Document:

EXHIBIT 10.49

                        SANDS BROTHERS INTERNATIONAL LTD.
                               INVESTMENT BANKERS
                                   MEMBER NASD
                      90 PARK AVENUE, NEW YORK, N.Y. 10016
           (212) 697-5200 Toll Free (800) 866-6116 Fax (212) 697-8035

                                                                   July 11, 2003

Mr. Oded Bashan
On Track Innovations Ltd
ZHR, Industrial Zone
Rosh Pina, Israel 12000

Re: Financial Advisor Agreement

Dear Oded:

Sands  Brothers  International  (SBIL") is  pleased to act as the  non-exclusive
financial advisor for On Track  Innovations Ltd.  ("Company") in connection with
your proposed  capital  transaction.  The terms of our  engagement are set forth
below. We look forward to working with you.

     1.   The Offering.

          We  understand  you wish to raise up to $2.5 million  through a "PIPE"
          transaction   involving  the  sale  of  securities  to   institutional
          investors  (the  "Offering").  You  understand the actual terms of the
          Offering  will  depend on market  conditions,  and will be  subject to
          negotiation between the Company and prospective investors.

     2.   Fees and Expenses.

          (a)  Concurrently  with the closing of any part of the  Offering,  the
               Company  will  pay us in  cash a fee  equal  to 10% of the  gross
               proceeds  received  from the sale of  securities  on investors we
               introduce  to  you  and  5%  on  investors  who  invest   through
               intermediaries we introduce to you.

          (b)  In addition,  the Company agrees to reimburse us upon request for
               our expenses,  including the fees and  disbursements of our legal
               counsel of up to $8,000.

          (c)  Furthermore,  upon the closing of the offering, the Company shall
               grant to us warrants  for the  purchase of an amount equal to 10%
               of  the  securities  issued  in  the  offering  on  investors  we
               introduce  to  you  and  5%  on  investors  who  invest   through
               intermediaries  we  introduce  to you.  The  Warrants  shall  be:
               exercisable  into  securities  similar to those issued as part of
               the  offering;  have a strike price equal to 110% of the offering
               price; have a term of five years; and include a cashless issuance
               provision.

<PAGE>

     3.   Terms.

          (a)  The term of this agreement shall be three months; however, either
               party  may  terminate  this  agreement  at any time  upon 10 days
               written notice to the other party. Upon  termination,  we will be
               entitled to collect all fees earned and expenses incurred through
               the date of termination.

          (b)  If any part of the  offering is not closed  during the term,  for
               reasons  other  than  termination  of this  agreement  by us, and
               during the six months following termination of the agreement, any
               person  which  we  introduced,  directly  or  indirectly,  to the
               Company or with which we have discussions or negotiations  during
               the term of behalf of the Company,  purchases securities from the
               Company (other than through a underwritten public offering),  you
               agree to pay us upon the  closing a cash fee in the  amount  that
               would  otherwise  have been payable to SBIL had such  transaction
               occurred during the term.

     4.   Representations and Warranties.

          (a)  You  hereby   authorize  SBIL  to  transmit  to  the  prospective
               purchasers  of the  securities  material  prepared by the Company
               with  such  exhibits  and  supplements  as may from  time to time
               required  or  appropriate  and or  copies of the  Company's  most
               recent filings with Securities and Exchange Commission,  together
               with summary materials  prepared by the Company,  if we deem them
               appropriate (collectively "Material"). The Company represents and
               warrants that the Material (i) will be prepared by the management
               of  the  Company  and  reviewed  and  approved  by its  Board  of
               Directors;  and (ii) will not contain any untrue  statement  of a
               material  fact or omit to state a material  fact  required  to be
               stated  therein or  necessary to make the  statements  therein or
               previously made, in light of the  circumstances  under which they
               made, not misleading. The Company will advise SBIL immediately of
               the  occurrence  of any  event or any other  change  known to the
               Company  which  results  in the  Material  containing  an  untrue
               statement of a material fact or omitting to state a material fact
               required to be stated therein or necessary to make the statements
               therein or previously  made, in light of the  circumstance  under
               which they were made, not misleading.

          (b)  You agree  that you will enter  into  subscription,  registration
               rights and other customary agreements, and that your counsel will
               supply an opinion letter on the  transaction,  and comfort letter
               on the  non-financial  portions of the material and your auditors
               will supply a "comfort"  letter on the financial  information  in
               the  material,  all  of  which  will  be in  form  and  substance
               reasonably acceptable to, and addressed to the investors.

     5.   Indemnification, Contribution, and Confidentiality.

          The Company  agrees to  indemnify  SBIL and its  controlling  persons,
          representatives  and  agents in  accordance  with the  indemnification
          provisions  set  forth in  Schedule  A, and the  parties  agree to the
          confidentiality   provisions   of   Schedule   B,  all  of  which  are
          incorporated  herein by this  reference.  These  provisions will apply
          regardless of whether the proposed offering is consummated.

