiate) to make such adjustments in the terms and conditions of this
          Agreement so that such Acquisition Proposal ceases to constitute a Superior
          Proposal, (B) in determining whether to cause or permit the Company to effect a
          Change in Recommendation or approve or recommend a Superior Proposal, the board
          of directors of the Company shall take into account any changes to the financial
          terms of this Agreement proposed by the Purchaser to the Company in any bona
          fide written proposal in response to a Notice of Superior Proposal or otherwise,
          and (C) any material amendment to the financial terms of such Superior Proposal
          shall require a new Notice of Superior Proposal and a new three (3) –
          Business Day period), and (ii) the Company has complied in all material respects
          with this Section 6.5. In addition, the Board of Directors shall not approve or
          recommend a Superior Proposal unless the Company immediately terminates this
          Agreement pursuant to Section 8.1(g). Except as expressly permitted by this
          Section 6.5, the Board of Directors shall not (i) effect a Change of
          Recommendation or publicly propose to withdraw, modify or qualify the Company
          Recommendation or (ii) approve, recommend or adopt or publicly propose to
          approve, recommend or adopt any Superior Proposal. 

         (e)       
          Nothing contained in this Agreement shall prohibit the Company or its Board of
          Directors from disclosing to its shareholders a position contemplated by Rules
          14d-9 and 14e-2(a) promulgated under the Exchange Act; provided, however,
          that any such disclosure (other than (i) a “stop, look and listen”
          communication or similar communication of the type contemplated by Rule 14d-9(f)
          under the Exchange Act or (ii) a negative recommendation of such tender offer)
          shall be deemed to be an Change of Recommendation; provided, further,
          however, that the Board of Directors shall not (A) recommend that the
          shareholders of the Company tender their Company Shares in connection with such
          tender or exchange offer (or otherwise approve or recommend any Acquisition
          Proposal) or (B) effect a Change of Recommendation, unless, in each case, the
          applicable requirements of Section 6.5(d) shall have been satisfied. 

48

         (f)       
          For the purposes of this Agreement, “Acquisition Proposal”
          shall mean, with respect to the Company, any unsolicited offer or
          proposal (other than an offer or proposal made or submitted by the Purchaser or
          any of its Subsidiaries) contemplating or otherwise relating to any transaction
          or series of related transactions involving (i) any merger, consolidation,
          amalgamation, share exchange, business combination, issuance of securities,
          acquisition of securities, reorganization, recapitalization, exchange offer or
          other similar transaction in which (A) the Company or any Subsidiary is a
          constituent corporation, (B) a Person or “group” (as defined in the
          Exchange Act and the rules promulgated thereunder) directly or indirectly
          acquires beneficial or record ownership of securities representing more than
          twenty percent (20%) of the outstanding Company Shares, or (C) the Company or
          any Subsidiary issues securities representing more than twenty percent (20%) of
          the outstanding Company Shares, (ii) any sale, lease, exchange, transfer,
          license, acquisition or disposition of any business or businesses or assets that
          constitute or account for twenty percent (20%) or more of the fair market value
          of the assets of the Company and the Subsidiaries, taken as a whole, or (iii)
          any liquidation or dissolution of the Company. 

         (g)       
          For the purposes of this Agreement, “Superior Proposal” shall
          mean an offer or proposal to enter into (i) a merger, consolidation,
          amalgamation, share exchange, business combination, issuance of securities,
          acquisition of securities, reorganization, recapitalization, exchange offer or
          other similar transaction as a result of which either (A) the shareholders of
          the Company prior to such transaction in the aggregate cease to own at least
          fifty percent (50%) of the voting securities of the entity surviving or
          resulting from such transaction (or the ultimate parent entity thereof) or (B) a
          Person or “group” (as defined in the Exchange Act and the rules
          promulgated thereunder) directly or indirectly acquires beneficial or record
          ownership of securities representing fifty percent (50%) or more of the Company
          Shares or (ii) a sale, lease, exchange transfer, license, acquisition or
          disposition of any business or businesses or assets that constitute or account
          for fifty percent (50%) or more of the fair market value of the assets of the
          Company and the Subsidiaries, taken as a whole, in the case of clauses (i) and
          (ii), in a single transaction or a series of related transactions that (1) was
          not obtained or made as a direct or indirect result of a breach of (or in
          violation of) this Agreement, and (2) is on terms that the board of directors of
          the Company determines in good faith, after consultation with the Company’s
          outside legal and financial advisors, would if consummated, result in a
          transaction that is more favorable to the Company and its shareholders from a
          financial point of view than the transactions contemplated by this Agreement
          (including any adjustment to the terms and conditions proposed by the Purchaser
          in response to such proposal), taking into account all of the terms and
          conditions of such proposal and this Agreement, including any break-up and
          reverse break-up fees, expense reimbursement or similar provisions, and is
          reasonably capable of being consummated in a timely manner on the terms
          proposed, in each case, taking into account all financial (including the
          financing terms of such proposal), regulatory, legal and other aspects of such
          proposal. 

49

        Section
6.6 Merger Proposal.  

        Each
of the Company and, if applicable, the Merger Sub, shall take the following actions within
the time frames set forth herein; provided, however, that any such actions or the
time frame for taking such action shall be subject to any amendment in the applicable
provisions of the Companies Law and the regulations promulgated thereunder (and in case of
an amendment thereto, such amendment shall automatically apply so as to amend this Section
6.6 accordingly): 

         (a)       
          As promptly as reasonably practicable after the execution and delivery of this
          Agreement: 

		    (i)        each
of the Company and the Merger Sub shall cause a merger proposal (in the           Hebrew
language) in substantially the form attached hereto as Exhibit C          (a “Merger
Proposal”) to be executed in accordance with Section           316 of the
Companies Law;  

		    (ii)        the
Company shall call the Company Shareholders’ Meeting, it being           understood
that the sole shareholder of the Merger Sub has approved the Merger
          contemporaneously with the execution of this Agreement; and  

		    (iii)        within
three (3) days from the date that the Company Shareholders’ Meeting           has
been convened as aforesaid, the Company and the Merger Sub shall jointly
          deliver the applicable Merger Proposal to the Companies Registrar. Each of the
          Company and the Merger Sub shall cause a copy of its Merger Proposal to be
          delivered to its secured creditors, if any, not later than three (3) days after
          the date on which the Merger Proposal is delivered to the Companies Registrar
          and shall promptly inform its respective non-secured creditors, if any, of its
          Merger Proposal and its contents in accordance with Section 318 of the
Companies           Law and the regulations promulgated thereunder.  

