Document:

20-F

Exhibit 4.7  

B.O.S. BETTER ON-LINE
SOLUTIONS LTD. 

SECURITIES PURCHASE
AGREEMENT 

August 16, 2006 

SECURITIES PURCHASE AGREEMENT 

        THIS
SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of
August 16, 2006, by and among B.O.S. BETTER ON-LINE SOLUTIONS LTD., a corporation
incorporated under the laws of the State of Israel (p.c. number 520042565) (the
“Company”), BOScom Ltd., a corporation incorporated under the laws of the State
of Israel (organizational identification number (51-2236431) (solely with respect to the
representations and warranties pertaining to it) (the “Subsidiary”), and Laurus
Master Fund, Ltd., a Cayman Islands company (the “Purchaser”). 

RECITALS 

        WHEREAS,
the Company has authorized the sale to the Purchaser of a Convertible Term Note in the
aggregate principal amount of One Million and Five Hundred Thousand Dollars in the
currency of the United States ($1,500,000) (the “Note”), which Note is
convertible into shares of the Company’s Ordinary Shares, NIS 4.00 nominal value per
share (the “Ordinary Shares”) at a fixed conversion price of $3.08 per share of
Ordinary Shares for the first Five Hundred Thousand Dollars ($500,000) of principal amount
payable thereunder and $4.08 per share of Ordinary Shares for any additional amount
payable thereunder (the “Fixed Conversion Price”); 

        WHEREAS,
the Company wishes to issue a warrant to the Purchaser to purchase up to 73,052 Ordinary
Shares (subject to adjustment as set forth therein) in connection with Purchaser’s
purchase of the Note; 

        WHEREAS,
Purchaser desires to purchase the Note and the Warrant (as defined in Section 2) on the
terms and conditions set forth herein; and 

        WHEREAS,
the Company desires to issue and sell the Note and Warrant to Purchaser on the terms and
conditions set forth herein. 

AGREEMENT 

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

1.     Agreement
to Sell and Purchase. Pursuant to the terms and conditions set forth in this
Agreement, on the Closing Date (as defined in Section 3), the Company agrees to sell to
the Purchaser, and the Purchaser hereby agrees to purchase from the Company, a Note in
the aggregate principal amount of $1,500,000 (the “Purchase Price”) convertible
into the Company’s Ordinary Shares in accordance with the terms of the Note and this
Agreement. The issuance of the Note purchased on the Closing Date shall be known as the
“Offering.” A form of the Note is annexed hereto as Exhibit A. The Note will
mature on the Maturity Date (as defined in the Note). Collectively, the Note and Warrant
and Ordinary Shares issuable in payment of the Note, upon conversion of the Note and upon
exercise of the Warrant are referred to as the “Securities.” 

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     2.    
          Warrant. On the Closing Date, the Company will issue and deliver to the
          Purchaser a Warrant (the “Warrant”) to purchase up to 73,052 Ordinary
          Shares in connection with the Offering (the “Warrant Shares”) pursuant
          to Section 1 hereof. The Warrant must be delivered on the Closing Date. A form
          of Warrant is annexed hereto as Exhibit B. All the representations, covenants,
          warranties, undertakings, and indemnification, and other rights made or granted
          to or for the benefit of the Purchaser by the Company are hereby also made and
          granted in respect of the Warrant and the Company’s Ordinary Shares
          issuable upon exercise of the Warrant (the “Warrant Shares”). 

     3.    
          Closing, Delivery, Payment and other Closing Conditions. 

    3.1        Closing.
The execution and delivery of this Agreement and the Related Agreements shall occur upon
exchange by facsimile of executed signature pages and all other documents, instruments
and writings required to be delivered pursuant hereto and thereto. Subject to the terms
and conditions herein, the closing of the transactions contemplated hereby (the “Closing”),
shall take place on which date the conditions for Closing set forth in Section 9 herein
shall be satisfied in full or waived by the Company, or at such different date as the
Company and Purchaser may mutually agree (such date is hereinafter referred to as the
“Closing Date”).  

    3.2        Delivery.
Pursuant to the Funds Escrow Agreement in the form attached hereto as Exhibit D at the
Closing on the Closing Date, the Company will deliver to the Purchaser, among other
things, (i) a Note in the form attached as Exhibit A representing the Purchase Price; and
(ii) a Warrant in the form attached as Exhibit B in the Purchaser’s name
representing 73,052 Warrant Shares, and the Purchaser will deliver to the Company, among
other things, the Purchase Price (amounts set forth in a disbursement letter) by
certified funds or wire transfer to an account designated by the Company.  

    3.3        Other
Closing Conditions.  Prior to closing of this transaction, the Company will obtain the
necessary board approvals. 

     4.    
          Representations and Warranties of the Company. The Company hereby
          represents and warrants to the Purchaser as follows (which representations and
          warranties are supplemented by the Company’s filings under the Securities
          Exchange Act of 1934 (collectively, the “Exchange Act Filings”) and
          the Company’s Audited Consolidated Financial Statements as of December 31,
          2005 (including the notes thereto) (the “Financial Statements”)): 

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    4.1        Organization,
Good Standing and Qualification. Each of the Company and the Subsidiary is a
corporation duly incorporated and validly existing under the laws of its jurisdiction of
incorporation. Each of the Company and the Subsidiary has the corporate power and
authority to own and operate its properties and assets and carry on its respective
business as presently conducted, except as would not have a Material Adverse Effect (as
defined below), and to execute and deliver, as applicable, (i) this Agreement, (ii) the
Note and the Warrant to be issued in connection with this Agreement, (iii) the Master
Security Agreement dated as of the date hereof among the Company and the Purchaser (as
amended, modified or supplemented from time to time, the “Master Security Agreement”),
(iv) the Registration Rights Agreement relating to the Securities dated as of the date
hereof between the Company and the Purchaser, (v) the Escrow Agreement dated as of the
date hereof among the Company, the Purchaser and the Escrow Agent referred to therein and
(vi) all other agreements related to this Agreement and the Note and referred to herein
(the preceding clauses (ii) through (vi), collectively, the “Related Agreements”),
to issue and sell the Note and the Ordinary Shares issuable upon conversion of the Note
(the “Note Shares”), to issue and sell the Warrant and the Warrant Shares, and
to carry out the provisions of this Agreement and the Related Agreements and to carry on
its business as presently conducted. Each of the Company and the Subsidiary is duly
qualified and is authorized to do business and is in good standing as a foreign
corporation in all jurisdictions in which the nature of its activities and of its
properties (both owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so has not, or could not reasonably be expected to
have, individually or in the aggregate, a material adverse effect on the business,
assets, liabilities, condition (financial or otherwise), properties, or operations of the
Company and it Subsidiary, taken as a whole (a “Material Adverse Effect”).  

    4.2        [Reserved]  

    4.3        Capitalization;
Voting Rights.  

		    (a)        The
authorized capital stock of the Company, as of the date hereof consists of
          35,000,000 Ordinary Shares nominal value NIS 4.00 per share, of which, as of
          June 30, 2006, 6,702,534 Ordinary Shares are issued and outstanding.  

		    (b)        Except
as disclosed on Schedule 4.3, the Exchange Act Filings or the Financial
          Statements, other than: (i) the shares reserved for issuance under the
          Company’s stock option plans; (ii) shares which may be granted pursuant to
          the Securities Purchase Agreement entered into by the Company and the Purchaser
          as of September 29, 2005 and the Related Agreements (as defined therein); and
          (iii) shares which may be granted pursuant to this Agreement and the Related
          Agreements (as defined herein), there are no outstanding options, warrants,
          rights (including conversion or preemptive rights and rights of first refusal),
          proxy or shareholder agreements, or arrangements or agreements of any kind for
          the purchase or acquisition from the Company of any of its securities. Except
as           disclosed on Schedule 4.3, the Exchange Act Filings or the Financial
Statements,           neither the offer, issuance or sale of any of the Note or the
Warrant, or the           issuance of any of the Note Shares or Warrant Shares, nor the
consummation of           any transaction contemplated hereby will result in a change in
the price or           number of any securities of the Company outstanding, under
anti-dilution or           other similar provisions contained in or affecting any such
securities.  

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		    (c)       All
issued and outstanding Ordinary Shares of the Company: (i) have been duly
          authorized and validly issued and are fully paid and nonassessable; and (ii)
          were issued in compliance with all applicable state and federal laws concerning
          the issuance of securities.  

		    (d)       The
rights, preferences, privileges and restrictions of the Ordinary Shares are           as
stated in the Company’s Articles of Association (the           “Articles”).
The Note Shares and Warrant Shares shall have been, on or           before the Closing
Date, duly and validly reserved for issuance. When issued in           compliance with
the provisions of this Agreement and the Company’s           Articles, the
Securities will be validly issued, fully paid and nonassessable,           and will be
free of any liens or encumbrances; provided, however, that the           Securities may
be subject to restrictions on transfer under state, federal           and/or Israeli
securities laws as set forth herein or as otherwise required by           such laws at
the time a transfer is proposed.  

    4.4        Authorization;
Binding Obligations. All corporate action on the part of the Company and the
Subsidiary (including their respective officers and directors) necessary for the
authorization of this Agreement and the Related Agreements, the performance of all
obligations of the Company hereunder and under the other Related Agreements at the
Closing and, the authorization, sale, issuance and delivery of the Note and Warrant has
been taken or will be taken prior to the Closing. This Agreement and the other Related
Agreements, when executed and delivered and to the extent it is a party thereto, will be
valid and binding obligations of the Company and with respect to the representations and
warranties pertaining to it the Subsidiary, enforceable against each such person in
accordance with their terms, except:  

		    (a)       as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
          other laws of general application affecting enforcement of creditors’          rights;
and  

		    (b)       general
principles of equity that restrict the availability of equitable or           legal
remedies.  

Except as disclosed on Schedule 4.4,
in the Exchange Act Filings or the Financial Statements, the sale of the Note, the
subsequent conversion of the Note into Note Shares, are not and will not be subject to any
preemptive rights or rights of first refusal that have not been properly waived or
complied with. The issuance of the Warrant and the subsequent exercise of the Warrant for
Warrant Shares are not and will not be subject to any preemptive rights or rights of first
refusal that have not been properly waived or complied with. 

    4.5        Liabilities.
Neither the Company nor the Subsidiary has any material contingent liabilities, except
current liabilities incurred in the ordinary course of business and liabilities disclosed
in any Exchange Act Filings, in the Financial Statements or that would not be reasonably
likely to have a Material Adverse Effect.  

    4.6        Agreements;
Action. Except as set forth on Schedule 4.6 or as disclosed in any Exchange Act
Filings or the Financial Statements:  

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		    (a)       there
are no agreements, understandings, instruments, contracts, judgments,           orders,
writs or decrees to which the Company or the Subsidiary is a party or by           which
it is bound which may involve: (i) obligations (contingent or otherwise)           of, or
payments to, the Company in excess of $500,000 (other than obligations           of, or
payments to, the Company arising from purchase or sale agreements entered           into
in the ordinary course of business); (ii) the transfer or license of any
          material patent, copyright, trade secret or other proprietary right to or from
          the Company (other than licenses arising from the purchase of “off the
          shelf” or other standard products); or (iii) provisions restricting the
          development, manufacture or distribution of the Company’s products or
          services.  

		    (b)       Since
December 31, 2005, neither the Company nor the Subsidiary has: (i)           declared or
paid any dividends, or authorized or made any distribution upon or           with respect
to any class or series of its share capital; (ii) incurred any           indebtedness for
money borrowed or any other liabilities (other than ordinary           course
obligations) individually in excess of $500,000 or, in the case of           indebtedness
and/or liabilities individually less than $500,000, in excess of           $1,000,000 in
the aggregate; (iii) made any loans or advances to any person           (other than the
Company’s subsidiaries) in excess, individually or in the           aggregate, of
$500,000, other than ordinary course advances for travel expenses;           or (iv)
sold, exchanged or otherwise disposed of any of its material assets or           rights,
other than the sale of its inventory in the ordinary course of business           or as a
result of discontinued operations.  

		    (c)       For
the purposes of subsections (a) and (b) above, all indebtedness,           liabilities,
agreements, understandings, instruments and contracts involving the           same person
or entity (including persons or entities the Company has reason to           believe are
affiliated therewith) shall be aggregated for the purpose of meeting           the
individual minimum dollar amounts of such subsections.  