<PAGE>

     6.   Governing Law.

          This Agreement  shall be governed by and construed in accordance  with
          the laws of the state of New York applicable to contracts executed and
          to be wholly performed  therein without giving effect to its conflicts
          of laws  principles  or rules.  This  letter,  including  Schedule  A,
          constitutes  the entire  understanding  of the parties with respect to
          the subject  matter hereof and may not be altered or amended except in
          a writing signed by both parties.  This  Agreement  shall be deemed to
          have been made and delivered in New York City and shall be governed as
          to  validity,  interpretation,  construction,  effect and in all other
          respects by the  internal  laws of the State of New York.  The Company
          (l) agrees that any legal suit, action or proceeding arising out of or
          relating to this letter shall be  instituted  exclusively  in New York
          State  Supreme  Court,  County of New York,  or in the  United  States
          District  Court for the Southern  District of New York, (2) waives any
          objection  which the Company may have now or hereafter to the venue of
          any such suit, action or proceeding,  and (3) irrevocably  consents to
          the  jurisdiction  of the New York State Supreme Court,  County of New
          York, and the United States  District Court for the Southern  District
          of New  York in any such  suit,  action  or  proceeding.  The  Company
          further  agrees  to  accept  and  acknowledge  service  of any and all
          process which may be served in any such suit,  action or proceeding in
          the New York State Supreme Court, County of New York, or in the United
          States District Court for the Southern District of New York and agrees
          that service of process upon the Company  mailed by certified  mail to
          the  Company's  address  shall be  deemed in every  respect  effective
          service  of process  upon the  Company,  in any such  suit,  action or
          proceeding.  THE PARTIES HERETO AGREE TO WAIVE THEIR RESPECTIVE RIGHTS
          TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION  BASED UPON OR ARISING
          OUT OF  THIS  AGREEMENT  OR ANY  DOCUMENT  OR  AGREEMENT  CONTEMPLATED
          HEREBY.  Neither  the  execution  and  delivery  of this letter by the
          Company nor the consummation of the transactions  contemplated  hereby
          will, directly or indirectly,  with or without the giving of notice or
          lapse of time, or both: (i) violate any provisions of the  Certificate
          of Incorporation or By-laws of the Company;  or (ii) violate, or be in
          conflict  with, or constitute a default under,  any agreement,  lease,
          mortgage,  debt or  obligation  of the Company or require the payment,
          any pre-payment or other penalty with respect thereto.

     7.   Announcement of Offering.

          If the  Offering is  consummated,  SBIL may at its  expense,  place an
          announcement  in such  newspapers and  periodicals as SBIL may desire.
          OTI reserves the right to review and comment on any announcement  that
          SBIL  intends to publish with  respect to any  financing  contemplated
          here under that closes.

     8.   Advice to the Board.

          The Company  acknowledges that any advice given by us to you is solely
          for the benefit and use of the Board of  Directors  of the Company and
          may not be used,  reproduced,  disseminated,  quoted or  referred  to,
          without our prior written consent.

<PAGE>

     9.   Entire Agreement.

          This Agreement  constitutes the entire  Agreement  between the parties
          and  supersedes  and  cancels  any and all  prior  or  contemporaneous
          arrangements,  understandings and agreements,  written or oral between
          them relating to the subject matter hereof.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

     We look forward to working with you and developing a long-term relationship
with the Company.

     Very Truly yours,

     Sands Brothers International, Ltd.

     By: /s/ Michael C. Caska
         Michael C. Caska
         President

     Confirmed and accepted as of This ___11th___ day of July, 2003.

     On Track Innovations Ltd.