         (b)       
          Promptly after the Company and the Merger Sub shall have complied with the
          provisions of Section 6.6(a) above and with subsections (i) and (ii) of this
          Section 6.6(b), but in any event not later than three (3) Business Days (as
          defined in the Companies Law) following the date on which such notice was sent
          to the creditors, each of the Company and the Merger Sub shall inform the
          Companies Registrar, in accordance with Section 317(b) of the Companies Law,
          that notice was submitted to their respective secured and non-secured creditors
          in accordance with Section 318 of the Companies Law and the regulations
          promulgated thereunder. In addition to the above, each of the Company and, if
          applicable, the Merger Sub, shall: 

		    (i)        publish
a notice to its creditors, stating that a Merger Proposal has been           submitted to
the Companies Registrar and that the creditors may review the           Merger Proposal
at the offices of the Companies Registrar, the Company’s           registered
offices or the Merger Sub’s registered offices, as applicable,           and at such
other locations as the Company or the Merger Sub, as applicable, may           determine,
in (A) two (2) daily Hebrew newspapers circulated in Israel, on the           day that
the Merger Proposal is submitted to the Companies Registrar, (B) a           newspaper
circulated in the United States, not later than three (3) Business           Days
following the day on which the Merger Proposal was submitted to the           Companies
Registrar, and (C) if required, in such other manner as may be           required by any
applicable Law;  

50

		    (ii)        within
four (4) Business Days from the date of submitting the Merger Proposal to           the
Companies Registrar, send a notice, by registered mail, to all of the           “Substantial
Creditors” (as such term is defined in the           regulations promulgated
under the Companies Law), in which it shall state that a           Merger Proposal was
submitted to the Companies Registrar and that the creditors           may review the
Merger Proposal at such additional locations, as specified in the           notice
referred to in subsection (i) above; and  

		    (iii)        send
to the Company “employees committee” (Va’ad Ovdim) or           display in
a prominent place at the Company premises, a copy of the notice           published in a
daily Hebrew newspaper (as referred to in subsection (i)(A)           above), not later
than three (3) Business Days following the day on which the           Merger Proposal has
been submitted to the Companies Registrar.  

        Section
6.7 Shareholders Approval.  

         (a)       
          The Company will take, in accordance with applicable Law and its Articles of
          Association, all action necessary to convene a general meeting of its
          shareholders (the “Company Shareholders’ Meeting”) as
          promptly as reasonably practicable to consider and vote for the approval of this
          Agreement, the Merger and the Transactions. The Board of Directors shall
          recommend such approval subject to the notice requirements of the Companies Law
          and the rules and regulations promulgated thereunder and the Articles of
          Association of the Company. The Company Shareholders’ Meeting shall be held
          as promptly as reasonably practicable after the date hereof. The Company shall
          call, notice, convene, hold and conduct the Company Shareholders’ Meeting
          in compliance with applicable Laws including the Companies Law, the Articles of
          Association of the Company and the rules of NASDAQ. Subject to the provisions of
          Section 320(c) of the Companies Law, the approval of the Merger requires the
          Company Shareholder Approval. The quorum required for the shareholders’
          meeting is at least two (2) shareholders, present in person or by proxy, holding
          at least thirty-three and one-third percent (33 1/3%) of the issued and
          outstanding share capital of the Company. The Company may adjourn or postpone
          the Company Shareholders’ Meeting (i) if and to the extent necessary to
          provide any necessary supplement or amendment of the notice to the
          Company’s shareholders in advance of a vote on this Agreement, and the
          Merger and the Transactions; or (ii) if, as of the time for which the Company
          Shareholders’ Meeting is originally scheduled (as set forth in the notice
          for the Company Shareholders’ Meeting), the number of Company Shares
          present at the Company Shareholders’ Meeting (either in person or by proxy)
          is insufficient to constitute the required quorum necessary to conduct the
          business of the Company Shareholders’ Meeting. The Company shall include
          the Recommendation in any materials sent to the shareholders of the Company in
          connection with the Company Shareholders’ Meeting. In the event that the
          Purchaser or any of its Affiliates casts any votes in respect of the Merger, the
          Purchaser shall disclose to the Company in writing the number of shares and how
          voted. 

         (b)       
          The sole shareholder of the Merger Sub has approved the Merger subject to the
          satisfaction or waiver (to the extent permitted hereunder) of all the conditions
          to Closing (other than those that by their nature may only be satisfied or
          waived at Closing). Not later than three (3) days after the date of such
          approval, the Merger Sub shall (in accordance with Section 317(b) of the
          Companies Law and the regulations thereunder) inform the Companies Registrar of
          such approval. In accordance with the customary practice of the Companies
          Registrar, the Merger Sub shall request, following coordination with Company,
          that the Companies Registrar declare the Merger effective and issue the
          Certificate of Merger upon such date as the Merger Sub shall advise the
          Companies Registrar, which date shall be not later than the second Business Day
          immediately following the Closing. 

51

        Section
6.8 Filings; Other Actions; Notification.  

         (a)       
          Subject to the terms and conditions set forth in this Agreement, the Company and
          the Purchaser shall cooperate with each other and use, and shall cause their
          respective Subsidiaries and Affiliates to use, their respective reasonable best
          efforts to take or cause to be taken all actions, and do or cause to be done all
          things, reasonably necessary, proper or advisable on their part under this
          Agreement and applicable Law to consummate and make effective the Merger and the
          Transactions as soon as practicable, including (i) obtaining all necessary
          actions, consents and approvals from Governmental Authorities, or other Persons
          necessary in connection with the consummation of the Transactions and the making
          of all necessary registrations and filings (including filings with Governmental
          Authorities, if any, required or recommended under all applicable Antitrust
          Requirements) and taking all reasonable steps as may be necessary to obtain an
          approval from, or to avoid an action or proceeding by, any Governmental
          Authority or other Persons necessary in connection with the consummation of the
          Transactions, (ii) defending any lawsuits or other legal proceedings, whether
          judicial or administrative, challenging this Agreement or the consummation of
          the Transactions performed or consummated by such Party in accordance with the
          terms of this Agreement, including seeking to have any stay or temporary
          restraining order entered by any Governmental Authority vacated or reversed,
          (iii) the execution and delivery of any additional instruments necessary to
          consummate the Merger and Transactions in accordance with the terms of this
          Agreement and to fully carry out the purposes of this Agreement, and (iv) the
          execution by the Purchaser and/or its Affiliates of an undertaking in customary
          form in favor of the OCS to comply with the applicable Law, if required. 

         (b)       
          In furtherance and not in limitation of the foregoing, (i) each party hereto
          agrees to make all appropriate filings with any applicable Governmental
          Authority set forth on Section 7.1(b) of the Company Disclosure Schedule as
          promptly as practicable and in any event within fifteen (15) Business Days from
          the date hereof, or such other time as mutually agreed to by the parties, and to
          supply as promptly as practicable any additional information and documentary
          material that may be required with respect to such filings and use its
          reasonable best efforts to take, or cause to be taken, all other actions
          consistent with this Section 6.8 necessary to cause the expiration or
          termination of the applicable waiting periods with respect to such filings
          (including any extensions thereof), if any, as soon as practicable and (ii) the
          Company and the Purchaser shall each use its reasonable best efforts to (A) take
          all action necessary to ensure that no state takeover statute or similar Law is
          or becomes applicable to the Merger or the Transactions and (B) if any state
          takeover statute or similar Law becomes applicable to the Merger or the
          Transactions, take all action necessary to ensure that the Merger and the
          Transactions may be consummated as promptly as practicable on the terms
          contemplated by this Agreement and otherwise minimize the effect of such Law on
          the Merger and the Transactions. 