    4.7        Obligations
to Related Parties. Except as set forth on Schedule 4.7 or disclosed in any of the
Exchange Act Filings or in the Financial Statements, there are no obligations of the
Company or of the Subsidiary to officers, directors, shareholders or employees of the
Company or the Subsidiary other than:  

		    (a)       for
payment of salary or fees for services rendered and for bonus payments;  

		    (b)       reimbursement
for reasonable expenses incurred on behalf of the Company and its           Subsidiary;  

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		    (c)       for
other standard employee benefits made generally available to all employees
          (including stock option agreements outstanding or to be entered into under any
          stock option plan approved by the Board of Directors of the Company); and  

		    (d)       obligations
listed in the Company’s financial statements.  

Except as listed in the
Company’s financial statements, disclosed in any of the Company’s Exchange Act
Filings, in the Financial Statements or set forth on Schedule 4.7, to the Company’s
knowledge, none of the officers, directors, key employees or shareholders holding 10% or
more of the Company’s share capital or any members of their immediate families, are
indebted to the Company, individually, in excess of $50,000 or have any direct or indirect
ownership interest in any firm or corporation with which the Company is affiliated or with
which the Company has a business relationship, or any firm or corporation which competes
with the Company, other than passive investments in publicly traded companies
(representing less than one percent (1%) of such company) which may compete with the
Company. Except as listed in the Financial Statements, disclosed in any of the
Company’s Exchange Act Filings or set forth on Schedule 4.7, (i) to the
Company’s knowledge no officer, director or shareholder holding 10% or more of the
Company’s share capital, or any member of their immediate families, is, directly or
indirectly, interested in any material contract between any third party and the Company
and (ii) except with respect to the Company’s subsidiaries, the Company is not a
guarantor or indemnitor of any indebtedness of any other person, firm or corporation. 

    4.8        Changes.
Since December 31, 2005, except as disclosed in any Exchange Act Filing, in the Financial
Statements or in any Schedule to this Agreement or to any of the Related Agreements,
there has not been:  

		    (a)       any
change in the business, assets, liabilities, condition (financial or
          otherwise), properties operations of the Company or its Subsidiary, which
          individually or in the aggregate has had, or could reasonably be expected to
          have, individually or in the aggregate, a Material Adverse Effect;  

		    (b)       any
resignation or termination of any officer, key employee or group of           employees
of the Company or of its Subsidiary;  

		    (c)       any
material change, except in the ordinary course of business or as would not           have
a Material Adverse Effect, in the contingent obligations of the Company or           of
its Subsidiary by way of guaranty, endorsement, indemnity, warranty or
          otherwise;  

		    (d)       any
damage, destruction or loss, whether or not covered by insurance, which has
          had, or could reasonably be expected to have, individually or in the aggregate,
          a Material Adverse Effect;  

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		    (e)        any
waiver by the Company or its Subsidiary of a material right or of a material
               debt owed to it;  

		    (f)        any
direct or indirect loans made by the Company or its Subsidiary to any
               stockholder, employee, officer or director of the Company or its
Subsidiary,                other than advances made in the ordinary course of business or
loans which do                not, in the aggregate, exceed $50,000;  

		    (g)        any
material change in any compensation arrangement or agreement with any
               employee, officer, director or shareholder of the Company or its
Subsidiary  

		    (h)        any
declaration or payment of any dividend or other distribution of the assets
               of the Company or its Subsidiary;  

		    (i)        any
labor organization activity related to the Company or its Subsidiary;  

		    (j)        any
debt, obligation or liability incurred, assumed or guaranteed by the Company
               or its Subsidiary, except those for immaterial amounts and for current
               liabilities incurred in the ordinary course of business;  

		    (k)        any
sale, assignment or transfer of any patents, trademarks, copyrights, trade
               secrets or other intangible assets owned by the Company or its Subsidiary;  

		    (l)        any
change in any material agreement to which the Company or its Subsidiary is a
               party or by which either the Company or its Subsidiary is bound which
either                individually or in the aggregate has had, or could reasonably be
expected to                have, individually or in the aggregate, a Material Adverse
Effect;  

		    (m)        any
other event or condition of any character that, either individually or in
               the aggregate, has had, or could reasonably be expected to have,
individually or                in the aggregate, a Material Adverse Effect; or  

		    (n)        any
arrangement or commitment by the Company or its Subsidiary to do any of the
               acts described in subsection (a) through (m) above.  

    4.9        Title
to Properties and Assets; Liens, Etc. Except as set forth on Schedule 4.9, in the
Company’s Exchange Act Filings or in the Financial Statements, each of the Company
and its Subsidiary has good and marketable title to its material properties and assets,
and good title to its material leasehold estates, in each case subject to no mortgage,
pledge, lien, lease, encumbrance or charge, other than:  

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		    (a)       those
resulting from taxes which have not yet become delinquent;  

		    (b)       minor
liens and encumbrances which do not materially detract from the value of           the
property subject thereto or materially impair the operations of the Company           or
its Subsidiary; and  

		    (c)       those
that have otherwise arisen in the ordinary course of business.  

All material facilities, machinery,
equipment, fixtures, vehicles and other properties owned, leased or used by the Company
and its Subsidiary are in good operating condition and repair and are reasonably fit and
usable for the purposes for which they are being used, except as would not have a Material
Adverse Effect. Except as set forth on Schedule 4.9, the Company and its Subsidiary are in
compliance with all material terms of each lease to which it is a party or is otherwise
bound except those that would not be reasonably likely to have a Material Adverse Effect. 

    4.10        Intellectual
Property.  

		    (a)       Each
of the Company and its Subsidiary owns or possesses sufficient legal rights           to
use all material patents, trademarks, service marks, trade names, copyrights,
          trade secrets, licenses, information and other proprietary rights and processes
          described or referred to in the Company’s Exchange Act Filings or
Financial           Statements as necessary for its business as now conducted (the
          “Intellectual Property”), without any known infringement of the
rights           of others. Except as disclosed in the Company’s Exchange Act
Filings, in           the Financial Statements, in connection with grants made by the OCS
(as defined           below) and for licenses granted in the ordinary course of business,
there are no           outstanding options, licenses or agreements of any kind relating
to the           foregoing proprietary rights.  

		    (b)       Neither
the Company nor its Subsidiary has received any communications alleging           that
the Company or its Subsidiary has violated any of the patents, trademarks,
          service marks, trade names, copyrights or trade secrets or other proprietary
          rights of any other person or entity, nor is the Company or its Subsidiary
aware           of any basis therefor.  

		    (c)       The
Company does not believe it is necessary to utilize any inventions, trade
          secrets or proprietary information of any of its employees made prior to their
          employment by the Company or its Subsidiary, except for inventions, trade
          secrets or proprietary information that have been rightfully assigned to the
          Company or its Subsidiary.  

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    4.11        Compliance
with Other Instruments. Neither the Company nor its Subsidiary is in violation or
default of (x) any term of its Articles or Memorandum of Association, or (y) any material
provision of any indebtedness, mortgage, indenture, contract, agreement or instrument to
which it is party or by which it is bound or of any judgment, decree, order or writ,
which violation or default, in the case of this clause (y), has had, or could reasonably
be expected to have, either individually or in the aggregate, a Material Adverse Effect.
The execution, delivery and performance of and compliance with this Agreement and the
Related Agreements to which it is a party, and the issuance and sale of the Note by the
Company and the other Securities by the Company each pursuant hereto and thereto, will
not, with or without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term or
provision, or result in the creation of any mortgage, pledge, lien, encumbrance or charge
upon any of the properties or assets of the Company or its Subsidiary or the suspension,
revocation, impairment, forfeiture or non-renewal of any material permit, license,
authorization or approval applicable to the Company, its business or operations or any of
its assets or properties, except as would not be reasonably expected to have a Material
Adverse Effect.  

    4.12        Litigation.
Except as set forth on Schedule 4.12 hereto, in the Company’s Exchange Act Filings
or in the Financial Statements, there is no action, suit, proceeding or investigation
pending or, to the Company’s knowledge, currently threatened against the Company or
its Subsidiary that prevents the Company or its Subsidiary from entering into this
Agreement or the other Related Agreements, or from consummating the transactions
contemplated hereby or thereby, or which has had, or could reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect or any change in
the current equity ownership of the Company or its Subsidiary, nor is the Company aware
that there is any basis to assert any of the foregoing. Neither the Company nor its
Subsidiary is a party or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality. There is no
action, suit, proceeding or investigation by the Company or its Subsidiary currently
pending or which the Company or its Subsidiary intends to initiate.  

    4.13        Tax
Returns and Payments. Each of the Company and its Subsidiary has timely filed all tax
returns required to be filed by it for the periods up to and including December 31, 2004.
All taxes shown to be due and payable on such returns, any assessments imposed, and all
other taxes due and payable by the Company or its Subsidiary on or before the Closing,
have been paid or will be paid prior to the time they become delinquent, except as would
not have a Material Adverse Effect. Except as set forth on Schedule 4.13, in the Exchange
Act Filings or in the Financial Statements, neither the Company nor its Subsidiary has
been advised:  

		    (a)        that
any of its returns have been or are being audited as of the date hereof; or  

		    (b)        of
any deficiency in assessment or proposed judgment to of its taxes.  

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The Company has no knowledge of any
liability of any tax to be imposed upon its properties or assets as of the date of this
Agreement that is not adequately provided for or which would be reasonably likely to have
a Material Adverse Effect. 

    4.14        Employees.
Except as set forth on Schedule 4.14, in the Exchange Act Filings, or in the Financial
Statements the Company is in compliance with all applicable material laws respecting
employment, collective bargaining and wages and hours and have withheld all amounts
required by law or by agreement to be withheld from the wages, salaries and other
payments to its employees. 

    4.15        Registration
Rights and Voting Rights. Except as set forth on Schedule 4.15 and except as
disclosed in the Exchange Act Filings or in the Financial Statements, neither the Company
nor its Subsidiary is presently under any obligation, and neither the Company nor its
Subsidiary has granted any rights, to register any of the Company’s or its Subsidiary’s
presently outstanding securities or any of its securities that may hereafter be issued.
Except as set forth on Schedule 4.15 and except as disclosed in Exchange Act Filings or
in the Financial Statements, to the Company’s knowledge, no shareholder of the
Company or any of its Subsidiary is party to an existing agreement with respect to the
voting of equity securities of the Company or its Subsidiary.  

    4.16        Compliance
with Laws; Permits. Neither the Company nor its Subsidiary is in material violation
of any applicable statute, rule, regulation, order or restriction of any domestic Israeli
or, to the Company’s knowledge, foreign government or any instrumentality or agency
thereof in respect of the conduct of its business or the ownership of its properties
which has had, or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect. Except as set forth herein or on Schedule 4.16, no
governmental orders, permissions, consents, approvals or authorizations are required to
be obtained and no registrations or declarations are required to be filed in connection
with the execution and delivery of this Agreement or any other Related Agreement and the
issuance of any of the Securities, except such as has been, or shall be on or before the
Closing Date, duly and validly obtained or filed or with respect to any filings that must
be made after the Closing, as will be filed in a timely manner. Each of the Company and
its Subsidiary has all material franchises, permits, licenses and any similar authority
necessary for the conduct of its business as now being conducted by it, the lack of which
could, either individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.  

    4.17        Environmental
and Safety Laws. Neither the Company nor its Subsidiary is in material violation of
any applicable Israeli statute, law or regulation relating to the environment or
occupational health and safety, and to its knowledge, no material expenditures are or
will be required in order to comply with any such existing statute, law or regulation.
Except as set forth on Schedule 4.17, no Hazardous Materials (as defined below) are used
or have been used, stored, or disposed of by the Company or its Subsidiary or, to the
Company’s knowledge, by any other person or entity on any property owned, leased or
used by the Company or its Subsidiary. For the purposes of the preceding sentence, “Hazardous
Materials” shall mean:  

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		    (a)       materials
which are listed or otherwise defined as “hazardous” or           “toxic” under
any applicable Israeli laws and regulations that govern           the existence and/or
remedy of contamination on property, the protection of the           environment from
contamination, the control of hazardous wastes, or other           activities involving
hazardous substances, including building materials; or  

		    (b)       any
petroleum products or nuclear materials.  

    4.18        Valid
Offering. Assuming the accuracy of the representations and warranties of the
Purchaser contained in this Agreement and in any Related Agreement, the offer, sale and
issuance of the Securities will be exempt from the registration requirements of the
Securities Act of 1933, as amended (the “Securities Act”), and will have been
registered or qualified (or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all applicable state securities
laws.  