     By: /s/ Oded Bashan
         Oded Bashan
         Chief Operating Officer

<PAGE>

                                   SCHEDULE A

                                 INDEMNIFICATION

         Recognizing  that matters of the type  contemplated  in this engagement
sometimes  result in  litigation  and that SBIL' role is  advisory,  the Company
agrees to indemnify and hold harmless Sands  Brothers,  its affiliates and their
respective  officers,  directors,  employees,  agents  and  controlling  persons
(collectively,  the "Indemnified Parties"), from and against any losses, claims,
damages and liabilities,  joint or several,  related to or arising in any manner
out of any transaction,  financing,  proposal or any other matter (collectively,
the  "Matters")  contemplated  by the  engagement  of SBIL  hereunder,  and will
promptly reimburse the Indemnified  Parties for all expenses (including fees and
expenses of legal counsel) as incurred in connection with the  investigation of,
preparation  for or defense of any  pending or  threatened  claim  related to or
arising in any manner out of any Matter  contemplated  by the engagement of SBIL
hereunder,  or  any  action  or  proceeding  arising  therefrom   (collectively,
"Proceedings"),  whether or not such Indemnified  Party is a formal party to any
such Proceeding.  Notwithstanding the foregoing, the Company shall not be liable
in respect of any losses, claims, damages,  liabilities or expenses that a court
of competent  jurisdiction  shall have  determined  by final  judgment  resulted
solely from the gross negligence or willful  misconduct of an Indemnified Party.
The Company  further agrees that it will not,  without the prior written consent
of Sands Brothers, settle, compromise or consent to the entry of any judgment in
any pending or threatened  Proceeding in respect of which indemnification may be
sought hereunder  (whether or not SBIL or any Indemnified  Party is an actual or
potential  party to such  Proceeding),  unless such  settlement,  compromise  or
consent  includes an  unconditional  release of SBIL and each other  Indemnified
Party hereunder from all liability arising out of such Proceeding.

         The Company agrees that if any indemnification or reimbursement  sought
pursuant  to  this  letter  were  for  any  reason  not to be  available  to any
Indemnified  Party or  insufficient  to hold it  harmless  as and to the  extent
contemplated  by this letter,  then the Company  shall  contribute to the amount
paid or payable by such Indemnified Party in respect of losses,  claims, damages
and  liabilities  in such  proportion as is  appropriate to reflect the relative
benefits to the Company and its  stockholders  on the one hand,  and SBIL on the
other,  in  connection  with  the  Matters  to  which  such  indemnification  or
reimbursement relates or, if such allocation is not permitted by applicable law,
not only such relative  benefits but also the relative faults of such parties as
well as any  other  equitable  considerations.  It is  hereby  agreed  that  the
relative  benefits  to the  Company  and/or  its  stockholders  and to SBIL with
respect to SBIL'  engagement shall be deemed to be in the same proportion as (i)
the total value paid or received or to be paid or received by the Company and/or
its stockholders  pursuant to the Matters (whether or not consummated) for which
SBIL is engaged to render  financial  advisory  services  bears to (ii) the fees
paid  to SBIL  in  connection  with  such  engagement.  In no  event  shall  the
Indemnified Parties contribute or otherwise be liable for an amount in excess of
the  aggregate  amount  of  fees  actually  received  by SBIL  pursuant  to such
engagement (excluding amounts received by SBIL as reimbursement of expenses).

<PAGE>

         The Company  further  agrees that no  Indemnified  Party shall have any
liability (whether direct of indirect,  in contract or tort or otherwise) to the
Company for or in connection with SBIL' engagement  hereunder except for losses,
claims, damages,  liabilities or expenses that a court of competent jurisdiction
shall  have  determined  by  final  judgment  resulted  solely  from  the  gross
negligence  or willful  misconduct of such  Indemnified  Party.  The  indemnity,
reimbursement  and contribution  obligations of the Company shall be in addition
to any liability  which the Company may otherwise have and shall be binding upon
and  inure  to the  benefit  of any  successors,  assigns,  heirs  and  personal
representatives of the Company or an Indemnified Party.

         The indemnity, reimbursement,  contribution provisions set forth herein
shall  remain  operative  and in full  force and  effect  regardless  of (i) any
withdrawal,  termination or consummation of or failure to initiate or consummate
any Matter referred to herein,  (ii) any  investigation  made by or on behalf of
any party hereto or any person controlling  (within the meaning of Section 15 of
the Securities Act of 1933, as amended, or Section 20 of the Securities Exchange
Act of 1934,  as  amended)  any  party  hereto,  (iii)  any  termination  or the
completion or expiration of this letter or SBIL'  engagement and (iv) whether or
not SBIL  shall,  or shall not,  be called upon to render any formal or informal
advice in the course of such engagement.

<PAGE>

                                   SCHEDULE B

                   INFORMATION TO BE SUPPLIED; CONFIDENTIALITY

         In  connection  with SBIL's  activities  on behalf of the Company,  the
Company will furnish SBIL with all financial and other information regarding the
Company that SBIL  reasonably  believes  appropriate to its assignment (all such
information so furnished by the Company,  whether  furnished before or after the
date of this  Agreement,  being  referred to herein as the  "Information").  The
Company  will provide SBIL with access to the  officers,  directors,  employees,
independent accountants, legal counsel and other advisors and consultants of the
Company.  The  Company  recognizes  and  agrees  that SBIL (i) will use and rely
primarily on the Information and information available from generally recognized
public sources in performing the services contemplated by this Agreement without
independently verifying the Information or such other information, (ii) does not
assume  responsibility  for the accuracy of the Information or such information,
and (iii)  will not make an  appraisal  of any  assets or  liabilities  owned or
controlled by the Company or its market competitors.