52

         (c)       
          Subject to applicable Law and the instructions of any Governmental Authority,
          each of the Company and the Purchaser shall keep the other reasonably apprised
          of the status of matters relating to completion of the Transactions, including
          promptly furnishing the other with copies of material notices or other
          communications received by the Purchaser or the Company, as the case may be, or
          any of their Subsidiaries from any third party and/or any Governmental Authority
          with respect to the Transactions. Neither the Company nor the Purchaser shall
          permit any of its officers or any other Representatives to participate in any
          meeting with any Governmental Authority in respect of any filings, investigation
          or other inquiry relating to the Transactions unless it consults with the other
          Party in advance and shall, to the extent permitted by such Governmental
          Authority, give the other Party the opportunity to attend and participate
          thereat. 

         (d)       
          Each of the Company and the Purchaser hereby agrees to pay or commit to pay
          fifty percent (50%) of all fees in connection with the filings with Governmental
          Authorities contemplated by this Section 6.8 and Section 6.10 of this Agreement.
          Each of the Parties hereto will furnish to the other such necessary information
          and reasonable assistance as the other may request in connection with the
          preparation of any required governmental filings or submissions and will
          cooperate in responding to any inquiry from a Governmental Authority, including
          immediately informing the other Party of such inquiry, consulting in advance
          before making any presentations or submissions to a Governmental Authority, and
          supplying each other with copies of all material correspondence, filings or
          communications between such Party and any Governmental Authority with respect to
          this Agreement. 

        Section
6.9 Publicity.  

        The
initial press release with respect to the execution of this Agreement shall be a joint
press release to be reasonably agreed upon by the Purchaser and the Company. Thereafter,
neither the Company nor the Purchaser shall issue or cause the publication of any press
release or other public announcement (to the extent not previously issued or made in
accordance with this Agreement) with respect to this Agreement, the Merger or the other
Transactions without the prior consent of the other Party (which consent shall not be
unreasonably withheld), except as may be required by Law or by any listing agreement with
or rules of any national securities exchange or NASDAQ or by the request of any
Governmental Authority. Each of the Purchaser and the Company may make any public
statement in response to specific questions presented by the press, analysts, investors or
those attending industry conferences or financial analyst conference calls, so long as
such statements are substantially similar to previous press releases, public disclosures
or public statements made by the Purchaser or the Company in accordance with this Section
6.9. 

        Section
6.10 Israeli Tax Ruling.  

        As
soon as reasonably practicable after the execution of this Agreement, the Company shall
instruct its Israeli counsel, advisors and/or accountants to prepare and file with the
Israeli Tax Authority applications for: 

53

         (a)       
          a ruling providing, among other things (i) with respect to holders of Company
          Shares that are non-Israeli residents (as defined in the Ordinance), that the
          Purchaser will be exempt from any obligation to withhold Israeli Tax at source
          from any consideration payable or otherwise deliverable pursuant to this
          Agreement, including the Merger Consideration, or clarifying that no such
          obligation exists, and (ii) with respect to holders of Company Shares that are
          Israeli residents (as defined in the Ordinance), clearly instructing the
          Purchaser, in the absence of an exemption from Tax withholding to be provided by
          any such holder prior to the Closing Date, the manner in which such withholding
          at source is to be executed, and in particular the rate or rates of withholding
          to be applied (the “Israeli Withholding Tax Ruling”). In the
          event that the Israeli Withholding Tax Ruling is not obtained prior to the
          Closing Date, the Company shall instruct its Israeli counsel, advisors and/or
          accountants to promptly apply to the Israeli Tax Authority for an extension of
          time with respect to the obligation to deduct or withhold Israeli Tax at source
          from any consideration payable or otherwise deliverable pursuant to this
          Agreement (such extension, if granted by the Israeli Tax Authority, an
          “Israeli Withholding Tax Extension”); and 

         (b)       
          a ruling providing, among other things, that the treatment of Company 102
          Securities contemplated by Section 3.3, prior to the lapse of the minimum trust
          period required by Section 102 of the Ordinance (the “102 Trust
          Period”), will not be treated as a breach of the provisions
          of Section 102 of the Ordinance, provided that, the
          applicable Option Consideration paid to holders of said Company 102
          Securities is deposited for the duration of the 102 Trust Period with the 102
          Trustee (the “Israeli Options Tax Ruling”). 

        Each
of the Company and the Purchaser shall cause their respective Israeli counsel, advisors
and/or accountants to coordinate all activities, and to cooperate with each other, with
respect to the preparation and filing of such applications and in the preparation of any
written or oral submissions that may be necessary, proper or advisable to obtain the
Israeli Withholding Tax Ruling and the Israeli Options Tax Ruling. 

        Section
6.11 Notification of Certain Matters.  

        The
Company shall give prompt notice to the Purchaser, and the Purchaser shall give prompt
notice to the Company, of (a) any notice or other communication received by such Party
from any Governmental Authority in connection with the Merger or the Transactions or from
any Person alleging that the consent of such person is or may be required in connection
with the Transactions, if the subject matter of such communication or the failure of such
Party to obtain such consent could be material to the Company, the Surviving Company or
the Purchaser, (b) any actions, suits, claims, investigations or proceedings commenced or,
to such Party’s Knowledge, threatened against, relating to or involving or otherwise
affecting such Party or any of its Subsidiaries which relate to the Merger or the
Transactions, (c) the discovery of any fact or circumstance that, or the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which, would cause any
representation or warranty made by such Party contained in this Agreement (i) that is
qualified as to materiality or Material Adverse Effect to be untrue and (ii) that is not
so qualified to be untrue in any material respect, and (d) any material failure of such
Party to comply with or satisfy any covenant or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.11 shall not (A) cure any breach of, or non-compliance with, any other
provision of this Agreement or (B) limit the remedies available to the Party receiving
such notice. 

54

        Section
6.12 Directors' and Officers' Insurance; Indemnification Agreements.  

         (a)       
          From and after the Effective Time, the Purchaser shall cause the Surviving
          Company to fulfill and honor all the obligations of the Company pursuant to the
          indemnification agreements listed in Section 6.12(a) of the Company Disclosure
          Schedule, with each individual who at the Effective Time is, or at any time
          prior to the Effective Time was, a director or officer of the Company or of any
          current or former Subsidiary of the Company (each, an
          “Indemnitee” and, collectively, the
          “Indemnitees”), which agreements shall survive the Transactions
          and continue in full force and effect in accordance with their respective terms.
          Without limiting the foregoing, the Purchaser, from and after the Effective Time
          until seven (7) years from the Effective Time, shall cause, unless otherwise
          required by Law, the articles of association, certificate of incorporation and
          by-laws (as applicable) and comparable organizational documents of the Surviving
          Company and each of its Subsidiaries to contain provisions no less favorable to
          the Indemnitees with respect to exculpation and limitation of liabilities of
          directors and officers, insurance and indemnification than are set forth as of
          the date of this Agreement in the Company Charter Documents and comparable
          organizational documents of the relevant Subsidiaries, which provisions shall
          not be amended, repealed or otherwise modified in a manner that would adversely
          affect the rights thereunder of the Indemnitees with respect to exculpation and
          limitation of liabilities or insurance and indemnification. 