    4.19        Full
Disclosure. There is no material information relating to the Company or its
Subsidiary, which the Company and/or its Subsidiary believe is reasonably necessary for
the Purchaser to make its investment decision, which was not previously disclosed to
Purchaser, or appears in the Schedules hereto, in the Company’s Exchange Act Filings
or in the Financial Statements. Neither this Agreement, the Related Agreements, the
exhibits and schedules hereto and thereto nor any other document delivered by the Company
or its Subsidiary to Purchaser or its attorneys or agents in connection herewith or
therewith or with the transactions contemplated hereby or thereby, contain any untrue
statement of a material fact nor omit to state a material fact necessary in order to make
the statements contained herein or therein, in light of the circumstances in which they
are made, not misleading.  

    4.20        Insurance.
The Subsidiary has general commercial, product liability, fire and casualty insurance
policies with coverages which the Company believes are customary for companies similarly
situated to the Subsidiary in the same or similar business.  

    4.21        SEC
Filings. Except as set forth on Schedule 4.21, the Company has filed with the
Securities and Exchange Commission (the “SEC”) all proxy statements, reports
and other documents required to be filed by it under the Exchange Act, as a foreign
private issuer (collectively, the “SEC Reports”). Except as set forth on
Schedule 4.21, each SEC Report was, at the time of its filing, in substantial compliance
with the requirements of its respective form and none of the SEC Reports, nor the
financial statements (and the notes thereto) included in the SEC Reports, as of their
respective filing dates, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading.  

    4.22        Listing.
The Company’s Ordinary Shares are listed for trading on the NASDAQ National Market (“NASDAQ”)
and the Tel-Aviv Stock Exchange (“TASE”) and satisfy all requirements for the
continuation of such listing. Except as disclosed in the Company’s Exchange Act
Filings or in the Financial Statements, the Company has not received any notice that its
Ordinary Shares will be delisted from NASDAQ or that its Ordinary Shares does not meet
all requirements for listing.  

11

    4.23        No
Integrated Offering. Neither the Company, nor its Subsidiary or affiliates, nor any
person acting on its or their behalf, has directly or indirectly made any offers or sales
of any security or solicited any offers to buy any security under circumstances that
would cause the offering of the Securities pursuant to this Agreement or any of the
Related Agreements to be integrated with prior offerings by the Company for purposes of
the Securities Act such that would subject the offering, issuance and sale of the
Securities hereunder to the registration requirements of Section 5 of the Securities Act,
or any applicable exchange-related stockholder approval provisions, nor will the Company
or any of its affiliates or its Subsidiary take any action or steps that would cause the
offering of the Securities to be integrated with other offerings.  

    4.24        Stop
Transfer. The Securities are restricted securities as of the date of this Agreement.
Neither the Company nor its Subsidiary will issue any stop transfer order or other order
impeding the sale and delivery of any of the Securities at such time as the Securities
are registered for public sale or an exemption from registration is available, except as
required by state and federal or Israeli securities laws, by NASDAQ or by TASE.  

    4.25        Dilution.
The Company specifically acknowledges that its obligation to issue the Ordinary Shares
upon conversion of the Note and exercise of the Warrant is binding upon the Company and
enforceable regardless of the dilution such issuance may have on the ownership interests
of other shareholders of the Company.  

    4.26        The
Company is entitled to certain tax benefits, based on its status as an Approved
Enterprise under the Law for the Encouragement of Capital Investments 5744-1984. The
Company has not received any notice that it has not complied, in all material respects,
with the terms and provisions of its Approved Enterprise status and applicable laws and
regulations in order to retain its status as an Approved Enterprise.  

    4.27        The
Company has received grants in support of its research and development through the Office
of the Chief Scientist of the Ministry of Industry and Trade of the State of Israel (the
“OCS”) as listed in Schedule 4.27 hereto, in the Exchange Act
Filings or in the Financial Statements (the “Grants”). The Company has
not received any notice that it is not in compliance, in all material respects, with the
terms and conditions of the Grants, or that is has not duly fulfilled, in all material
respects, all the undertakings relating thereto. The Company is not aware of any event or
other set of circumstances which might lead to the revocation or material modification of
any of the Grants.  

12

    4.28        Patriot
Act. The Company certifies that, to the best of Company’s knowledge, neither the
Company nor its Subsidiary has been designated, and is not owned or controlled, by a
“suspected terrorist” as defined in Executive Order 13224. The Company hereby
acknowledges that the Purchaser seeks to comply with all applicable laws concerning money
laundering and related activities. In furtherance of those efforts, the Company hereby
represents, warrants and agrees that: (i) none of the cash or property that the Company
or its Subsidiary will pay or will contribute to the Purchaser has been or shall be
derived from, or related to, any activity that is deemed criminal under United States
law; and (ii) no contribution or payment by the Company or its Subsidiary to the
Purchaser, to the extent that they are within the Company’s and/or its Subsidiary’s
control shall cause the Purchaser to be in violation of the United States Bank Secrecy
Act, the United States International Money Laundering Control Act of 1986 or the United
States International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001.
The Company shall promptly notify the Purchaser if any of these representations ceases to
be true and accurate regarding the Company or its Subsidiary. The Company agrees to
provide the Purchaser any additional information regarding the Company or its Subsidiary
that the Purchaser reasonably deems necessary or convenient to ensure compliance with all
applicable laws concerning money laundering and similar activities. The Company
understands and agrees that if at any time it is discovered that any of the foregoing
representations are incorrect, or if otherwise required by applicable law or regulation
related to money laundering similar activities, the Purchaser may undertake appropriate
actions to ensure compliance with applicable law or regulation, including but not limited
to segregation and/or redemption of the Purchaser’s investment in the Company. The
Company further understands that the Purchaser, if required by applicable law, may
release confidential information about the Company and its Subsidiary and, if applicable,
any underlying beneficial owners, to proper authorities if the Purchaser, in its sole
discretion, determines that it is in the best interests of the Purchaser in light of
relevant rules and regulations under the laws set forth in subsection (ii) above.  

5.     Representations
and Warranties of the Purchaser. The Purchaser hereby           represents and
warrants to the Company as follows (such representations and           warranties do not
lessen or obviate the representations and warranties of the           Company set forth
in this Agreement):  

    5.1        No
Shorting. The Purchaser or any of its affiliates and investment partners has not,
will not and will not cause any person or entity, directly or indirectly, to engage in
“short sales” of the Company’s Ordinary Shares or any other hedging
strategies as long as the Note shall be outstanding. This Section 5.1 shall survive the
Closing of the transactions contemplated hereby.  

    5.2        Requisite
Power and Authority. The Purchaser is duly organized, validly existing and in good
standing under the laws of the country of its formation and has all necessary power and
authority under all applicable provisions of law to execute and deliver this Agreement
and the Related Agreements and to carry out their provisions. All corporate action on
Purchaser’s part required for the lawful execution and delivery of this Agreement
and the Related Agreements have been or will be effectively taken prior to the Closing.
Upon their execution and delivery, this Agreement and the Related Agreements will be
valid and binding obligations of Purchaser, enforceable in accordance with their terms,
except:  

		    (a)       as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
          other laws of general application affecting enforcement of creditors’          rights;
and  

		    (b)       as
limited by general principles of equity that restrict the availability of
          equitable and legal remedies.  

13

    5.3        Investment
Representations. Purchaser understands that the Securities are being offered and sold
pursuant to an exemption or exemptions from registration requirements of Israeli and US
Federal and state securities laws and that the Company is relying upon the truth and
accuracy of Purchaser’s representations contained in the Agreement, including,
without limitation, that the Purchaser is an “accredited investor” within the
meaning of Regulation D under the Securities Act. The Purchaser confirms that it has
received or has had full access to all the information it considers necessary or
appropriate to make an informed investment decision with respect to the Note and the
Warrant to be purchased by it under this Agreement and the Note Shares and the Warrant
Shares acquired by it upon the conversion of the Note and the exercise of the Warrant,
respectively. The Purchaser further confirms that it has had an opportunity to ask
questions and receive answers from the Company regarding the Company’s and its
Subsidiary’s business, management and financial affairs and the terms and conditions
of the Offering, the Note, the Warrant and the Securities and to obtain additional
information (to the extent the Company possessed such information or could acquire it
without unreasonable effort or expense) necessary to verify any information furnished to
the Purchaser or to which the Purchaser had access.  

    5.4        Purchaser
Bears Economic Risk. The Purchaser has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar to the
Company so that it is capable of evaluating the merits and risks of its investment in the
Company and has the capacity to protect its own interests. The Purchaser must bear the
economic risk of this investment until the Securities are sold pursuant to: (i) an
effective registration statement under the Securities Act; or (ii) an exemption from
registration is available with respect to such sale.  

    5.5        Acquisition
for Own Account. The Purchaser is acquiring the Note and Warrant and the Note Shares
and the Warrant Shares for the Purchaser’s own account for investment only, and not
as a nominee or agent and not with a view towards or for resale in connection with their
distribution. Purchaser has not offered the Securities for sale by any means of general
solicitation or general advertising including, but no limited to, any advertisements,
articles, notices or other communications published in any newspaper, magazine, or
similar medium or broadcast over television or radio, or any seminar or meeting whose
attendees were invited by any general solicitation or general advertising.  

    5.6        Purchaser
Can Protect Its Interest. The Purchaser represents that by reason of its, or of its
management’s, business and financial experience, the Purchaser has the capacity to
evaluate the merits and risks of its investment in the Note, the Warrant and the
Securities and to protect its own interests in connection with the transactions
contemplated in this Agreement and the other Related Agreements. Further, Purchaser is
aware of no publication of any advertisement in connection with the transactions
contemplated in the Agreement or the Related Agreements.  

    5.7        Accredited
Investor. Purchaser represents that it is an "accredited investor" within the
meaning of Regulation D under the Securities Act.  

    5.8        Legends.  

14

		    (a)        The
Note shall bear substantially the following legend:  

	 	
“THIS
NOTE AND THE ORDINARY SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE
SECURITIES LAWS. THIS NOTE AND THE ORDINARY SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH SHARES UNDER SAID ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO B.O.S. BETTER ON-LINE
SOLUTIONS LTD. THAT SUCH REGISTRATION IS NOT REQUIRED.” 

		    (b)       The
Note Shares and the Warrant Shares, if not issued by DWAC system (as
          hereinafter defined), shall bear a legend which shall be in substantially the
          following form until such shares are covered by an effective registration
          statement filed with the SEC:  

	 	
“THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THESE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT TO THE SHARES EVIDENCED BY THIS CERTIFICATE, FILED
AND MADE EFFECTIVE UNDER THE SECURITIES ACT AND APPLICABLE STATE LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO B.O.S. BETTER ON-LINE SOLUTIONS LTD. THAT SUCH
REGISTRATION IS NOT REQUIRED.” 

		    (c)        The
Warrant shall bear substantially the following legend:  

	 	
“THIS
WARRANT AND THE ORDINARY SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS. THIS WARRANT AND THE ORDINARY SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OFFERED FOR SALE, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
WARRANT OR THE UNDERLYING ORDINARY SHARES UNDER SAID ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO B.O.S. BETTER ON-LINE SOLUTIONS
LTD. THAT SUCH REGISTRATION IS NOT REQUIRED.” 

15

    5.9        Control
over the Purchaser. The Purchaser has made available to the Company a complete and
detailed list of individuals who have or share voting and/or investment control over the
Purchaser. Purchaser acknowledges that such information shall be provided by the Company
to the OCS and the Investment Center of the Ministry of Industry, Trade and Labor of the
State of Israel (the “Investment Center”), whose approval of the transactions
contemplated hereby is a condition to the Company’s obligations hereunder. Purchaser
shall update such list as reasonably requested by the Company, to comply with any request
for such information from any regulatory body, including, without limitation the OCS and
the Investment Center. This Section 5.9 shall survive the Closing of the transactions
contemplated hereby.  

6.    Covenants
of the Company. Until irrevocable payment in full by the           Company (Subject
to Section 6.12) of all amounts due to Purchaser under the Note           and the Related
Agreements, the Company covenants and agrees with the Purchaser           as follows:  

    6.1        Stop-Orders.
The Company will advise the Purchaser, promptly after it receives notice of issuance by
the SEC, any state securities commission or any other regulatory authority of any stop
order or of any order preventing or suspending any offering of any securities of the
Company, or of the suspension of the qualification of the Ordinary Shares of the Company
for offering or sale in any jurisdiction, or the initiation of any proceeding for any
such purpose.  