         SBIL will maintain the  confidentiality  of the Information and, unless
and until  such  information  shall  have been made  publicly  available  by the
Company  or by others  without  breach  of a  confidentiality  agreement,  shall
disclose the information only as authorized by the Company or as required by law
or by order of a governmental authority or court of competent  jurisdiction.  In
the  event  that  SBIL is  legally  required  to make  disclosure  of any of the
Information,  SBIL will give notice to the Company prior to such disclosure,  to
the extent that SBIL can practically do so.

The foregoing paragraph shall not apply to information that:

                  (i)      at the  time of  disclosure  by the  Company  is,  or
                           thereafter becomes, generally available to the public
                           or within the industries in which the Company or SBIL
                           or its affiliates  conduct business,  other than as a
                           direct result of a breach by SBIL of its  obligations
                           under this Agreement;

                  (ii)     prior to or at the time of disclosure by the Company,
                           was already it in the  possession  of, or,  conceived
                           by, SBIL or any of its affiliates, or could have been
                           developed  by them  from  information  then in  their
                           possession,  by the application of other  information
                           or   techniques   in  their   possession,   generally
                           available to the public,  or available to SBIL or its
                           affiliates other than from the Company;

                  (iii)    at  the  time  of   disclosure   by  the  Company  or
                           thereafter,  is  obtained  by  SBIL  or  any  of  its
                           affiliates  from a third  party  who SBIL  reasonably
                           believes to be in possession of the  information  not
                           in violation of any  contractual,  legal or fiduciary
                           obligation  to  the  Company  with  respect  to  that
                           information; or

<PAGE>

                  (iv)     is independently developed by SBIL or its affiliates.

         Nothing in this  Agreement  shall be  construed to limit the ability of
SBIL or its affiliates to pursue, investigate,  analyze, invest in, or engage in
investment banking,  financial advisory or any other business  relationship with
entities  other than the  Company,  notwithstanding  that such  entities  may be
engaged in a business  which is similar to or  competitive  with the business of
the Company, and notwithstanding that such entities may have actual or potential
operations,  products,  services, plans, ideas, customers or supplies similar or
identical  to the  Company's,  or may have been  identified  by the  Company  as
potential merger or acquisition  targets or potential  candidates for some other
business  combination,   cooperation  or  relationship.  The  Company  expressly
acknowledges  and agrees that it does not claim any proprietary  interest in the
identity of any other entity in its industry or otherwise, and that the identity
of any such entity is not confidential information.EXHIBIT 10.50

                                     Warrant

THE WARRANT  EVIDENCED OR CONSTITUTED  HEREBY,  AND ALL ORDINARY SHARES ISSUABLE
HEREUNDER,  HAVE  BEEN  AND  WILL  BE  ISSUED  WITHOUT  REGISTRATION  UNDER  THE
SECURITIES ACT OF 1933, AS AMENDED ("THE ACT") AND MAY NOT BE SOLD,  OFFERED FOR
SALE,  TRANSFERRED,  PLEDGED OR HYPOTHECATED  WITHOUT REGISTRATION UNDER THE ACT
UNLESS  EITHER (i) THE COMPANY HAS  RECEIVED AN OPINION OF COUNSEL,  IN FORM AND
SUBSTANCE   REASONABLY   SATISFACTORY  TO  THE  COMPANY,   TO  THE  EFFECT  THAT
REGISTRATION  IS NOT REQUIRED IN CONNECTION  WITH SUCH  DISPOSITION  OR (ii) THE
SALE OF SUCH SECURITIES HAS BEEN REGISTERED UNDER THE ACT.

                       WARRANT TO PURCHASE ORDINARY SHARES
                          OF ON TRACK INNOVATIONS LTD.

NO. 1

         This Certifies That, for value received,  Sands Brothers International,
Ltd. (the  "Holder"),  is entitled,  subject to the terms and conditions of this
Warrant, to purchase from On Track Innovations Ltd., an Israeli corporation (the
"Company"),  at a price  per  share as  specified  below up to  18,182  Ordinary
Shares,  par  value  NIS 0.1 each  (subject  to  adjustment  for  stock  splits,
recapitalization events and the like) (the "Warrant Shares"), as follows.

1. CERTAIN  DEFINITIONS.  As used in this Warrant the following terms shall have
the following respective meanings:

         "HSR Act" means the  Hart-Scott-Rodino  Antitrust  Improvements  Act of
1976, as amended.

          "Registered  Holder"  means any Holder in whose  name this  Warrant is
registered upon the books and records maintained by the Company.

         "Warrant"  as used  herein,  includes  this  Warrant  and  any  warrant
delivered in substitution or exchange therefor as provided herein.