         (b)       
          The Company shall, after reasonable consultation with the Purchaser in good
          faith, purchase at the Effective Time, a “tail” policy (the
          “Tail Policy”), which policy shall be exclusively “A
          side”, “B side” and “C side” coverage, from an insurer
          with a Standard & Poor’s rating of at least A or from a licensed
          insurance company registered in Israel, which (i) has an effective term of seven
          (7) years from the Effective Time, (ii) covers each Indemnitee, (iii) contains
          terms that are no less favorable than those of the Company’s
          directors’ and officers’ insurance policy in effect on the date of
          this Agreement and on terms comparable to companies similarly situated in the
          industries in which the Company operates and (iv) is at a cost not in excess of
          $1,200,000. If and to the extent such a policy has been purchased prior to the
          Effective Time, the Purchaser shall, and shall cause the Surviving Company to,
          maintain such policy in effect and continue to honor the obligations thereunder. 

         (c)       
          The Indemnitees to whom this Section 6.12 applies shall be intended third party
          beneficiaries of this Section 6.12. The provisions of this Section 6.12 are
          intended to be for the benefit of each Indemnitee, his or her successors, heirs
          or representatives. All reasonable expenses, including reasonable
          attorneys’ fees, and all other obligations provided in this Section 6.11
          that may be incurred by (i) any Indemnitee in enforcing the indemnity and (ii)
          the Purchaser, the Surviving Company or their respective successors and assigns,
          as the case may be, in defending the indemnity shall be the responsibility of
          the Party who does not prevail in such enforcement action. 

55

         (d)       
          This Section 6.12 shall be binding upon the Purchaser and the Surviving Company
          and their respective successors and assigns. In the event that the Purchaser,
          the Surviving Company or any of their respective successors or assigns
          consolidates with, or merges into, any other Person and is not the continuing or
          surviving corporation or entity of such consolidation or merger, or transfers or
          conveys all or a majority of its properties and assets to any Person, then, and
          in each such case, proper provisions shall be made so that the successors and
          assigns of the Purchaser or the Surviving Company, as applicable, shall succeed
          to the obligations set forth in this Section 6.12. If the Tail Policy is not
          purchased, for the seven-year period commencing immediately after the Effective
          Time, the Purchaser shall maintain in effect the Company’s current
          directors’ and officers’ liability insurance covering acts or
          omissions occurring at or prior to the Effective Time with respect to those
          Persons who are currently (and any additional persons who prior to the Effective
          Time become) covered by the Company’s directors’ and officers’
          liability insurance policy on terms and scope with respect to such coverage, and
          in amount, not less favorable to such individuals than those of such policy in
          effect on the date hereof (or the Purchaser may substitute therefor policies,
          issued by reputable insurers, of at least the same coverage with respect to
          matters occurring prior to the Effective Time, including a “tail”
          policy); provided, however, that in no event shall the Purchaser be
          required to expend per year of coverage more than two hundred percent (200%) of
          the amount currently expended by the Company per year of coverage as of the date
          of this Agreement (the “Maximum Amount”) to maintain or procure
          insurance coverage pursuant hereto. If notwithstanding the use of reasonable
          best efforts to do so, the Purchaser is unable to maintain or obtain the
          insurance called for by this Section 6.12(d), the Purchaser shall obtain as much
          comparable insurance as available for the Maximum Amount. 

         (e)       
          If Surviving Company or any of its successors or assigns (i) consolidates with
          or merges into any other Person and shall not be the continuing or surviving
          corporation or entity of such consolidation or merger, or (ii) transfers or
          conveys all or substantially all of its properties and assets to any Person,
          then, and in each such case, to the extent necessary, proper provision shall be
          made so that the successors and assigns of Company or the Surviving Corporation,
          as the case may be, shall assume the obligations set forth in this provision. 

        Section
6.13 The Merger Sub Obligations.  

        The
Purchaser shall cause the Merger Sub to comply with all of its obligations under this
Agreement. During the period from the date of this Agreement through the Effective Time,
except as expressly provided in this Agreement, the Merger Sub shall not, and the
Purchaser shall not permit the Merger Sub to, conduct any business or undertake any
activities except as required in performing its express obligations hereunder. 

        Section
6.14 Employee Matters.  

         (a)       
          During the eighteen (18) month period commencing on the Closing Date, the
          Purchaser shall provide or shall cause the Surviving Company to provide to each
          then current Employee (“Company Employees”) compensation and
          benefits (other than equity based compensation plans and transactional and
          change in control bonuses) that are, in the aggregate, to any such employee,
          substantially comparable to the compensation and benefits being provided to
          Company Employees immediately prior to the Effective Time. Notwithstanding any
          other provision of this Agreement to the contrary, the Purchaser shall or shall
          cause the Surviving Company to provide Company Employees whose employment is
          terminated by the Company during the eighteen (18) month period following the
          Effective Time with severance benefits in an amount that is equal to the
          severance benefits that such Company Employee would have been entitled to
          pursuant to and under circumstances consistent with the terms of the
          Company’s severance plan applicable to such Company Employee as set forth
          in Section 6.14(a) of the Company Disclosure Schedule; provided that,
          such severance benefits shall be determined without taking into account any
          reduction after the Effective Time in compensation and benefits paid to Company
          Employees and shall take into account the service crediting provisions set forth
          in Section 6.14(a) of the Company Disclosure Schedule. 

56

         (b)       
          For purposes of eligibility under any employee benefit plans established by the
          Purchaser, the Company, the Company Subsidiaries and their respective Affiliates
          providing benefits to any Company Employees after the Closing (the “New
          Plans”), and for purposes of accrual of vacation and other paid time
          off and severance benefits under the New Plans, in addition to such Company
          employees’ years of service after the Closing, each Company Employee shall
          be credited with his or her years of service with the Company, the Company
          Subsidiaries and their respective Affiliates (and any additional service with
          any predecessor employer) before the Closing, to the same extent as such Company
          Employee was entitled, before the Closing, to credit for such service under any
          similar Company Employee Plan. In addition, and without limiting the generality
          of the foregoing (i) each Company Employee shall be immediately eligible to
          participate, without any waiting time, in any and all New Plans to the extent
          coverage under such New Plan replaces coverage under a comparable, in the
          aggregate, Company Employee Plan in which such Company Employee participated
          immediately before the replacement, and (ii) for purposes of each New Plan
          providing medical, dental, pharmaceutical and/or vision benefits to any Company
          Employee, the Purchaser shall cause all pre-existing condition exclusions and
          actively-at-work requirements of such New Plan to be waived for such employee
          and his or her covered dependents, and the Purchaser shall cause any eligible
          expenses incurred by such employee and his or her covered dependents under an
          Company Employee Plan during the portion of the plan year of the New Plan ending
          on the date such employee’s participation in the corresponding New Plan
          begins to be taken into account under such New Plan for purposes of satisfying
          all deductible, coinsurance and maximum out-of-pocket requirements applicable to
          such employee and his or her covered dependents for the applicable plan year as
          if such amounts had been paid in accordance with such New Plan. 