    6.2        Listing.
The Company shall promptly secure the listing of the Ordinary Shares issuable upon
conversion of the Note and upon the exercise of the Warrant on the NASDAQ National Market
or on any other market upon which the Company’s Ordinary Shares are then listed (the
“Principal Market”) (subject to official notice of issuance) and shall maintain
such listing so long as any other Ordinary Shares shall be so listed. Except with respect
to the listing on the Tel-Aviv Stock Exchange, the Company will maintain the listing of
its Ordinary Shares on the Principal Market, and will comply in all material respects
with the Company’s reporting, filing and other obligations under the bylaws or rules
of the National Association of Securities Dealers (“NASD”) and such exchanges,
as applicable.  

    6.3        Market
Regulations. The Company shall notify the SEC, NASD, the Israeli Securities Authority
and the Tel-Aviv Stock Exchange and applicable state authorities, in accordance with
their requirements, of the transactions contemplated by this Agreement, and shall take
all other necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Securities to the
Purchaser.  

16

    6.4        Reporting
Requirements. The Company will timely file with the SEC all reports required to be
filed pursuant to the Exchange Act by foreign private issuers and refrain from
terminating its status as an issuer required by the Exchange Act to file reports
thereunder even if the Exchange Act or the rules or regulations thereunder would permit
such termination.  

    6.5        Use
of Funds. The Company agrees that it will use the proceeds of the sale of the Note
and the Warrant for general working capital purposes, and/or mergers and acquisitions
only.  

    6.6        Access
to Facilities Each of the Company and its Subsidiary will permit any representatives
designated by the Purchaser (or any successor of the Purchaser), upon reasonable notice
and during normal business hours, at such person’s expense and accompanied by a
representative of the Company, to:  

		    (a)       visit
and inspect any of the properties of the Company or its Subsidiary;  

		    (b)       examine
the corporate and financial records of the Company or of its Subsidiary           (unless
such examination is not permitted by federal, state or local law or by
          contract) and make copies thereof or extracts therefrom; and  

		    (c)        discuss
the affairs, finances and accounts of the Company or its Subsidiary with
               the directors, officers and independent accountants of the Company or its
               Subsidiary. Notwithstanding the foregoing, neither the Company nor its
               Subsidiary will provide any material, non-public information to the
Purchaser                unless the Purchaser signs a confidentiality agreement and
otherwise complies                with Regulation FD, under the federal securities laws.  

    6.7        Taxes.
Each of the Company and its Subsidiary will promptly pay and discharge, or cause to be
paid and discharged, when due and payable, all lawful taxes, assessments and governmental
charges or levies imposed upon the income, profits, property or business of the Company
and its Subsidiary; provided, however, that any such tax, assessment, charge or levy need
not be paid if the validity thereof shall currently be contested in good faith by
appropriate proceedings and if the Company and/or such Subsidiary shall have set aside on
its books adequate reserves with respect thereto, and provided, further, that the Company
and its Subsidiary will pay all such taxes, assessments, charges or levies forthwith upon
the commencement of proceedings to foreclose any lien which may have attached as security
therefor.  

17

    6.8        Insurance.
Each of the Company and its Subsidiary will keep its assets which are of an insurable
character insured by financially sound and reputable insurers against loss or damage by
fire, explosion and other risks customarily insured against by companies in similar
business similarly situated as the Company and its Subsidiary; and the Subsidiary will
maintain, with financially sound and reputable insurers, insurance against other hazards
and risks and liability to persons and property to the extent and in the manner which the
Company reasonably believes is customary for companies in similar business similarly
situated as the Company and its Subsidiary and to the extent available on commercially
reasonable terms. The Company will bear the full risk of loss from any loss of any nature
whatsoever with respect to the assets pledged to the Purchaser as security for its
obligations hereunder and under the Related Agreements. At the Company’s and its
Subsidiary’s cost and expense in amounts and with carriers reasonably acceptable to
Purchaser, the Company and its Subsidiary shall (i) keep its material properties insured
against the hazards of fire, flood and such other hazards that are included in “Extended
Fire” insurance, for such properties’ full value; (ii) maintain Third Party
Liability insurance against claims for personal injury, death or property damage suffered
by others with the limit of liability of NIS 5 Million per occurrence and in the
aggregate; (iii) maintain Employers’ Liability Insurance with the limit of liability
of $5 Million per occurrence and in the aggregate; and (iv) furnish Purchaser with (x) a
certificate evidencing the maintenance of such insurance coverage at least thirty (30)
days before any expiration date, (y) excepting the Employer’s Liability Insurance,
endorsements to such policies naming Purchaser as “co-insured” or “additional
insured” , and (z) evidence that as to Purchaser the insurance coverage shall not be
impaired or invalidated by the insurer and the insurer will provide Purchaser with at
least thirty (30) days notice prior to cancellation. The Company and the Subsidiary shall
instruct the insurance carriers that in the event of any loss thereunder in excess of
$50,000 in the aggregate, upon the occurrence and during the continuance of an Event of
Default beyond any applicable cure period and until such Event of Default is cured, or
waived by the Purchaser in its sole discretion, the carriers shall make payment for such
loss to the Company and/or the Subsidiary and Purchaser jointly. In the event that as of
the date of receipt of each loss recovery upon any such insurance, the Purchaser has not
declared an Event of Default with respect to this Agreement or any of the Related
Agreements, then the Company and/or such Subsidiary shall be permitted to direct the
application of such loss recovery proceeds toward investment in property, plant and
equipment that would comprise “Pledgor Collateral” secured by Purchaser’s
security interest pursuant to its security agreement, with any surplus funds to be
applied toward payment of the obligations of the Company to Purchaser. In the event that
Purchaser has properly declared an Event of Default with respect to this Agreement or any
of the Related Agreements, then all loss recoveries received by Purchaser upon any such
insurance thereafter may be applied to the obligations of the Company hereunder and under
the Related Agreements, in such order as the Purchaser may determine. Any surplus
(following satisfaction of all Company obligations to Purchaser) shall be paid by
Purchaser to the Company or applied as may be otherwise required by law. Any deficiency
thereon shall be paid by the Company or the Subsidiary, as applicable, to Purchaser, on
demand. 

    6.9        Intellectual
Property. Each of the Company and its Subsidiary shall maintain in full force and
effect its existence, rights and franchises and all licenses and other rights to use
Intellectual Property owned or possessed by it and reasonably deemed to be necessary to
the conduct of its business.  

    6.10        Properties.
Each of the Company and its Subsidiary will keep its material properties in good repair,
working order and condition, reasonable wear and tear excepted, and from time to time
make all needful and proper repairs, renewals, replacements, additions and improvements
thereto, except as would not have a Material Adverse Effect; and each of the Company and
its Subsidiary will at all times comply with each provision of all leases to which it is
a party or under which it occupies property if the breach of such provision could, either
individually or in the aggregate, reasonably be expected to have a Material Adverse
Effect.  

18

    6.11        Confidentiality The
Company agrees that it will not disclose, and will not include in any public
announcement, the name of the Purchaser, unless expressly agreed to by the Purchaser or
unless and until such disclosure is required by law or applicable regulation, and then
only to the extent of such requirement. Notwithstanding the foregoing, the Company may
disclose Purchaser’s identity and the terms of this Agreement to its current and
prospective debt and equity financing sources.  

    6.12        Required
Approvals. For so long as twenty-five percent (25%) of the principal amount of the
Note is outstanding, the Company, without the prior written consent of the Purchaser,
shall not:  

		    (a)       directly
or indirectly declare or pay any dividends, other than dividends paid           to the
Company or any of its wholly-owned subsidiaries;  

		    (b)       liquidate,
dissolve or effect a material reorganization provided, however, that           the
Company may merge or effect a material reorganization if the Company is the
          surviving entity;  

		    (c)       become
subject to (including, without limitation, by way of amendment to or
          modification of) any agreement or instrument which by its terms would (under
any           circumstances) restrict the Company’s or its Subsidiary’s right
to           perform the provisions of this Agreement, any other Related Agreement or any
of           the agreements contemplated hereby or thereby;  

		    (d)       (i)
create, incur, assume or suffer to exist any indebtedness (exclusive of           trade
debt and debt incurred to finance the purchase of equipment (not in excess           of
ten percent (10%) per annum of the fair market value of the Company’s
          assets) whether secured or unsecured other than (x) the Company’s
          indebtedness to the Purchaser, (y) indebtedness set forth on Schedule 6.12(d) attached
hereto and made a part hereof and any refinancings or           replacements thereof on
terms no less favorable to the Company than the           indebtedness being refinanced
or replaced, and (z) any debt incurred in           connection with the purchase of
assets, or any refinancings or replacements           thereof on terms no less favorable
to the Company than the indebtedness being           refinanced or replaced; (ii) cancel
any debt owing to it in excess of $500,000           in the aggregate during any 12 month
period; (iii) assume, guarantee, endorse or           otherwise become directly or
contingently liable in connection with any           obligations of any other person,
except the endorsement of negotiable           instruments by the Company for deposit or
collection or similar transactions in           the ordinary course of business or
guarantees of indebtedness of the           Company’s subsidiaries or otherwise
permitted to be outstanding pursuant to           this clause (d); and  

19

		    (e)       except
as set forth in Schedule 6.12(e), create or acquire any subsidiary           after
the date hereof unless (i) such subsidiary is a wholly-owned subsidiary of           the
Company or (ii) such Subsidiary becomes party to the Master Security           Agreement
(either by executing a counterpart thereof or an assumption or joinder
          agreement in respect thereof) and, to the extent required by the Purchaser,
          satisfies each condition of this Agreement and the other Related Agreements as
          if such subsidiary was a subsidiary on the Closing Date.  

    6.13        Reissuance
of Securities. The Company agrees to reissue certificates representing the Securities
without the legends set forth in Section 5.8 above at such time as:  

		    (a)        the
holder thereof is permitted to dispose of such Securities pursuant to Rule
          144(k) under the Securities Act; or  

		    (b)        upon
resale subject to an effective registration statement after such Securities           are
registered under the Securities Act.  

        The
Company agrees to cooperate with the Purchaser in connection with all resales pursuant to
Rule 144(d) and Rule 144(k) and provide legal opinions necessary to allow such resales
provided the Company and its counsel receive reasonably requested representations from the
selling Purchaser and broker, if any. 

    6.14        Opinions.
On the Closing Date, the Company will deliver to the Purchaser opinions acceptable to the
Purchaser substantially in the forms of Exhibits C1 and C2 hereto, from the Company’s
external legal counsels. The Company will provide, at the Company’s expense, such
other legal opinions to be issued in connection with sales effected under Rule 144 of the
Securities Act, or in connection with a request by or on behalf of the Company’s
Transfer Agent in the future as are deemed reasonably necessary by the Purchaser (and
acceptable to the Purchaser) in connection with the conversion of the Note and exercise
of the Warrant.  

    6.15        On
or prior to the Closing Date the Company will execute and deliver to the Purchaser the
Related Agreements signed by the Company and its Subsidiary (if required) and any
debentures attached thereto.  

    6.16        On
or prior to the Closing Date, the Company will execute and deliver to the Purchaser a
confirmation by the board of directors of the Company according to section 282 of the
Companies Law – 1999, together with a copy of resolutions by the Company’s
Board of Directors, authorizing the execution and performance of this Agreement, the
Related Agreements and the transactions contemplated hereby and thereby.  

20

    6.17        The
Company will at all times have authorized and reserved a sufficient number of Ordinary
Shares for the full conversion of the Note and exercise of the Warrants.  

     7.    
          Covenants of the Purchaser. The Purchaser covenants and agrees with the
          Company as follows: 

    7.1        Confidentiality.
The Purchaser agrees that it will not disclose, and will not include in any public
announcement, the name of the Company, unless expressly agreed to by the Company or
unless and until such disclosure is required by law or applicable regulation, and then
only to the extent of such requirement.  

    7.2        Non-Public
Information. The Purchaser agrees not to effect any sales in the Company’s
Ordinary Shares while in possession of material, non-public information regarding the
Company if such sales would violate applicable securities law.  

        This
Section 7 shall survive the Closing of the transactions contemplated hereby. 