2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         2.1 Due  Authorization;  Consents.  All corporate action on the part of
the  Company,  its  officers,  directors  and  shareholders  necessary  for  the
authorization, execution and delivery of, and the performance of all obligations
of the Company under, this Warrant, and the authorization, issuance, reservation
for  issuance and delivery of all of the Warrant  Shares,  has been taken.  This
Warrant  is a  valid  and  binding  obligation  of the  Company  enforceable  in
accordance with its terms, subject, as to enforcement of remedies, to applicable
bankruptcy,  insolvency,  moratorium,  reorganization and similar laws affecting
creditors' rights generally and to general equitable  principles.  All consents,
approvals and authorizations  of, and registrations,  qualifications and filings
with, any federal or state governmental agency,  authority or

<PAGE>

body, or any third party,  required in connection  with the execution,  delivery
and  performance  of this  Warrant  and  the  consummation  of the  transactions
contemplated hereby have been obtained.

         2.2   Governmental   Consents.   All   consents,   approvals,   orders,
authorizations or registrations,  qualifications,  designations, declarations or
filings  with any  governmental  authority  on the part of Company  required  in
connection with the  consummation of the transactions  contemplated  herein have
been obtained.

         2.3 Compliance  with Other  Instruments.  The  execution,  delivery and
performance  of and  compliance  with this Warrant and the  consummation  of the
transactions  contemplated  hereby will not be in conflict  with or  constitute,
with or without  the  passage of time or the giving of notice or both,  either a
default under the  Memorandum of  Association,  Articles of  Association,  other
constitutive  document,  or any  agreement  or  contract  of the  Company,  or a
violation  of any  statutes,  laws,  regulations  or orders,  or an event  which
results in the creation of any lien, charge or encumbrance upon any asset of the
Company.

3. EXERCISE OF WARRANT

         3.1A.  Subject  to  compliance  with the terms and  conditions  of this
Warrant and applicable securities laws, this Warrant may be exercised,  in whole
or in part with  respect  to the  applicable  number of  Warrant  Shares,  at an
exercise price (the "Exercise Price") of U.S. $3.85 per Warrant Share;

         3.1B. The Holder may exercise this Warrant in respect of the applicable
number  of  Warrant  Shares,  at any time or from  time to time by the  delivery
(including, without limitation,  delivery by facsimile) of the form of Notice of
Exercise attached hereto as Exhibit 1 (the "Notice of Exercise"),  duly executed
by  the  Holder,  at the  principal  office  of the  Company,  and  as  soon  as
practicable after such date, surrendering:

                  (a) this Warrant at the principal office of the Company, and

                  (b) payment, (i) in cash (by check) or by wire transfer, of an
amount  equal to the  product  obtained by  multiplying  the number of shares of
Warrant  Shares  being  purchased  upon  such  exercise  by the then  applicable
Exercise  Price,  except that if Holder is subject to HSR Act  Restrictions  (as
defined in Section 3.6 below),  the Exercise Amount shall be paid to the Company
within five (5) business days of the termination of all HSR Act Restrictions.

         3.2. Net Issue  Exercise.  In lieu of the payment  methods set forth in
Section  3.1B(b)  above,  the  Holder may elect to  exchange  all or some of the
Warrant  for  shares of Warrant  Shares  equal to the value of the amount of the
Warrant  being  exchanged on the date of exchange.  If Holder elects to exchange
this  Warrant as provided in this  Section  3.2,  the Holder shall tender to the
Company the Warrant for the amount being exchanged, along with written notice of
the Holder's  election to exchange  some or all of the Warrant,  and the Company
shall issue to Holder the number of shares of Warrant Shares  computed using the
following formula:

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

                                       2
<PAGE>

                  Where X = the number of shares of Warrant  Shares to be issued
                  to Holder.

                  Y = the number of shares of Warrant Shares  purchasable  under
                  the amount of the Warrant being  exchanged (as adjusted to the
                  date of such calculation).

                  A = the  Fair  Market  Value  of one  share  of the  Company's
                  Warrant Shares.

                  B  =  Purchase   Price  (as  adjusted  to  the  date  of  such
                  calculation).

         All references  herein to an "exercise" of the Warrant shall include an
exchange pursuant to this Section 3.2.

         3.3.  Fractional  Shares. The Company shall pay the Holder cash in lieu
of any fraction of a share equal to such  fraction of the Exercise  Price of one
whole  share of  Warrant  Shares.  No  fractional  shares or scrip  representing
fractional shares shall be issued upon an exercise of this Warrant.

         3.4. HSR Act. The Company  hereby  acknowledges  that  exercise of this
Warrant  by Holder  may  subject  the  Company  and/or  the Holder to the filing
requirements  of the HSR Act and that Holder may be  prevented  from  exercising
this Warrant until the expiration or early  termination  of all waiting  periods
imposed by the HSR Act ("HSR Act Restrictions").