         (c)       
          From and after the Effective Time, the Purchaser shall cause the Surviving
          Company and its Subsidiaries to honor all obligations under the Company Employee
          Plans and compensation and severance arrangements and agreements in accordance
          with their terms as in effect immediately prior to the Effective Time,
          provided that, subject to the requirements of Section 6.14(a), nothing
          herein shall prohibit the Surviving Company from amending or terminating any
          particular Company Employee Plan to the extent permitted by its terms or
          applicable Law. 

         (d)       
          The provisions of this Section 6.14 are solely for the benefit of the parties to
          this Agreement, and no current or former employee or any other individual
          associate therewith shall be regarded for any purpose as a third-party
          beneficiary of the Agreement and nothing herein shall be construed as an
          amendment to any Company Employee Plan for any purpose. 

        Section
6.15 Property.  

        Prior
to the Effective Time, the Company shall use its reasonable best efforts to obtain any and
all approvals and permits (including all Tax approvals) which may be required in order to
lawfully effect the registration of its rights in the Property. The Company shall promptly
inform the Purchaser of any claim or legal proceeding commenced against it or any of its
officers or directors in connection with the Property. 

57

ARTICLE VII 

CONDITIONS PRECEDENT 

        Section
7.1 Conditions to Each Party's Obligation to Effect the Merger.  

        The
respective obligation of each Party to effect the Merger is subject to the satisfaction
(or waiver, if permissible under applicable Law) on or prior to the Closing Date of the
following conditions: 

		    (a)        Company
Shareholder Approval. The Company Shareholder Approval shall have           been
obtained in accordance with applicable Law and the Articles of Association           of
the Company.  

		    (b)        Governmental
Consents. The Governmental Consents listed in Section 7.1(b)           of the Company
Disclosure Schedule shall have been obtained or the applicable           waiting periods
shall have expired or been terminated.  

		    (c)        Israeli
Statutory Waiting Periods. At least fifty (50) days shall have           elapsed
after the filing of the Merger Proposals with the Companies Registrar           and at
least thirty (30) days shall have elapsed after receipt of the Company
          Shareholder Approval and the approval of the Merger by the shareholders of the
          Merger Sub.  

		    (d)        Certificate
of Merger. The Company and the Merger Sub shall have received           the Merger
Certificate from the Companies Registrar.  

		    (e)        Injunction.
No injunction, judgment, order, decree, statute, Law,           ordinance, rule or
regulation, entered, enacted, promulgated, enforced or issued           by any court or
other Governmental Authority of competent jurisdiction or other           similar legal
restraint or prohibition (collectively,           “Restraints”)
preventing, enjoining, restraining, prohibiting           or making illegal the
consummation of the Merger shall be in effect.  

        Section
7.2 Conditions to Obligations of the Purchaser and the Merger Sub to Effect the
Merger. 

        The
obligations of the Purchaser and the Merger Sub to effect the Merger are further subject
to the satisfaction (or waiver, if permissible under applicable Law) on or prior to the
Closing Date of the following conditions: 

		    (a)        The
representations and warranties of the Company set forth in this Agreement,
          disregarding for this purpose any Material Adverse Effect or materiality
          qualification, shall be true and correct at and as of the date of this
Agreement           and at and as of the Closing Date as though made at and as of the
Closing Date,           except for such failures to be true and correct as would not
have, individually           or in the aggregate, a Material Adverse Effect (except that
the representations           and warranties contained in Section 4.2 and Section 4.18
shall be true and           correct in all material respects); provided, however,
that, with respect           to representations and warranties that are made as of a
particular date or           period shall be true and correct (in the manner set forth
above) only as of such           date or period.  

58

		    (b)        The
Company shall have performed in all material respects all obligations           required
to be performed by it under this Agreement at or prior to the Closing           Date, and
the Purchaser shall have received a certificate signed on behalf of           the Company
by the chief executive officer of the Company to such effect.  

		    (c)        Between
the date of this Agreement and the Closing Date, there shall not have           been any
Material Adverse Effect.  

        Section
7.3 Conditions to Obligations of the Company to Effect the Merger. 

        The
obligation of the Company to effect the Merger is further subject to the satisfaction (or
waiver, if permissible under applicable Law) on or prior to the Closing Date of the
following conditions: 

		    (a)        The
representations and warranties of the Purchaser set forth in this Agreement,
          disregarding for this purpose any materiality qualification, shall be true and
          correct at and as of the date of this Agreement and at and as of the Closing
          Date as though made at and as of the Closing Date, except for such failures to
          be true and correct as would not have and would not reasonably be expected to
          have, individually or in the aggregate, a material adverse effect on the
          Purchaser; provided, however, that, with respect to representations and
          warranties that are made as of a particular date or period shall be true and
          correct (in the manner set forth above) only as of such date or period.  

		    (b)        The
Purchaser shall have performed in all material respects all obligations
          required to be performed by it under this Agreement at or prior to the Closing
          Date, and the Company shall have received a certificate signed on behalf of the
          Purchaser by the chief executive officer of the Purchaser to such effect.  

        Section
7.4 Frustration of Closing Conditions.  

        None
of the Company, the Purchaser or the Merger Sub may rely on the failure of any condition
set forth in Section 7.1, 7.2 or 7.3, as the case may be, to be satisfied if such failure
was caused by such Party’s failure to use its reasonable best efforts to consummate
the Merger and the other Transactions. 

59

ARTICLE VIII 

TERMINATION 

        Section
8.1 Termination or Abandonment.  

        Notwithstanding
anything contained in this Agreement to the contrary, this Agreement may be terminated and
abandoned at any time prior to the Effective Time, whether before or after receipt of the
Company Shareholder Approval: 

		    (a)        by
the mutual written consent of the Company and the Purchaser;  

		    (b)        by
either the Company or the Purchaser by notice to the other, if (i) the
          Effective Time shall not have occurred on or before September 28, 2008 (the
          “End Date”) and (ii) the Party seeking to terminate this
          Agreement pursuant to this Section 8.1(b) shall not have breached in any
          material respect its obligations under this Agreement in any manner that shall
          have proximately caused the failure of the Effective Date to occur on or before
          such date;  

		    (c)        by
either the Company or the Purchaser by notice to the other, if a Restraint
          shall have been entered permanently preventing, enjoining or otherwise
          prohibiting the consummation of the Merger and such Restraint shall have become
          final and non-appealable; provided that, the Party seeking to terminate
          this Agreement pursuant to this Section 8.1(c) (i) shall have used its
          reasonable best efforts to remove such Restraint, and (ii) shall not have
          breached in any material respect its obligations under this Agreement in any
          manner that shall have proximately caused such injunction to be issued;  

		    (d)        by
either the Company or the Purchaser by notice to the other, if the Company
          Shareholders’ Meeting (including any adjournments thereof) shall have been
          convened and concluded and the Company Shareholder Approval shall not have been
          obtained;  