     8.    
          Covenants of the Company and Purchaser Regarding Indemnification. 

    8.1        Company
Indemnification. The Company agrees to indemnify, hold harmless, reimburse and defend
the Purchaser, each of the Purchaser’s officers, directors, agents, affiliates,
control persons, and principal shareholders, against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature, incurred by
or imposed upon the Purchaser which results, arises out of or is based upon: (i) any
misrepresentation by the Company or its Subsidiary or breach of any warranty by the
Company or its Subsidiary in this Agreement, any other Related Agreement or in any
exhibits or schedules attached hereto or thereto; or (ii) any breach or default in
performance by Company or its Subsidiary of any covenant or undertaking to be performed
by Company or its Subsidiary hereunder, under any other Related Agreement or any other
agreement entered into by the Company and Purchaser relating hereto or thereto. Nothing
herein shall be deemed to expand the Subsidiary’s liability hereunder or under any
Related Agreement, beyond its liability in connection with the representations and
warranties made by the Subsidiary hereunder.  

    8.2        Purchaser’s
Indemnification. Purchaser agrees to indemnify, hold harmless, reimburse and defend
the Company and each of the Company’s officers, directors, agents, affiliates,
control persons and principal shareholders, at all times against any claim, cost,
expense, liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon the Company which results, arises out of or is based
upon: (i) any misrepresentation by Purchaser or breach of any warranty by Purchaser in
this Agreement or in any exhibits or schedules attached hereto or any Related Agreement;
or (ii) any breach or default in performance by Purchaser of any covenant or undertaking
to be performed by Purchaser hereunder, or under any other Related Agreement.  

21

     9.    
          Conditions of the Company’s Obligations at the Closing. The
          obligations of the Company to issue the Note and the Warrant to the Purchaser at
          the Closing is subject to the fulfillment (or waiver by the Company) prior to or
          on the Closing Date of the conditions set forth below. In the event that any
          such condition is not met to the satisfaction of the Company, then the Company
          shall not be obligated to proceed with the transactions contemplated hereunder
          and in the Related Agreements, and shall not be subject to any liability
          hereunder or thereunder. 

	 	9.1 	Representations
and Warranties. The representations and warranties of the Purchaser under this
Agreement and the related Agreements shall be true in all material respects as of the
Closing Date, with the same effect as though made on and as of such date. 

	 	9.2 	Compliance
with Agreements. Purchaser shall have performed and complied in all respects with all
agreements or conditions required by this Agreement and the Related Agreements to be
performed and complied with by it prior to or as of the Closing Date. 

	 	9.3 	No
Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction, which prohibits the consummation of any
of the transactions contemplated by this Agreement and the Related Agreements. 

	 	9.4 	Delivery
of Purchase  Price.  The  Purchaser  shall have  delivered  to the Company the  Purchase
                  Price on or before the Closing Date. 

	 	9.5 	Government
Approvals. The Company shall have received all necessary approvals by the OCS and the
Investment Center with respect to the transactions contemplated hereby and by the Related
Agreements. The Purchaser shall have executed any confirmations required by the OCS
and/or the Investment Center for the grant of such approvals. 

	 	9.6 	Notices
to NASDAQ the TASE and the ISA. The Company shall have made all required filings of
notices with NASDAQ, the Tel Aviv Stock Exchange and the Israel Securities Authority and
has received no notice adversely effecting the performance of the transactions
contemplated hereunder and in the Related Agreements. The Company shall use its
commercially reasonable efforts to complete such filings. 

22

     10.    
          Conversion of Convertible Note. 

    10.1        Mechanics
of Conversion.  

		    (a)       Provided
the Purchaser has notified the Company of the Purchaser’s           intention to
sell the Note Shares and the Note Shares are included in an           effective
registration statement or are otherwise exempt from registration when           sold: (i)
upon the conversion of the Note or part thereof, the Company shall, at           its own
cost and expense, take all necessary action (including the issuance of           an
opinion of counsel reasonably acceptable to the Purchaser following a request
          by the Purchaser) to assure that the Company’s transfer agent shall issue
          the Company’s Ordinary Shares in the name of the Purchaser (or its
nominee)           or such other persons as designated by the Purchaser in accordance
with Section           10.1(b) hereof and in such denominations to be specified
representing the number           of Note Shares issuable upon such conversion; and (ii)
the Company warrants that           no instructions other than these instructions have
been or will be given to the           transfer agent of the Company’s Ordinary
Shares and that after the           Effectiveness Date (as defined in the Registration
Rights Agreement) the Note           Shares issued will be freely transferable subject to
the prospectus delivery           requirements of the Securities Act and the provisions
of this Agreement, and           will not contain a legend restricting the resale or
transferability of the Note           Shares.  

		    (b)       Purchaser
will give notice of its decision to exercise its right to convert the           Note or
part thereof by telecopying or otherwise delivering an executed and           completed
notice including a breakdown in reasonable detail of the Principal           Amount and
accrued interest being converted (the “Notice of           Conversion”) all as
more fully provided in the Note. The Purchaser will not           be required to
surrender the Note until the Purchaser receives a credit to the           account of the
Purchaser’s prime broker through the DWAC system (as defined           below),
representing the Note Shares or until the Note has been fully satisfied.           Each
date on which a Notice of Conversion is telecopied or delivered to the           Company
in accordance with the provisions hereof shall be deemed a           “Conversion
Date.” Pursuant to the terms of the Notice of Conversion,           the Borrower
will issue instructions to the transfer agent accompanied by an           opinion of
counsel within one (1) business day of the date of the delivery to           Borrower of
the Notice of Conversion and shall cause the transfer agent to           transmit the
certificates representing the Conversion Shares to the Holder by           crediting the
account of the Purchaser’s prime broker with the Depository           Trust Company (“DTC”)
through its Deposit Withdrawal Agent Commission           (“DWAC”) system
within three (3) business days after receipt by the           Company of the Notice of
Conversion (the “Delivery Date”)  

23

		    (c)       The
Company understands that a delay in the delivery of the Note Shares in the           form
required pursuant to Section 10 hereof beyond the Delivery Date could           result in
economic loss to the Purchaser. In the event that the Company fails to           direct
its transfer agent to deliver the Note Shares to the Purchaser via the           DWAC
system within the time frame set forth in Section 10.1(b) above and the           Note
Shares are not delivered to the Purchaser by the Delivery Date, as           compensation
to the Purchaser for such loss, the Company agrees to pay late           payments to the
Purchaser for late issuance of the Note Shares in the form           required pursuant to
Section hereof upon conversion of the Note in the amount           equal to the greater
of: (i) $500 per business day after the Delivery Date; or           (ii) the Purchaser’s
actual damages from such delayed delivery.           Notwithstanding the foregoing, the
Company will not owe the Purchaser any late           payments if the delay in the
delivery of the Note Shares beyond the Delivery           Date is solely out of the
control of the Company and the Company is actively           trying to cure the cause of
the delay. The Company shall pay any payments           incurred under this Section in
immediately available funds upon demand and, in           the case of actual damages,
against reasonable documentation of the amount of           such damages. Such
documentation shall show the number of Ordinary Shares the           Purchaser is forced
to purchase (in an open market transaction) which the           Purchaser anticipated
receiving upon such conversion, and shall be calculated as           the amount by which
(A) the Purchaser’s total purchase price (including           customary brokerage
commissions, if any) for the Ordinary Shares so purchased           exceeds (B) the
aggregate principal and/or interest amount of the Note, for           which such
Conversion Notice was not timely honored.  

    10.2        Nothing
contained herein or in any document referred to herein or delivered in connection
herewith shall be deemed to establish or require the payment of a rate of interest or
other charges in excess of the maximum permitted by applicable law. In the event that the
rate of interest or dividends required to be paid or other charges hereunder exceed the
maximum amount permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Company to the Purchaser and thus refunded to the
Company.  

     11.    
          Registration Rights, Offering Restrictions. 

    11.1        Registration
Rights Granted. The Company hereby grants registration rights to the Purchaser
pursuant to a Registration Rights Agreement dated as of even date herewith between the
Company and the Purchaser.  

24

    11.2        Offering
Restrictions. Except as previously disclosed in the SEC Reports, in the Exchange Act
Filings, in the Financial Statements, or stock or stock options granted to employees or
directors of the Company (these exceptions hereinafter referred to as the “Excepted
Issuances”), neither the Company nor its Subsidiary will issue any securities with a
continuously variable/floating conversion feature which are or could be (by conversion or
registration) free-trading securities (i.e. Ordinary Shares subject to a registration
statement) prior to the full repayment or conversion of the Note (together with all
accrued and unpaid interest and fees related thereto).  

12.     Miscellaneous.  

    12.1        Governing
Law. THIS AGREEMENT AND EACH RELATED AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS. ANY ACTION BROUGHT BY EITHER PARTY AGAINST THE OTHER CONCERNING THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT SHALL BE BROUGHT ONLY IN THE STATE COURTS OF
NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK. BOTH PARTIES AND THE
INDIVIDUALS EXECUTING THIS AGREEMENT AND THE OTHER RELATED AGREEMENTS ON BEHALF OF THE
COMPANY AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS AND WAIVE TRIAL BY JURY. IN
THE EVENT THAT ANY PROVISION OF THIS AGREEMENT OR ANY OTHER RELATED AGREEMENT DELIVERED
IN CONNECTION HEREWITH IS INVALID OR UNENFORCEABLE UNDER ANY APPLICABLE STATUTE OR RULE
OF LAW, THEN SUCH PROVISION SHALL BE DEEMED INOPERATIVE TO THE EXTENT THAT IT MAY
CONFLICT THEREWITH AND SHALL BE DEEMED MODIFIED TO CONFORM WITH SUCH STATUTE OR RULE OF
LAW. ANY SUCH PROVISION WHICH MAY PROVE INVALID OR UNENFORCEABLE UNDER ANY LAW SHALL NOT
AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF ANY AGREEMENT.  

    12.2        Survival.
The representations, warranties, covenants and agreements made herein shall survive any
investigation made by the Purchaser and the closing of the transactions contemplated
hereby to the extent provided therein. All statements as to factual matters contained in
any certificate or other instrument delivered by or on behalf of either party pursuant
hereto in connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by such party hereunder solely as of the date of such
certificate or instrument.  

    12.3        Successors.
Except as otherwise expressly provided herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors, heirs, executors and administrators of
the parties hereto and shall inure to the benefit of and be enforceable by each person
who shall be a holder of the Securities from time to time, other than the holders of
Ordinary Shares which have been sold by the Purchaser pursuant to Rule 144 or an
effective registration statement. Purchaser may not assign its rights hereunder to a
competitor of the Company or its Subsidiary.  

25

    12.4        Entire
Agreement. This Agreement, the Related Agreements, the exhibits and schedules hereto
and thereto and the other documents delivered pursuant hereto constitute the full and
entire understanding and agreement between the parties with regard to the subjects hereof
and no party shall be liable or bound to any other in any manner by any representations,
warranties, covenants and agreements except as specifically set forth herein and therein.  

    12.5        Severability.
In case any provision of the Agreement shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.  

    12.6        Amendment
and Waiver.  

		    (a)       This
Agreement may be amended or modified only upon the written consent of the
          Company and the Purchaser or their respective successors.  

		    (b)       The
obligations of the Company and the rights of the Purchaser under this           Agreement
may be waived only with the written consent of the Purchaser or its           successors.  

		    (c)       The
obligations of the Purchaser and the rights of the Company under this           Agreement
may be waived only with the written consent of the Company or its           successors.  

    12.7        Delays
or Omissions. It is agreed that no delay or omission to exercise any right, power or
remedy accruing to any party, upon any breach, default or noncompliance by another party
under this Agreement or the Related Agreements, shall impair any such right, power or
remedy, nor shall it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of or in any similar breach, default or
noncompliance thereafter occurring. All remedies, either under this Agreement or the
Related Agreements, by law or otherwise afforded to any party, shall be cumulative and
not alternative.  

    12.8        Notices.
All notices required or permitted hereunder shall be in writing and shall be deemed
effectively given:  

		    (a)       upon
personal delivery to the party to be notified;  

		    (b)       when
sent by confirmed facsimile if sent during normal business hours of the
          recipient, if not, then on the next business day;  

		    (c)       three
(3) business days after having been sent by registered or certified mail,
          return receipt requested, postage prepaid; or  

26

		    (d)       one
(1) day after deposit with a nationally recognized overnight courier,
          specifying next day delivery, with written verification of receipt.  