         3.5.  Partial  Exercise;  Effective  Date of  Exercise.  In case of any
partial  exercise of this  Warrant,  the Company  shall cancel this Warrant upon
surrender  hereof and shall  execute and deliver a new Warrant of like tenor and
date for the balance of the shares of Warrant Shares purchasable hereunder. This
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided  above.  However,
if Holder is subject to HSR Act filing requirements this Warrant shall be deemed
to have  been  exercised  on the  date  immediately  following  the  date of the
expiration  of all HSR Act  Restrictions.  The person  entitled  to receive  the
shares of Warrant Shares issuable upon exercise of this Warrant shall be treated
for all  purposes  as the  holder of  record  of such  shares as of the close of
business on the date the Holder is deemed to have exercised this Warrant.

         3.6 Expiration of Warrant.  This Warrant shall expire,  with respect to
the  applicable  number of Warrant Shares only, on the earlier to occur of : (a)
the date  that is five (5) years  following  the date of this  Warrant;  (b) the
merger  or  consolidation  of the  Company  with or into,  or the sale of all or
substantially  all of the assets or shares of the Company to,  another person or
entity,   following  which  the  Company  is  not  the  surviving  entity  ("M&A
Transaction");  provided,  however,  that the Holder  receives at least 30 days'
prior  written  notice of such follow on offering  and shall be entitled to make
its exercise of this Warrant conditional upon the closing of such transaction.

4. VALID ISSUANCE;  TAXES. All shares of Warrant Shares issued upon the exercise
of this Warrant shall be validly issued, fully paid and non-assessable,  and the
Company shall pay all taxes and other  governmental  charges that may be imposed
in respect of the issue or delivery  thereof.  The Company shall not be required
to pay any tax or other charge imposed in connection with any transfer  involved
in the  issuance  of any  certificate  for shares of Warrant  Shares in any name
other than that of

                                       3
<PAGE>

the Registered Holder of this Warrant, and in such case the Company shall not be
required to issue or deliver any stock certificate or security until such tax or
other  charge  has  been  paid,  or it has  been  established  to the  Company's
reasonable satisfaction that no tax or other charge is due.

5.  ADJUSTMENT  OF  PURCHASE  PRICE AND NUMBER OF  SHARES.  In  addition  to any
adjustment to the Warrant Shares required by the terms of such Warrant Shares in
the Company's  Articles of  Association,  the number of shares of Warrant Shares
issuable  upon  exercise  of this  Warrant  (or any  shares  of  stock  or other
securities or property receivable or issuable upon exercise of this Warrant) and
the Purchase  Price are subject to adjustment  upon  occurrence of the following
events:

         5.1. Adjustment for Share Splits, Share Subdivisions or Combinations of
Shares. The Purchase Price of this Warrant shall be proportionally decreased and
the number of shares of Warrant  Shares  issuable  upon exercise of this Warrant
(or any shares of stock or other  securities  at the time issuable upon exercise
of this Warrant) shall be proportionally increased to reflect any stock split or
subdivision  of the Company's  Warrant Shares or Ordinary  Shares.  The Purchase
Price of this Warrant shall be proportionally increased and the number of shares
of Warrant Shares issuable upon exercise of this Warrant (or any shares of stock
or other securities at the time issuable upon exercise of this Warrant) shall be
proportionally decreased to reflect any combination of the Company's Shares.

         5.2.  Adjustment  for  Dividends  or  Distributions  of Shares or Other
Securities or Property.  In case the Company shall make or issue, or shall fix a
record date for the  determination of eligible  holders  entitled to receive,  a
dividend or other distribution with respect to the Warrant Shares (or any shares
of stock or other  securities at the time issuable upon exercise of the Warrant)
payable in (a) securities of the Company or (b) assets (excluding cash dividends
paid or payable solely out of retained  earnings),  then, in each such case, the
Holder of this  Warrant on exercise  hereof at any time after the  consummation,
effective  date or record  date of such  dividend or other  distribution,  shall
receive,  in  addition  to the shares of Warrant  Shares (or such other stock or
securities)  issuable  on such  exercise  prior to such date,  and  without  the
payment of  additional  consideration  therefor,  the  securities  or such other
assets of the Company to which such Holder  would have been  entitled  upon such
date if such  Holder  had  exercised  this  Warrant  on the date  hereof and had
thereafter,  during the period from the date hereof to and including the date of
such exercise,  retained such shares and/or all other additional stock available
by it as aforesaid  during such period giving effect to all  adjustments  called
for by this Section 5.