		    (e)        by
the Company by notice to the Purchaser, if (i) the Purchaser shall have
          breached or failed to perform in any material respect any of its
          representations, warranties, covenants or other agreements contained in this
          Agreement, which breach or failure to perform, (A) would result in a failure of
          a condition set forth in Section 7.1 or Section 7.3 and (B) is not capable of
          being cured by the End Date or, if capable of being cured, is not cured within
          thirty (30) days following receipt of notice from the Company stating the
          Company’s intention to terminate this Agreement pursuant to this Section
          8.1(e) or (ii) the conditions to closing set forth in Section 7.1 and Section
          7.2 have been satisfied and the Purchaser has failed to consummate the Merger
          within ten (10) Business Days (or such longer period specified by the Company
in           a notice to the Purchaser scheduling the Closing) after the later of (A) the
          first day that the conditions set forth in Section 7.1 and Section 7.2 have
been           satisfied and (B) the date on which the Company provides such notice to
the           Purchaser irrevocably undertaking to close the Merger in accordance with
this           Agreement on the date specified in such notice;  

		    (f)        by
the Purchaser by notice to the Company, if the Company shall have breached or
          failed to perform in any material respect any of its representations,
          warranties, covenants or other agreements contained in this Agreement, which
          breach or failure to perform (i) would result in a failure of a condition set
          forth in Section 7.1 or Section 7.2 and (ii) is not capable of being cured by
          the End Date or, if capable of being cured, is not cured within thirty (30)
days           following receipt of notice from the Purchaser stating the Purchaser’s
          intention to terminate this Agreement pursuant to this Section 8.1(f);  

60

		    (g)        by
the Company by notice to the Purchaser, at any time prior to the receipt of           the
Company Shareholder Approval, if the board of directors of the Company has
          approved or recommended a Superior Proposal in accordance with Section 6.5(d);
provided that, any termination pursuant to this Section 8.1(g) shall be
          conditioned on and subject to the payment of the Company Termination Fee
          pursuant to Section 8.2(a)(i); or  

		    (h)        by
the Purchaser by notice to the Company, if the Board of Directors shall have
          (i) made or resolved to make a Change of Recommendation, (ii) failed to
          recommend against a tender or exchange offer constituting an Acquisition
          Proposal in any publicly disclosed position taken pursuant to Rules 14d-9 and
          14e-2 under the Exchange Act, except to the extent permitted pursuant to
Section           6.5(e), (iii) recommended to the shareholders of the Company or
approved any           Acquisition Proposal or (iv) failed to include the Recommendation
in any           materials sent to the shareholders of the Company in connection with the
Company           Shareholders’ Meeting.  

In the event of termination of this
Agreement pursuant to this Section 8.1, this Agreement shall terminate and be of no
further force or effect (except for the Confidentiality Agreement, the provisions of
Section 8.2 and Article IX), and there shall be no other liability on the part of the
Company or the Purchaser and the Merger Sub to the other; provided that, nothing
herein shall relieve any Party from liability arising out of fraud prior to the date on
which this Agreement is terminated, in which case the aggrieved Party shall, subject to
the terms of this Agreement, be entitled to all rights and remedies available at law or in
equity. 

        Section
8.2 Termination Fees and Expenses.  

    (a)        Notwithstanding
any provision in this Agreement to the contrary, if:  

		    (i)        this
Agreement is terminated by the Company pursuant to Section 8.1(g), the           Company
shall pay the Purchaser or an Affiliate of the Purchaser designated by           the
Purchaser a fee of $ 14,239,000 in cash (the “Company Termination           Fee”)
prior to or simultaneous with such termination;  

		    (ii)        this
Agreement is terminated by the Purchaser pursuant to Section 8.1(h) , the
          Company shall pay the Purchaser or an Affiliate of the Purchaser designated by
          the Purchaser the Company Termination Fee no later than two (2) Business Days
          after such termination;  

		    (iii)        this
Agreement is terminated by the Purchaser pursuant to Section 8.1(f), the
          Company shall pay the Purchaser or an Affiliate of the Purchaser designated by
          the Purchaser the Purchaser Expenses (as defined below) no later than two (2)
          Business Days after such termination; and  

61

		    (iv)        prior
to the termination of this Agreement, (A) any bona fide Acquisition           Proposal
(provided that for the purpose of this Section 8.2(a)(iv) any reference           in the
definition of Acquisition Proposal to twenty percent (20%) shall be           deemed to
be a reference to fifty percent (50%)) is publicly proposed or           otherwise
privately communicated to the Board of Directors, (B) this Agreement           is
terminated by the Purchaser or the Company pursuant to Section 8.1(b) or
          Section 8.1(d) or by the Purchaser pursuant to Section 8.1(f) and (C) no later
          than nine (9) months after such termination, any definitive agreement providing
          for any Acquisition Proposal shall have been entered into or any Acquisition
          Proposal consummated (in each case which need not be the same Acquisition
          Proposal), then in any such event the Company shall pay to the Purchaser the
          Company Termination Fee, simultaneously with the consummation of such
          Acquisition Proposal or any Acquisition Proposal relating thereto.  

    (b)        Notwithstanding
any provision in this Agreement to the contrary, if:  

		    (i)        this
Agreement is terminated by the Company pursuant to Section 8.1(e)(i) and           the
Purchaser’s breach or failure to perform is not intentional, the           Purchaser
shall pay the Company or an Affiliate of the Company designated by the           Company
the Company Expenses (as defined below) no later than ten (10) Business           Days
after such termination;  

		    (ii)        if
this Agreement is terminated by the Company pursuant to Section 8.1(e)(i) and
          the Purchaser’s breach or failure to perform is intentional, and as of the
          date of termination the conditions to closing set forth in Section 7.1 and 7.2
          have been satisfied, the Purchaser shall pay the Company or an Affiliate of the
          Company designated by the Company $ $47,463,000 in cash (the “Purchaser
          Termination Fee”) no later than ten (10) Business Days after such
          termination; provided, that for the purposes of this Section 8.2(b)(ii)
          if the Purchaser obtains Financing that does not comply with the third sentence
          of Section 6.4(d) such action shall be deemed an intentional breach; and  

		    (iii)        this
Agreement is terminated by the Company pursuant to Section 8.1(e)(ii), the
          Purchaser shall pay the Company or an Affiliate of the Company designated by
the           Company the Purchaser Termination Fee no later than ten (10) Business Days
after           such termination.  

    (c)        For
the purposes of this Agreement, “Company Expenses” shall           mean
all reasonable, actual and documented out-of-pocket costs and expenses           incurred
prior to the termination of this Agreement by or on behalf of the           Company and
its Subsidiaries in connection with entering into this Agreement and           the
carrying out of any and all acts contemplated hereunder, including           reasonable
fees and expenses of counsel, investment banking firms, lenders or           financial
advisors, accountants, and consultants, up to an aggregate maximum           amount of
$5,000,000, and “Purchaser Expenses” shall mean all
          reasonable, actual and documented out-of-pocket costs and expenses incurred
          prior to the termination of this Agreement by or on behalf of the Purchaser,
the           Merger Sub or their Affiliates in connection with the entering into this
          Agreement and the carrying out of any and all acts contemplated hereunder,
          including reasonable fees and expenses of counsel, investment banking firms,
          lenders or financial advisors, accountants, and consultants, up to an aggregate
          maximum amount of $5,000,000.  