All communications shall be sent as
follows: 

			
	 	If to the Purchaser, to: 	
B.O.S. Better On-Line Solutions Ltd.

Beit Rabin, 100 BOS Road, Teradyon Industrial Park,

 Misgav 20179, Israel

Attention:         Chief Financial Officer

Facsimile:         (972) 4 999-0334

with copies to:

Amit, Pollak, Matalon & Co.

NYP Tower, 17 Yitzhak Sadeh Street, 19th Floor

Tel Aviv 67775

Attention: Shlomo Landress, Esq.

Facsimile: (972) 3 561-3620

and

Phillips NizerLLP

666 Fifth Avenue

New York, NY 10103

Attention: Brian Brodrick, Esq.

Facsimile: 212-262-5152 

			
	 	If to the Company, to: 	
Laurus Master Fund, Ltd.

c/o Ironshore Corporate Services ltd.

P.O. Box 1234 G.T.

Queensgate House, South Church Street

Grand Cayman, Cayman Islands

Facsimile:         345-949-9877

with a copy to:

John E. Tucker, Esq.

825 Third Avenue 14th Floor

New York, NY 10022

Facsimile:         212-541-4434 

or at such other address as the Company
or the Purchaser may designate by written notice to the other parties hereto given in
accordance herewith. 

27

    12.9        Attorneys’ Fees.
In the event that any suit or action is instituted to enforce any provision in this
Agreement, the prevailing party in such dispute shall be entitled to recover from the
losing party all reasonable and actually incurred fees, costs and expenses of enforcing
any right of such prevailing party under or with respect to this Agreement, including,
without limitation, such reasonable fees and expenses of attorneys and accountants, which
shall include, without limitation, all fees, costs and expenses of appeals.  

    12.10        Titles
and Subtitles. The titles of the sections and subsections of this Agreement are for
convenience of reference only and are not to be considered in construing this Agreement.  

    12.11        Facsimile
Signatures; Counterparts. This Agreement may be executed by facsimile signatures and
in any number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.  

    12.12        Broker’s
Fees, Stamp Taxes. Except as set forth on Schedule 12.12 hereof, each party hereto
represents and warrants that no agent, broker, investment banker, person or firm acting
on behalf of or under the authority of such party hereto is or will be entitled to any
broker’s or finder’s fee or any other commission directly or indirectly in
connection with the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such other
party as a result of the representation in this Section 12.12 being untrue. The Company
shall bear all stamp taxes required to be paid in connection with this Agreement, the
Note and/or the Warrant, if any.  

    12.13        Construction.
Each party acknowledges that its legal counsel participated in the preparation of this
Agreement and the Related Agreements and, therefore, stipulates that the rule of
construction that ambiguities are to be resolved against the drafting party shall not be
applied in the interpretation of this Agreement to favor any party against the other.  

28

        IN
WITNESS WHEREOF, the parties hereto have executed the SECURITIES PURCHASE AGREEMENT as of
the date set forth in the first paragraph hereof. 

	COMPANY:                            

B.O.S. BETTER ON-LINE SOLUTIONS LTD.
	PURCHASER:

LAURUS MASTER FUND, LTD.

	By:   

      

Name: 

      

Title:
	 
——————————————

Adiv Baruch     Nehemia Kaufman
——————————————

CEO                   CFO
——————————————
	By:   

      

Name: 

      

Title:
	 
——————————————

 
——————————————
 
——————————————

BOSCOM, LTD.

	By:   

      

Name: 

      

Title:
	
——————————————

Adiv Baruch
——————————————
CEO
——————————————
	

29

EXHIBIT A 

FORM OF CONVERTIBLE
NOTE 

[OMITTED] 

EXHIBIT B 

FORM OF WARRANT 

[OMITTED] 

EXHIBITS C1-C2 

OPINIONS 

[OMITTED] 

EXHIBIT D 

FORM OF ESCROW
AGREEMENT 

[OMITTED] 

MASTER SECURITY
AGREEMENT  

THIS MASTER SECURITY AGREEMENT (this “Security
Agreement”) made as of the 16th day of August 2006, by and between
B.O.S. Better On-Line Solutions Ltd., a company incorporated under the laws of the State
of Israel, company number 52-004256-5 (the “Pledgor”) and Laurus Master
Fund a Cayman Islands company (the “Purchaser”). 

	WHEREAS 	
Pledgor and the Purchaser have entered into a certain Master Security Agreement on
September 29, 2005 (the “2005 Master Security Agreement”) according to
which the Pledgor Collateral and the Pledged Shares (as such terms are defined below) were
pledged by a floating charge and fixed charge, respectively, to the benefit of the
Purchaser (the “2005 Pledges”). 

	WHEREAS 	
Pledgor and the Purchaser, have entered into a Securities Purchase Agreement dated August
16, 2006 (the “Purchase Agreement”) 

	WHEREAS 	
the Pledgor has agreed to enter into this Security Agreement in order to secure the
Obligations (as defined below) of the Pledgor to the Purchaser pursuant to the Purchase
Agreement, the Note, the Warrant and the Related Agreements. 

NOW, THEREFORE, IT IS AGREED AS
FOLLOWS: 

	1.  	The
Preamble to this Security Agreement constitutes an integral part thereof.
               All capitalized terms used herein and not defined herein shall have the
meaning                assigned to such terms in the Purchase Agreement. 

	2.  	To
secure the full and punctual payment and performance of all Obligations (as
               hereafter defined), the Pledgor hereby assigns and grants to the Purchaser
the                following security interests: 

	 	(a) 	A
first priority floating charge on all assets of the Pledgor, now owned or at
               any time hereafter acquired by the Pledgor, or in which the Pledgor now
has or                at any time in the future may acquire any right, title or interest
(the                “Pledgor Collateral”), including without limitation,
all                accounts, inventory, equipment, goods, promissory notes, contractual
rights                (subject to any assignment or pledge limitations included therein)
chattel                paper, investment property (excluding the Pledged Shares (as
defined below) and                any interests in Surf Communications Solutions Ltd. but
including all other                equity interests owned by the Pledgor),
letter-of-credit rights, intellectual                property, trademarks and tradestyles
in which the Pledgor now has or hereafter                may acquire any right, title or
interest, all proceeds and products thereof                (including, without
limitation, proceeds of insurance) and all additions,                accessions and
substitutions thereto or therefore. A debenture with respect the                said
pledge is attached as Exhibit A  hereto. 

	 	(b) 	A
first priority fixed charge on (i) all of its right, title and interest in all
               outstanding and issued shares (144,465 Ordinary Shares) of BOScom Ltd.
held by                the Pledgor and any additional shares of BOScom Ltd. that Pledgor
may acquire,                receive and/or otherwise be entitled to (the “BOScom
Pledged                Shares”); (ii) all of its right, title and interest in
all outstanding                and issued shares (1,000 Ordinary Shares) of Quasar
Telecom (2004) Ltd. held by                the Pledgor and any additional shares of
Quasar Telecom (2004) Ltd. that Pledgor                may acquire, receive and/or
otherwise be entitled to (the “Quasar                Pledged Shares”;
and together with the BOScom Pledged Shares, the                “Pledged Shares”). 

	 	
A
debenture with respect the Pledged Shares is attached as Exhibit B hereto.  

	3.  	The
floating charge pursuant to Section 2(a) above and the fixed charge pursuant
               to Section 2(b) above shall rank in parity with the respective 2005 Charge
               Pledges (which, for the avoidance of doubt, will not be removed upon
execution                of this Agreement). The execution of this Agreement shall be
deemed as the                Purchaser’s consent for creating the charges
contemplated hereunder                together with the 2005 Pledges. 

	4.  	Notwithstanding
any other provision herein, any security interest granted by the                Pledgor
hereunder shall be subject to any restriction, if such exist, on the
               transfer of intellectual property imposed by or pursuant to the
regulations and                directives of the Ministry of Industry and Trade and the
Office of the Chief                Scientist applicable to the Company. 

	5.  	The
term “Obligations” as used herein shall mean and include
               all debts, indebtedness, obligations and liabilities of the Pledgor to the
               Purchaser whether now existing or hereafter arising, direct or indirect,
               liquidated or unliquidated, absolute or contingent, due or not due and
whether                under, pursuant to or evidenced by a note, agreement, guaranty,
instrument or                otherwise and arising under, out of, or in connection with:
(i) the Purchase                Agreement, (ii) the Note, (iii) the Warrant, (iv) the
Related Agreements (the                Purchase Agreement, the Note, the Warrant and the
Related Agreements and this                Security Agreement, as each may be amended,
modified, restated or supplemented                from time to time, are collectively
referred to as the                “Documents”), and in connection with
any documents, instruments                or agreements relating to or executed in
connection with the Documents or any                documents, instruments or agreements
referred to therein, provided however that                the realization of any pledge
under this Security Agreement shall at all times                be limited to the then
outstanding amount payable to Purchaser under the Note                and to any expenses
and costs related to the realization of such pledge. 

	6.  	The
Pledgor hereby represents, warrants and covenants to the Purchaser that: 

	 	(a) 	it
is a corporation validly existing and duly incorporated under the laws of the
               State of Israel; 

	 	(b) 	its
legal name is as set forth in its Certificate of Incorporation as amended
               through the date hereof and it will provide the Purchaser thirty (30) days’               prior
written notice of any change in its legal name; 

	 	(c) 	its
organizational identification number (if applicable) is as set forth above
               and it will provide the Purchaser thirty (30) days’ prior written
notice of                any change in its organizational identification number; 

2

	 	(d) 	it
is the lawful owner of the Pledgor Collateral and the Pledged Shares, it has
               the sole right to grant a security interest therein and will defend such
               collateral against all claims and demands of all persons and entities; 

	 	(e) 	it
will keep the Pledgor Collateral and the Pledged Shares free and clear of all
               attachments, levies, taxes, liens, security interests and encumbrances of
every                kind and nature (“Encumbrances”), except for such
Encumbrances                which by their terms are junior to the security interests
granted to the                Purchaser and were created after receipt of the prior
written consent of the                Purchaser (which consent shall not be unreasonably
withheld) or with respect to                the Pledgor Collateral only, are made in the
ordinary course of business; 

	 	(f) 	it
will not, without the Purchaser’ prior written consent, which consent
               shall not be unreasonably withheld, sell, exchange, lease, pledge or
otherwise                dispose of or give any other rights in the Pledgor Collateral
and the Pledged                Shares except, with respect to the Pledgor Collateral only
and not including the                Pledged Shares, for sales and/or exchanges of
tangible assets that are part of                the Pledgor Collateral and for leases,
pledges on assets imposed in connection                with the purchase or lease thereof
or other dispositions in the ordinary course                of business. 

	 	(g) 	it
will insure or cause Pledgor Collateral to be insured in accordance with the
               provisions of the Purchase Agreement; 

	 	(h) 	it
will upon reasonable notice and during normal business hours allow the
               Purchaser or the Purchaser’ representatives free access to and the
right of                inspection of the tangible Pledgor Collateral; 

	 	(i) 	Pledgor
hereby agrees to indemnify and save the Purchaser harmless from all                loss,
costs, damage, liability and/or expense, including reasonable                attorneys’ fees,
that the Purchaser may sustain or incur to enforce                payment, performance or
fulfillment of any of the Obligations and/or in the                enforcement of this
Security Agreement or in the prosecution or defense of any                action or
proceeding either against the Purchaser or the Pledgor concerning any
               matter growing out of or in connection with this Security Agreement,
and/or any                of the Obligations and/or any of the Pledgor Collateral and the
Pledged Shares,                except to the extent caused by the Purchaser’s own
gross negligence or                willful misconduct (as determined by a court of
competent jurisdiction in a                final and non-appealable decision).
Notwithstanding the above, in no event shall                Pledgor’s aggregate
liability pursuant to all sections of this Security                Agreement exceed the
then outstanding amount payable to Purchaser under the Note                and to any
expenses and costs related to the realization of such pledge. 