         5.3.   Reclassification.   If  the  Company,   by  reclassification  of
securities or otherwise, shall change any of the securities as to which purchase
rights  under  this  Warrant  exist  into  the  same or a  different  number  of
securities  of any  other  class  or  classes,  this  Warrant  shall  thereafter
represent  the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the  securities  that
were subject to the purchase rights under this Warrant immediately prior to such
reclassification  or other  change and the  Purchase  Price  therefore  shall be
appropriately  adjusted,  all subject to further  adjustment as provided in this
Section 5. No  adjustment  shall be made  pursuant to this  Section 5.3 upon any
conversion or  redemption of the Warrant  Shares which is the subject of Section
5.5.

                                       4
<PAGE>

         5.4. Adjustment for Capital Reorganization, Merger or Consolidation. In
case of any capital  reorganization  of the capital stock of the Company  (other
than  a  combination,  reclassification,   exchange  or  subdivision  of  shares
otherwise  provided for herein),  or any merger or  consolidation of the Company
with or into another  corporation,  or the sale of all or substantially  all the
assets  of  the  Company  then,  and in  each  such  case,  as a  part  of  such
reorganization,  merger, consolidation, sale or transfer, lawful provision shall
be made so that the Holder of this  Warrant  shall  thereafter  be  entitled  to
receive upon exercise of this Warrant,  during the period  specified  herein and
upon payment of the Purchase Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization,  merger,  consolidation,  sale or transfer  that a holder of the
shares  deliverable  upon  exercise of this Warrant  would have been entitled to
receive in such reorganization,  consolidation, merger, sale or transfer if this
Warrant  had been  exercised  immediately  before such  reorganization,  merger,
consolidation,  sale or transfer,  all subject to further adjustment as provided
in this Section 5. The foregoing  provisions of this Section 5.4 shall similarly
apply  to  successive  reorganizations,   consolidations,   mergers,  sales  and
transfers and to the stock or securities  of any other  corporation  that are at
the  time  receivable  upon  the  exercise  of this  Warrant.  If the  per-share
consideration  payable to the Holder  hereof for shares in  connection  with any
such transaction is in a form other than cash or marketable securities, then the
value of such  consideration  shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's  Board of Directors)  shall be made in the application of
the  provisions  of this Warrant with respect to the rights and interests of the
Holder after the  transaction,  to the end that the  provisions  of this Warrant
shall be applicable  after that event, as near as reasonably may be, in relation
to any shares or other  property  deliverable  after that event upon exercise of
this Warrant. This Section 5.4 is subject to Section 3.8 above.

6. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the Purchase
Price, or number or type of shares  issuable upon exercise of this Warrant,  the
Chief  Financial  Officer  or  Controller  of the  Company  shall  compute  such
adjustment  in  accordance  with  the  terms  of  this  Warrant  and  prepare  a
certificate  setting forth such  adjustment and showing in detail the facts upon
which such adjustment is based,  including a statement of the adjusted  Purchase
Price.  The Company shall  promptly send (by facsimile and by either first class
mail, postage prepaid or overnight  delivery) a copy of each such certificate to
the Holder.

7. LOSS OR MUTILATION.  Upon receipt of evidence reasonably  satisfactory to the
Company of the ownership of and the loss,  theft,  destruction  or mutilation of
this Warrant, and of indemnity  reasonably  satisfactory to it, and (in the case
of mutilation) upon surrender and cancellation of this Warrant, the Company will
execute  and  deliver in lieu  thereof a new  Warrant of like tenor as the lost,
stolen, destroyed or mutilated Warrant.

8. RESERVATION OF WARRANT SHARES. The Company hereby covenants that at all times
there shall be reserved for issuance and delivery  upon exercise of this Warrant
such number of shares of Warrant  Shares or other shares of capital stock of the
Company as are from time to time  issuable  upon  exercise of this  Warrant and,
from time to time,  will  take all steps  necessary  to amend  its  Articles  of
Association to provide sufficient  reserves of shares of Warrant Shares issuable
upon exercise of this  Warrant.  All such shares shall be duly  authorized,  and
when  issued  upon  such  exercise,  shall be  validly  issued,  fully  paid and
non-assessable,  free and

                                       5
<PAGE>

clear of all  liens,  security  interests,  charges  and other  encumbrances  or
restrictions  on sale and  free  and  clear  of all  preemptive  rights,  except
encumbrances or  restrictions  arising under federal or state  securities  laws.
Issuance of this  Warrant  shall  constitute  full  authority  to the  Company's
officers  who are  charged  with the duty of  executing  share  certificates  to
execute and issue the necessary  certificates  for shares of Warrant Shares upon
the exercise of this Warrant.