         (d)       
          Notwithstanding anything to the contrary in this Agreement, in the event of a
          termination of this Agreement in connection with which the Purchaser Termination
          Fee or the Company Expenses are payable to the Company, payment of such
          Purchaser Termination Fee or Company Expenses by the Purchaser pursuant to this
          Section 8.2 or the Sponsors pursuant to the Limited Guaranty shall be the sole
          and exclusive remedy of the Company, and its Subsidiaries and Affiliates against
          the Sponsors, the Purchaser, the Merger Sub, their Subsidiaries and any of their
          respective former, current, or future general or limited partners, shareholders,
          managers, members, directors, officers, Affiliates or agents for the loss
          suffered as a result of the failure of the Merger to be consummated, and upon
          payment of such amounts, none of the Sponsors, the Purchaser, the Merger Sub,
          their Subsidiaries or any of their respective former, current, or future general
          or limited partners, shareholders, managers, members, directors, officers,
          Affiliates or agents shall have any further liability or obligation relating to
          or arising out of this Agreement or the transactions contemplated by this
          Agreement. 

62

         (e)       
          Notwithstanding anything to the contrary in this Agreement, in the event of a
          termination of this Agreement in connection with which a Company Termination Fee
          or the Purchaser Expenses are payable to the Purchaser, payment of such Company
          Termination Fee or the Purchaser Expenses, as the case may be, by the Company
          pursuant to and in accordance with this Section 8.2 shall be the sole and
          exclusive remedy of the Purchaser, the Merger Sub and their Subsidiaries and
          Affiliates against the Company, its Subsidiaries and any of their respective
          former, current, or future general or limited partners, shareholders, managers,
          members, directors, officers, Affiliates or agents for the loss suffered as a
          result of the failure of the Merger to be consummated, and upon payment of such
          amounts, none of the Company, its Subsidiaries or any of their respective
          former, current, or future general or limited partners, shareholders, managers,
          members, directors, officers, Affiliates or agents shall have any further
          liability or obligation relating to or arising out of this Agreement or the
          transactions contemplated by this Agreement. 

         (f)       
          Any payment of the Company Termination Fee, the Purchaser Expenses, the
          Purchaser Termination Fee or the Company Expenses hereunder shall be net of any
          amounts as may be required to be deducted or withheld therefrom under the Code
          or under any provision of state, local or foreign tax Law. 

         (g)       
          Each of the Company, the Purchaser and the Merger Sub acknowledges and agrees
          that the agreements contained in this Section 8.2 are an integral part of the
          transactions contemplated by this Agreement, and that, without these agreements,
          the Company, the Purchaser and the Merger Sub would not have entered into this
          Agreement, and that the Company Termination Fee and the Purchaser Termination
          Fee, as the case may be, do not constitute a penalty but rather are liquidated
          damages in a reasonable amount to compensate the receiving Party for efforts and
          resources expended and opportunities foregone while negotiating this Agreement
          and in reliance on this Agreement and on the expectation of the consummation of
          the transactions contemplated hereby. Accordingly, if a Party fails to pay the
          Company Termination Fee, the Purchaser Expenses, the Purchaser Termination Fee
          or the Company Expenses, as the case may be, pursuant to this Section 8.2, and
          the receiving Party commences a suit to obtain such payments, which results in a
          judgment against the paying Party for the applicable amount due under this
          Section 8.2, such paying Party shall pay the receiving Party its costs and
          expenses (including reasonable attorneys’ fees) in connection with such
          suit, together with interest on such amount at the prime rate of Citibank N.A.
          in effect on the date such payment was required to be made through the date of
          payment. 

63

ARTICLE IX 

MISCELLANEOUS 

        Section
9.1 Amendment.  

        This
Agreement may be amended, supplemented or modified only by a written instrument duly
executed by or on behalf of each Party to this Agreement; provided, however, that,
after the approval of the Merger by shareholders of the Company, any amendment that by Law
or the rules of any stock exchange requires further approval by the shareholders of the
Company, this Agreement may not be amended, supplemented or modified without such further
approval of shareholders. 

        Section
9.2 Governing Law; Jurisdiction; Service of Process.  

         (a)       
          This Agreement, and all claims of causes of action (whether in contract or tort)
          that may be based upon, arise out of or relate to this Agreement or the
          negotiation, execution or performance of this Agreement (including any claim or
          cause of action based upon, arising out of or related to any representation or
          warranty made in or in connection with this Agreement or as an inducement to
          enter into this Agreement) shall be governed by, and construed, interpreted and
          enforced in accordance with, the Laws of the State of Israel, without regard to
          conflict of laws principles. 

         (b)       
          Any legal action, suit or proceeding arising out of or relating to this
          Agreement or the transactions contemplated hereby shall be heard and determined
          in, and the sole and exclusive jurisdiction shall be of, the competent court for
          Tel Aviv-Jaffa district, and each of the parties hereby submits irrevocably to
          the jurisdiction of such court in respect of any legal action, suit or
          proceeding arising out of or relating to this Agreement and waives, and agrees
          not to assert, as a defense in any such action, suit or proceeding, any claim
          that it is not subject personally to the jurisdiction of such courts, that its
          property is exempt or immune from attachment or execution, that the action, suit
          or proceeding is brought in an inconvenient forum, that the venue of action,
          suit or proceeding is improper or that this Agreement or the transactions
          contemplated hereby may not be enforced in or by such courts. 

         (c)       
          Each Party agrees that notice or the service of process in any action, suit or
          proceeding arising out of or relating to this Agreement shall be properly served
          or delivered if delivered in the manner contemplated by Section 9.4. 

         (d)       
          The consents to jurisdiction set forth in this Section 9.2 shall not constitute
          general consents to service of process in the State of Israel and shall have no
          effect for any purpose except as provided in this Section 9.2 and shall not be
          deemed to confer rights on any Person other than the Parties. The Parties agree
          that a final judgment in any such action or proceeding shall be conclusive and
          may be enforced in other jurisdictions by suit on the judgment or in any other
          manner provided by applicable law. 

64

        Section
9.3 Extension; Waiver.  

        At
any time prior to the Effective Time, a Party may (a) extend the time for the performance
of any of the obligations or other acts of the other Parties, (b) waive any inaccuracies
in the representations and warranties of the other Parties contained in this Agreement or
in any document delivered pursuant to this Agreement or (c) waive compliance by the other
Party with any of the agreements or conditions contained in this Agreement. Any agreement
by a Party to such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such Party. The failure of any Party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute a waiver
of such rights. 

        Section
9.4 Notices.  

        All
notices, claims, demands and other communications hereunder shall be in writing and shall
be deemed given when delivered personally or by internationally recognized overnight
courier (providing proof of delivery), or sent via fax or electronic email to the Parties
at the following addresses, email addresses or fax numbers (or at such other address,
email address or fax numbers as shall be specified by like notice): 

	 	(a) 	If
to the Purchaser or the Merger Sub, to: 

	 	
Galactic
Holdings Ltd.

c/o The Gores Group, LLC

10877 Wilshire Boulevard, 18th Floor

Los Angeles, CA 90024

Attention: General Counsel

Fax: (310) 443-2149

With a copy to:

Weil, Gotshal & Manges LLP

201 Redwood Shores Parkway

Redwood Shores, California 94065

Attention: Kyle C. Krpata

Fax: (650) 802-3100

E-mail: kyle.krpata@weil.com

	 	
and
to:  

	 	
Zellermayer
Pelossof & Co.
The Rubinstein House, 20 Lincoln Street

Tel Aviv, Israel 67134

Attention: Doni Toledano, Adv.