	7.  	The
 occurrence  of any of the  following  events or  conditions  shall  constitute  an
"Event of         Default":

	 	(a) 	Breach
of any  covenant,  warranty or  representation  made or furnished to the  Purchaser by
the                Pledgor  in any of the  Documents,  which,  after  given  prior
 notice if subject to cure,                shall not be cured for a period of thirty (30)
business days;

3

	 	(b) 	the
loss,  theft,  substantial  damage,  destruction to or of any material portion of the
Pledgor                Collateral;  the sale or  encumbrance of the Pledgor  Collateral
 except as set forth under                sections 6(e) or 6(f) above;  the sale or
 encumbrance  of the Pledged Shares or the making                of any seizure or
attachment thereof or thereon  except to the extent:

	 	(i) 	such
loss, damage or destruction is covered by insurance proceeds; 

	 	(ii) 	said
 encumbrance is junior to the security  interest  provided  hereunder and was registered
per                       written   prior  consent   provided  by  Purchaser,   which
 consent  shall  not  be                       unreasonably withheld; or 

	 	(iii) 	said
seizure or attachment  does not secure  indebtedness in excess of $50,000 or such seizure
or                       attachment  has not been removed or otherwise  released  within
thirty (30) business                       days of the creation or the assertion thereof; 

	 	(c) 	Pledgor
 is not  able to pay  its  matured  current  debts,  shall  cease  operations,  dissolve,
               terminate its business existence,  make an assignment for the benefit of
creditors,  suffer                the  appointment  of a receiver,  trustee,  liquidator
 or custodian of all or any material                part of the  Pledgor's  property,
 which  appointment  shall not have been  revoked  within                thirty (30)
business days;

	 	(d) 	Pledgor
shall become subject to any  proceedings  under any  applicable  bankruptcy or insolvency
               law,  which if commenced  against the Pledgor,  shall not be dismissed
 within  thirty (30)                business days;

	 	(e) 	The
Pledgor shall  repudiate,  purport to revoke or fail to perform any or all of its
obligations                under the Note  (after  given no less than  15-days  prior
 notice  and  after  passage  of                applicable cure period, if any);

	 	(f) 	an
Event of Default  shall have  occurred  under and as defined in the  Purchase  Agreement
or in                any Related Agreement (after passage of applicable cure period, if
any);

	 	(g) 	any
event which  materially  adversely  affects the value of any of the Pledged Shares and/or
the                Pledgor  Collateral.  The Pledgor  shall  promptly  notify the
Purchaser in writing of such                event.

	 	(h) 	any
event or series of events occur(s),  which, in the reasonable  opinion of the Purchaser,
 may                have a material  adverse effect on the business,  condition
 (financial or  otherwise),  or                results of  operations  of the  Pledgor or
on the ability of the Pledgor to comply with any                of its  material
 obligations  hereunder  or under the Purchase  Agreement,  provided  that
               Purchaser  gives the  Pledgor a written  notice for  declaring  a Default
 Event under this                subclause  (h),  and  further  provided  that the
 Pledgor  shall be  entitled to provide a                written  response to the
Purchaser  within  fourteen  (14) days,  it being agreed  however,                that
 nothing  herein  nor  the  Pledgor's  written  response  shall  limit  or  delay  the
               Purchaser's  right,  in its  discretion,  to declare a Default Event
hereunder and exercise                the remedies  available to the Purchaser
 hereunder,  immediately  after Pledgor's  written                response.

4

	8.  	Upon
the  occurrence  of any Event of  Default  and at any time  thereafter,  the  Purchaser
 may         declare all  Obligations  immediately due and payable and the Purchaser
shall have the remedies of         a secured  party  provided in this  Agreement  and
under any  applicable  law. Any proceeds of any         foreclosures on any of the
Pledgor  Collateral or the Pledged Shares shall be first applied by the         Purchaser
to the payment of all expenses in connection with the sale of the Pledgor  Collateral or
        the  Pledged  Shares,   including  reasonable   attorneys'  fees  and  other
 legal  expenses  and         disbursements and the reasonable expense of retaking,
 holding,  preparing for sale, selling,  and         the like,  and any balance of such
proceeds  shall be applied by the Purchaser  toward the payment         of any
 outstanding  Obligations in such order of application as the Purchaser may elect,  and
the         Pledgor shall be liable for any  deficiency.  Notwithstanding  the foregoing,
 in case an Event of         Default shall qualify also as an Event of Default under the
2005 Master  Security  Agreement,  the         proceeds  shall be  allocated on a pro
rata basis to cover for the  expenses  specified  above and         related to this
Agreement and for the expenses related to the 2005 Master Security Agreement.  The
        balance of the proceeds shall be allocated on a pro rata basis for the payment of
any  outstanding         Obligations  under this  agreement  and  outstanding
 Obligations  under the 2005 Master  Security         Agreement  in such order of
 application  as the  Purchaser  may elect,  and the Pledgor  shall be         liable for
any deficiency.

	9.  	If
the Pledgor  defaults  in the  performance  or  fulfillment  of any of the terms,
 conditions,         promises,  covenants,  provisions or warranties to be performed or
fulfilled  under or pursuant to         this Security  Agreement,  the Purchaser may, at
its option  without  waiving its right to enforce         this Security Agreement
according to its terms,  immediately or at any time thereafter but subject         to
notice to the Pledgor,  perform or fulfill the same or cause the  performance or
fulfillment of         the same for  Pledgor's  account  and at  Pledgor's  cost and
 expense,  and the cost and  expense         thereof  (including  reasonable  attorneys'
 fees) shall be added to the  Obligations and shall be         payable on demand with
interest thereon at the highest rate permitted by law.

	10.  	No
delay or  failure  on the  Purchaser's  part in  exercising  any  right,  privilege  or
option         hereunder  shall operate as a waiver of such or of any other right,
 privilege,  remedy or option,         and no waiver whatever shall be valid unless in
writing,  signed by the Purchaser and then only to         the extent  therein set forth,
 and no waiver by the  Purchaser of any default  shall operate as a         waiver of any
other default or of the same default on a future  occasion.  The  Purchaser's  books
        and records  containing entries with respect to the Obligations shall be
admissible in evidence in         any action or proceeding,  and unless Pledgor  presents
records or other evidence to the contrary,         shall be binding upon the Pledgor for
the purpose of establishing  the items therein set forth and         shall  constitute
 prima facie proof  thereof.  The Purchaser  shall have the right to enforce any
        one or more of the remedies available to the Purchaser, successively, alternately
or concurrently.

5

	11.  	The
Pledgor  shall  cooperate  with the  Purchaser and execute all documents as may be
reasonably         necessary to register the Pledged Shares and the Pledgor  Collateral
with the Israeli Registrar of         Companies and/or any other Registrar,  including,
 inter alia, the document(s) in the form annexed         hereto as Exhibit C hereto, and
shall bear all stamp taxes with respect to such registrations,  if         any.  The
Pledgor  undertakes  to  register  such  registrations  with the  Israeli  Registrar  of
        Companies  within 3 business  days in Israel.  The Pledgor shall pay upon demand,
 all  reasonable         expenses,  including reasonable  attorney's fees, of enforcing
the Purchaser's rights and remedies         hereunder  in the event of a breach by the
Pledgor as well as with  respect to expenses  resulting         from exercising the
pledge of any of the Pledged Shares, and/or the Pledgor Collateral.

	12.  	This
Security  Agreement shall terminate upon full payment of all the Obligations,  including
the         Note, and the Purchaser  undertakes to promptly sign any and all forms
required in order to remove         any and all security interests granted by Pledgor
hereunder.

	13.  	This
Security  Agreement  shall be governed by and  construed in accordance  with the laws of
the         State of Israel and cannot be terminated orally.  Notwithstanding  the above,
if legally possible,         the  Purchaser  will be entitled  to  initiate  any legal
 action  according  to the terms of this         Agreement  and elect to realize any or
all of the Pledged  Shares  and/or the Pledgor  Collateral,         pursuant  to the laws
of the State of New York.  In such  event the  competent  courts of New York         will
 have the  exclusive  jurisdiction  and this  Security  Agreement  shall be  governed  by
and         construed with the laws of the State of New York.

	14.  	All
of the rights, remedies,  options,  privileges and elections given to the Purchaser
hereunder         shall inure to the benefit of the  Purchaser's  successors  and
assigns.  The term  "Purchaser" as         herein used shall include the Purchaser's
 company,  any parent of the Purchaser's company, any of         the  Purchaser's
 subsidiaries  and any  co-subsidiaries  of The  Purchaser'  parent,  whether now
        existing or hereafter created or acquired, and all of the terms, conditions,
 promises, covenants,         provisions and warranties of this Security  Agreement shall
inure to the benefit of and shall bind         the representatives, successors and
assigns of each of us and them.

	15.  	All
notices  hereunder  shall be  sufficiently  given if mailed or delivered to the addresses
set         forth below.

6

IN WITNESS WHEREOF this Master
Security Agreement has been executed by the parties hereto as of the date first above
written. 

B.O.S. Better On-Line
Solutions Ltd. 

Beit Rabin, 100 BOS Road,
Teradyon 

Industrial Park, Misgav 20179, Israel 

		
		
		
		
		
	Attention:	Chief Financial Officer
	Facsimile:	(972) 4 999-0334

	
———————————————————————————— 

	By:   

      

Title:

      

Date:
	Adiv Baruch
——————————————

Chief Executive Officer
——————————————

August 16, 2006
——————————————	

	By:   

      

Title:

      

Date:
	Nehemia Kaufman
——————————————

Chief Financial Officer
——————————————

August 16, 2006
——————————————	

Laurus Master Fund Ltd. 

	
———————————————————————————— 

	By:   

      

Title:

      

Date:
	 
——————————————

 
——————————————

August 16, 2006
——————————————	

7EX10-1

CellCyte Genetics Corporation

EMPLOYMENT AGREEMENT

GARY A. REYS

 

          This Employment Agreement (the "Agreement") is entered into as of June 1, 2007 (the "Effective Date"), by and between CellCyte Genetics Corporation, a Nevada corporation (the "Company"), and Gary A. Reys (the "Executive") (and the Company and the Executive being hereinafter also individually or collectively referred to as a "party" or the "parties" as the context do requires.

          1.     Duties and Scope of Employment

                         (a)   Positions and Duties:  As of the Effective Date, the Executive has herein entered into an employment agreement in which the Executive has agreed to serve as Chairman, Chief Executive Officer and President of the Company and have overall charge of and responsibility for the business and affairs of the Company and any subsidiary of the Company and including, without limitation, CellCyte Genetics Corporation, a Washington corporation and the Company's present operating subsidiary.

                         (b)   Term:  The term and continuance of the Executive's employment under this Agreement is referred to herein as the "Employment Term". The initial Employment Term shall be for a period of five years form the Effective Date hereof; provided, however, that starting with the second anniversary date of the Effective Date of this Agreement, the Employment Term under this Agreement shall be extended under a daily three-year "Evergreen" feature such that the remaining Employment Term of this Agreement will always be at least three years unless either party hereto gives written notice of the discontinuation of the Evergreen feature.

                         (c)   Board Membership:  During the Employment Term the Executive will serve as Chairman of the Board of Directors of the Company (the "Board") subject to any required prior Board and/or stockholder approval of the Company as may be determined from time to time.

                         (d)   Obligations:  During the Employment Term the Executive will perform his duties faithfully, in the best interests of the Company and to the best of his ability. For the duration of the Employment Term the Executive agrees not to actively engage in any other employment, occupation or consulting activity with any company or organization that may be, or be interpreted to be, in direct or indirect competition with the Company without the prior approval of the Board.

          2.     Compensation

                         (a)   Base Salary:  The Company will pay the Executive as compensation for his services under this Agreement a base salary at the annualized rate of $350,000 (the "Base Salary").  The Base Salary will be paid periodically in accordance with the Company's normal payroll practices and be subject to the usual, required employee withholdings.

 

                         (b)   Increase in Salary:  Effective upon the Company raising not less than an aggregate of $15,000,000 in private and/or public equity or debt financing, the Executive's Base Salary will be increased to an annualized rate of $425,000 to be paid periodically in accordance with the Company's normal payroll practices and be subject to the usual, required employee withholdings.

                         (c)   Living Reimbursement:  During the Employment Term, and if the Executive is required by the Board to maintain a residence apart from the Executive's then permanent residence, the Company shall lease appropriate housing for the Executive and will reimburse the Executive for reasonable housing and living expenses.  Any such leased housing shall be comparable to the Executive's then permanent residence.

                         (d)   During the Employment Term the Company will lease an automobile for the Executive's benefit and for the Executive's business and personal use.