Fax: (972) (3) 625-5500

E-mail: doni@zelpel.com 

65

	 	
and
to:  

	 	
Gross,
Kleinhendler, Hodak, Berkman $ Co. 
One Azrieli Center

Tel Aviv, Israel 67021

Attention: Richard Mann

Fax: (972) (3) 607-4442

E-mail: rick@gkh-law.com

	 	                  (b) 	If
to the Company, to: 

	 	
Gilat
Satellite Networks Ltd. 
21 Yegia Kapayim St., Kiryat Arye

Petah Tikva 49130, Israel

Attention: Rachel Prishkolnik, Adv.

Fax: (972) (3) 925-2945

E-mail: rachelp@gilat.com

	 	
With
a copy to:  

	 	
Carter
Ledyard & Milburn LLP

2 Wall Street

New York, New York 10005

Fax No.: (212) 732-3232

Attention: Steven Glusband, Esq.

E-mail: Glusband@clm.com

	 	
and
to:  

	 	
Goldfarb,
Levy, Eran, Meiri & Co.

2 Weizmann Street

Tel Aviv 64239, Israel

Fax No.: (972) (3) 608-9909

Attention: Ashok Chandrasekhar, Adv.

E-mail: ashok.chandrasekhar@goldfarb.com 

66

        Section
9.5 Interpretation.  

        Any
reference in this Agreement to $ shall mean U.S. dollars. When a reference is made in this
Agreement to a Section or Article, such reference shall be to a Section or Article of this
Agreement, unless otherwise clearly indicated to the contrary. Whenever the words
“include,” “includes” or including are used in this Agreement, they
shall be deemed to be followed by the words “without limitation.” The words
“hereof,” “herein” and “herewith” and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement as a whole
and not to any particular provision of this Agreement, and annex, article, section,
paragraph, exhibit and schedule references are references to the annex, articles,
sections, paragraphs, exhibits and schedules of this Agreement, unless otherwise
specified. The plural of any defined term shall have a meaning correlative to such defined
term and words denoting any gender shall include all genders and the neuter. Where a word
or phrase is defined herein, each of its other grammatical forms shall have a
corresponding meaning. Any reference to a Party to this Agreement or any other agreement
or document contemplated hereby shall include such Party’s successors and permitted
assigns. A reference to any legislation or to any provision of any legislation shall
include any modification, amendment, re-enactment thereof, any legislative provision
substituted therefore and all rules, regulations and statutory instruments issued or
related to such legislation. The headings and captions in this Agreement are for reference
only and shall not be used in the construction or interpretation of this Agreement. The
Parties have participated jointly in the negotiation and drafting of this Agreement. If
any ambiguity or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties, and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of any provision
of this Agreement. No prior draft of this Agreement or any course of performance or course
of dealing shall be used in the interpretation or construction of this Agreement. No parol
evidence shall be introduced in the construction or interpretation of this Agreement
unless the ambiguity or uncertainty in issue is plainly discernable from a reading of this
Agreement without consideration of any extrinsic evidence. 

        Section
9.6 Counterparts.  

        This
Agreement may be executed in multiple counterparts, all of which shall be considered one
and the same agreement and shall become effective when one or more counterparts have been
signed by each of the Parties and delivered to the other Parties. 

        Section
9.7 Entire Agreement: Third-Party Beneficiaries.  

        This
Agreement and the documents and instruments and other agreements among the Parties hereto
as contemplated by or referred to herein, including the Confidentiality Agreement, the
Company Disclosure Schedule and the Purchaser Disclosure Schedule: 

		    (a)        constitutes
the entire agreement among the Parties with respect to the subject           matter
hereof, and supersedes all prior agreements and understandings, both           written
and oral, among the parties with respect to the subject matter of this
          Agreement; and  

		    (b)        except
for the provisions of Section 6.12 hereof, this Agreement is not intended           to,
and shall not confer upon, any Person other than the Parties hereto any           rights
or remedies hereunder.  

        Section
9.8 Severability.  

        If
any term or other provision of this Agreement or the application hereof is declared
invalid, illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in full force
and effect as long as the economic or legal substance of the Merger is not affected in any
manner materially adverse to any Party. If the final judgment of a court of competent
jurisdiction or other authority declares that any term or provision hereof is invalid,
void or unenforceable, the Parties agree that they shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the Parties as closely as possible
in a mutually acceptable manner in order that the Merger be consummated as originally
contemplated to the fullest extent possible. 

67

        Section
9.9 Other Remedies; Specific Performance.  

        Except
as otherwise provided herein, any and all remedies herein expressly conferred upon a Party
will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or
by Law or equity upon such Party, and the exercise by a Party of any remedy will not
preclude the exercise of any other remedy. The Company agrees that irreparable damage
would occur to the Purchaser in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the Purchaser (and not the Company) shall be entitled (without
any requirement to post a bond or other security) to seek one or more injunction or other
equitable remedies to prevent breaches of this Agreement and to enforce specifically the
terms and provisions hereof against the Company, this being in addition to any other
remedy to which they are entitled at Law or in equity. 

        Section
9.10 Assignment.  

        Neither
this Agreement nor any of the rights, interests or obligations under this Agreement shall
be assigned, in whole or in part, by operation of Law or otherwise by any of the Parties
hereto without the prior written consent of the other Parties. No duties under this
Agreement may be delegated, in whole or in part, by operation of Law or otherwise by any
of the Parties hereto without the prior written consent of the other Parties. Any
assignment or delegation in violation of this Section 9.10 shall be void. Subject to the
aforesaid in this Section 9.10, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the Parties and their respective successors and permitted
assigns. Notwithstanding the foregoing, the Purchaser may at the time of the Closing or
thereafter, without the consent of the Company, collaterally assign its rights hereunder
to one or more of its lenders (or any administrative or collateral agent for such
lenders). 

        Section
9.11 Non-Survival of Representations, Warranties and Agreements.  

        Except
as set forth in Section 8.2, the representations, warranties and agreements in this
Agreement and any certificate delivered pursuant hereto by any Person shall terminate at
the Effective Time or upon the termination of this Agreement pursuant to Article VIII of
this Agreement, as the case may be, except that this Section 9.11 shall not limit any
covenant or agreement of the Parties which by its terms contemplates performance after the
Effective Time or after termination of this Agreement, including those contained in
Section 6.12. 

[The
remainder of this page is intentionally left blank.] 

68

        IN
WITNESS WHEREOF, the Purchaser, the Merger Sub and the Company have caused this Agreement
to be duly executed and delivered as of the date first written. 

			GALACTIC HOLDINGS LTD.

By: /s/ Meir Shamir
——————————————

Meir Shamir
Officer

			GALACTIC ACQUISITION COMPANY LTD.

By: /s/ Meir Shamir
——————————————

Meir Shamir
 Officer

			GILAT SATELLITE NETWORKS LTD.

By: /s/ Amiram Levinberg and Tal Payne
—————————————————

Amiram Levinberg and Tal Payne
Chief Executive Officer and Chief Financial Officer

69

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