          3.     Employee Benefits:  During the Employment Term the Executive will be entitled to participate in all employee benefit plans and programs currently and hereafter maintained by the Company of general applicability to other senior executives of the Company and including, without limitation, the Company's group medical, dental, vision, disability, life insurance and flexible-spending account plans.  In this regard the Board reserves the right to cancel or change the employee benefit plans and programs it offers to its senior executives at any time.

          4.     Vacation:  The Executive will be entitled to paid vacation of four weeks per year in accordance with the Company's vacation policy with the timing and duration of specific vacations to be mutually and reasonably agreed upon by both parties hereto and in advance.

          5.     Expenses:  The Company will reimburse the Executive for all reasonable travel, entertainment or other expenses incurred by the Executive in the furtherance of or in connection with the performance of Executive's services hereunder and in accordance with the Company's expense reimbursement policy as in effect from time to time.

          6.     Severance

                         (a)   Involuntary Termination:  If the Executive's employment with the Company terminates other than voluntarily or for "Cause" (as defined herein; and such date of termination being a "Termination Date" herein), and should the Executive have already then executed and not otherwise revoked a standard and general mutual release of all claims with the Company, then, and subject to Section11: (i) the Executive shall then have the option of receiving, within 14 calendar days of such Termination Date, either (A) continuing payments (less applicable withholding taxes) of his then current annual Base Salary plus any payments equal to his most recent annual performance bonus for a period of 36 months from the date of such termination, to be paid periodically in accordance with the Company's normal payroll policies, or (ii) a lump sum payment representing such Base Salary continuation and performance bonus; and (ii) all of the Executive's then unvested stock options shall become fully vested at the Termination Date and then remain exercisable for a period of 24 months from said Termination Date.

                         (b)   Voluntary Termination; Termination for Cause:  If Executive's employment with the Company is terminates voluntarily by the Executive or for Cause by the Company, then: (i) all unexercised and vested stock options will terminate immediately; (ii) all payments of compensation by the Company to Executive hereunder will terminate immediately (except as to amounts already earned); and (iii) the Executive will only be eligible for severance benefits in accordance with the Company's established policies as then in effect; and being payable within 14 calendar days of such Termination Date.

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          7.     Change of Control Benefits:  If within 12 months following a "Change of Control" (as defined below) of the Company (i) the Executives employment with the Company or a successor corporation is subject to either a voluntary or Involuntary Termination (as defined below) or (ii) the Company or a successor corporation terminates the Executive's employment with the Company or successor corporation for other than Cause, then the Executive shall receive severance as stated in section 6 (a) of this Agreement

          8.     Definitions

                         (a)   Cause:  For purposes of this Agreement, "Cause" is defined as: (i) an act of dishonesty made by the Executive in connection with Executive's responsibilities as an employee of the Company; (ii) the Executive's conviction of, or plea of, nolo contendere to, a felony; (iii) the Executive's gross misconduct; or (iv) the Executive's continued substantial violations of his employment services or duties hereunder after the Executive has received a written demand for performance from the Company which specifically sets forth the factual basis for the Company's belief that Executive has not substantially performed his services or duties hereunder.

                         (b)   Change of Control:  For purposes of this Agreement, "Change of Control" of the Company is defined as: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the United States Securities Exchange Act of 1934, as amended (the "Exchange Act")) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company's then outstanding voting securities; (ii) the date of the consummation of a merger or arrangement of the Company with any other corporation that has been approved by the stockholders of the Company, other than a merger or arrangement which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or arrangement; (iii) the date the stockholders of the Company approve a plan of complete liquidation of the Company; or (iv) the date of the consummation of the sale or disposition by the Company of all or substantially all the Company's assets.

                         (c)   Involuntary Termination:  For purposes of this Agreement, "Involuntary Termination" means: (i) without the Executive's express written consent, a significant reduction of Executive's services, duties, position or responsibilities relative to the Executive's services, duties, position or responsibilities in effect immediately prior to such reduction, unless the Executive is provided with comparable services, duties, position or responsibilities; provided, however, that a reduction in services, duties, position or responsibilities solely by virtue of the Company being acquired and made part of a larger entity (as, for example, when the Chief Executive Officer of the Company remains as such following a Change of Control but is not made the Chief Executive Officer of the acquiring corporation) shall not constitute an Involuntary Termination; (ii) without the Executive's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Executive immediately prior to such reduction; (iii) without the Executive's express written consent, a material reduction by the Company of the Executive's Base Salary as in effect immediately prior to such reduction, other than in connection with a general decrease in base salaries for most employees of the Company and any successor corporation; (iv) without the Executive's express written consent, a material reduction by the Company in the kind or level of employee benefits to which Executive is entitled immediately prior to such reduction with the result that the Executive's overall benefits package is significantly reduced (other than any such reduction applicable to employees of the Company generally); (v) without the Executive's express written consent, the relocation of the Executive to a facility or a location more than 60 miles from his current location; or (vi) any purported termination of the Executive for other than for Cause. 

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          9.     Confidential Information  The Executive agrees to enter into the Company's standard Confidential Information and Invention Assignment Agreement (the "Confidential Information Agreement") upon commencing employment hereunder. 

          10.    Conditional Nature of Severance Payments

                         (a)   Non-compete:  The Executive acknowledges that the nature of the Company's business is such that if the Executive were to become employed by, or substantially involved in, the business of a competitor of the Company during the 12 months following the termination of Executive's employment with the Company either voluntarily or with or without Cause for any reason, it would be very difficult for the Executive not to rely on or use the Company's trade secrets and confidential information.  Thus, and to avoid the inevitable disclosure of the Company's trade secrets and confidential information, the Executive agrees and acknowledges that the Executive's right to receive the severance payments set forth in Section 6 (to the extent that the Executive is otherwise entitled to such payments) shall be conditioned upon the Executive not directly or indirectly engaging in (whether as an employee, consultant, agent, proprietor, principal, partner, stockholder, corporate officer, director or otherwise), or having any ownership interest in or participating in the financing, operation, management or control of, any person, firm, corporation or business that competes with Company or is a customer of the Company.  Upon any breach of this section, all remaining severance payments pursuant to this Agreement shall immediately cease.

                         (b)   Non-Solicitation:  Until the date which is one year after any Termination Date hereunder for any reason, the Executive agrees and acknowledges that the Executive's right to receive the severance payments set forth in Section 6 (to the extent that the Executive is otherwise entitled to such payments) shall be conditioned upon the Executive not either directly or indirectly soliciting, inducing, attempting to hire, recruiting, encouraging, taking away, hiring any employee of the Company or causing an employee to leave his or her employment either for the Executive or for any other entity or person.

                         (c)   Understanding of Covenants:  The Executive represents that he is familiar with the foregoing covenants not to compete and not to solicit and that he is fully aware of his obligations hereunder and including, without limitation, the reasonableness of the length of time, scope and geographic coverage of these covenants.

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          11.    Assignment:  This Agreement will be binding upon and inure to the benefit of the heirs, executors and legal representatives of the Executive, upon the Executive's death, and any successor of the Company.  Any such successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes.  For this purpose, "successor" means any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company.  None of the rights of the Executive to receive any form of compensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution.  Any other attempted assignment, transfer, conveyance or other disposition of the Executive's right to compensation or other benefits hereunder will be null and void.

          12.    Notices:  All notices, requests, demands and other communications called for hereunder shall be in writing and shall be deemed given: (i) on the date of delivery if delivered personally; (ii) one business day after being sent by a well established commercial overnight service; or (iii) four business days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at the following addresses, or at such other addresses as the parties may later designate in writing:
If to the Company:

The Board of Directors

CellCyte Genetics Corporation; and

If to Executive:

Gary Reys

1815 East Lancaster

Freeland, WA 98249

          13.    Severability.  In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement will continue in full force and effect without said provision.

          14.    Arbitration

                         (a)   General:  In consideration of the Executive's service to the Company, its promise to arbitrate all employment related disputes and the Executive's receipt of the compensation, pay raises and other benefits payable to the Executive by the Company, at present and in the future, the Executive agrees that any and all controversies, claims, or disputes with anyone (including the Company and any employee, officer, director, shareholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from the Executive's service to the Company under this Agreement or otherwise or the termination of Executive's service with the Company, including any breach of this Agreement, shall be subject to binding arbitration under the Arbitration Rules set forth in Revised Code of Washington ("RCW"), Sections 11.96A.260 through 11.96A.320 (the "Rules"), and pursuant to Washington State law.  Disputes which the Executive agrees to arbitrate, and thereby agrees to waive any right to a trial by jury (include any statutory claims under state or federal law and including, but not limited to, claims under Title VII of the United States Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the Fair Labor Standards Act and RCW Section 49.60.010 et seq., claims of harassment, discrimination or wrongful termination and any statutory claims.  The Executive further understands that this Agreement to arbitrate also applies to any disputes that the Company may have with the Executive. 

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                         (b)   Procedure:  The Executive agrees that any arbitration will be administered by the American Arbitration Association ( the "AAA") and that a neutral arbitrator will be selected in a manner consistent with its National Rules for the Resolution of Employment Disputes.  The arbitration proceedings will allow for discovery according to the rules set forth in the National Rules for the Resolution of Employment Disputes.  The Executive agrees that the arbitrator shall have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. The Executive agrees that the arbitrator shall issue a written decision on the merits.  The Executive also agrees that the arbitrator shall have the power to award any remedies, including attorneys' fees and costs, available under applicable law.  The Executive understands the Company will pay for any administrative or hearing fees charged by the arbitrator or AAA, except that the Executive shall pay the first $200.00 of any filing fees associated with any arbitration that the Executive initiates. The Executive agrees that the arbitrator shall administer and conduct any arbitration in a manner consistent with the Rules and that, to the extent that the AAA's National Rules for the Resolution of Employment Disputes conflict with the Rules, the Rules shall take precedence.

                         (c)   Remedy:  Except as provided by the Rules, arbitration shall be the sole, exclusive and final remedy for any dispute between the Executive and the Company.  Accordingly, and except as provided for by the Rules, neither the Executive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration.  Notwithstanding, the arbitrator will not have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator shall not order or require the Company to adopt a policy not otherwise required by law which the Company has not adopted.

                         (d)   Availability of Injunctive Relief:  In addition to the right under the Rules to petition a court for provisional relief, the Executive agrees that any party may also petition a court for injunctive relief where either party alleges or claims a violation of this Agreement or the Confidential Information Agreement or any other agreement regarding trade secrets, confidential information, non-solicitation or RCW Section 49.44.140.  In the event that either party seeks injunctive relief, the prevailing party shall be entitled to recover reasonable costs and attorneys fees. 

                         (e)   Administrative Relief:  The Executive understands that this Agreement does not prohibit the Executive from pursuing an administrative claim with a local, state or federal administrative body such as the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission or the workers' compensation board. This Agreement does, however, preclude the Executive from pursuing court action regarding any such claim. 

                         (f)   Voluntary Nature of Agreement:  The Executive acknowledges and agrees that the Executive is executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else.  The Executive further acknowledges and agrees that the Executive has carefully read this Agreement and that the Executive has asked any questions needed for the Executive to understand the terms, consequences and binding effect of this Agreement and fully understand it, including that the EXECUTIVE IS WAIVING THE EXECUTIVE'S RIGHT TO A JURY TRIAL.  Finally, the Executive agrees that the Executive has been provided an opportunity to seek the advice of an attorney of the Executive's choice before signing this Agreement.

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          15.     Integration  This Agreement, together with the Confidential Information Agreement and any other compensation agreement entered into as a consequence of this Agreement, represents the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior or contemporaneous agreements whether written or oral.  No waiver, alteration, or modification of any of the provisions of this Agreement will be binding unless in writing and signed by duly authorized representatives of the parties hereto.

          16.     Tax Withholding  All payments made pursuant to this Agreement will be subject to withholding of applicable taxes.

          17.     Governing Law  This Agreement will be governed by the laws of the State of Washington (with the exception of its conflict of laws provisions).

          18.     Acknowledgment  The Executive acknowledges that he has had the opportunity to discuss this matter with and obtain advice from his private attorney, has had sufficient time to and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.

          IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by their duly authorized officer, as of the day and year first above written.

COMPANY:

CellCyte Genetics Corporation

By: /s/ "Ronald Berninger"                                     Date:  __June 1. 2007_______________     

Title:   Executive Vice president, Chief Scientific office

 

EXECUTIVE:

/s/ "Gary A. Reys"                                                  Date:   __June 1. 2007_______________   

Gary A. Reys

 

- 7 -

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