9. [Intentionally omitted]

10.  RESTRICTIONS ON TRANSFER.  The Holder, by acceptance  hereof,  agrees that,
absent  an  effective  registration  statement  filed  with  the SEC  under  the
Securities  Act of 1933 (the "Act"),  covering the  disposition  or sale of this
Warrant or the Warrant  Shares issued or issuable  upon  exercise  hereof as the
case may be, and registration or qualification under applicable state securities
laws,  such Holder will not sell,  transfer,  pledge,  or hypothecate any or all
such Warrants or Warrant Shares, unless such transfer is performed in compliance
with the provisions of the Company's  Articles of Association and either (i) the
Company has  received an opinion of counsel,  in form and  substance  reasonably
satisfactory  to the  Company,  to the  effect  that  such  registration  is not
required in connection with such disposition or (ii) the sale of such securities
has been registered under the Act.

11.  COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant,  the Holder
hereby  represents,  warrants and covenants  that any shares of stock  purchased
upon exercise of this Warrant shall be acquired for investment only and not with
a view to, or for sale in connection  with, any distribution  thereof;  that the
Holder has had such  opportunity  as such  Holder has deemed  adequate to obtain
from  representatives  of the Company such information as is necessary to permit
the Holder to evaluate  the merits and risks of its  investment  in the Company;
that the Holder is able to bear the economic  risk of holding such shares as may
be acquired  pursuant to the exercise of this Warrant for an indefinite  period;
that the Holder  understands  that the shares of stock acquired  pursuant to the
exercise of this Warrant will not be registered under the Act (unless  otherwise
required pursuant to exercise by the Holder of the registration  rights, if any,
previously granted to the registered Holder) and will be "restricted securities"
within  the  meaning  of Rule 144  under  the Act and that  the  exemption  from
registration under Rule 144 will not be available for at least one year from the
date of exercise of this  Warrant,  subject to any special  treatment by the SEC
for exercise of this Warrant  pursuant to Section 3.2, and even then will not be
available unless a public market then exists for the stock, adequate information
concerning  the Company is then  available  to the  public,  and other terms and
conditions  of Rule 144 are  complied  with;  and that  all  stock  certificates
representing  shares of stock issued to the Holder upon exercise of this Warrant
may have affixed thereto a legend substantially in the following form:

         THE SECURITIES  REPRESENTED  HEREBY HAVE NOT BEEN REGISTERED  UNDER THE
         SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
         LAWS OF ANY STATE.  THESE  SECURITIES  ARE SUBJECT TO  RESTRICTIONS  ON
         TRANSFERABILITY  AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
         AS PERMITTED UNDER THE ACT AND THE APPLICABLE  STATE  SECURITIES  LAWS,
         PURSUANT TO REGISTRATION OR EXEMPTION  THEREFROM.  INVESTORS  SHOULD BE
         AWARE THAT THEY MAY BE  REQUIRED  TO BEAR THE  FINANCIAL  RISKS OF THIS
         INVESTMENT  FOR AN  INDEFINITE

                                       6
<PAGE>

         PERIOD OF TIME.  THE ISSUER OF THESE  SECURITIES MAY REQUIRE AN OPINION
         OF  COUNSEL  IN FORM AND  SUBSTANCE  SATISFACTORY  TO THE ISSUER TO THE
         EFFECT THAT ANY PROPOSED  TRANSFER OR RESALE IS IN COMPLIANCE  WITH THE
         ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

12. NO RIGHTS OR LIABILITIES AS SHAREHOLDERS. This Warrant shall not entitle the
Holder to any voting rights or other rights as a shareholder of the Company.  In
the absence of  affirmative  action by the Holder to purchase  Warrant Shares by
exercise of this  Warrant no  provisions  of this  Warrant,  and no  enumeration
herein of the rights or  privileges of the Holder hereof shall cause such Holder
hereof to be a shareholder of the Company for any purpose.

13. NOTICES. All notices and other communications  hereunder shall be in writing
and shall be given in person,  by registered mail (registered  international air
mail if mailed internationally), by an overnight courier service which obtains a
receipt to  evidence  delivery,  or by  facsimile  transmission  (provided  that
written confirmation of receipt is provided), addressed as set forth below:

If to the Company:         On Track Innovations Ltd.
                           Z.H.R. Industrial Zone
                           Rosh Pina, Israel 12000

With a copy to:            Zysman, Aharoni, Gayer & Co., Law Offices
                           52A Hayarkon Street
                           Tel Aviv, Israel 63432
                           Attn: Shy Baranov, Adv.
                           Fax Number: +972-3-7955520

If to Holder:              Sands Brother International, Ltd.
                           90 Park Avenue, 39TH Floor
                           New York, NY 10015

Or such other address as any party may designate to the other in accordance with
the  aforesaid  procedure.  All notices and other  communications  delivered  in
person or by courier  service shall be deemed to have been given as of three (3)
business days after sending thereof, those given by facsimile transmission shall
be deemed given  twenty-four hours following  transmission,  and all notices and
other  communications  sent by  registered  mail (or air mail if the  posting in
international) shall be deemed given seven (7) days after posting.

14.  HEADINGS.  The headings in this Warrant are for purposes of  convenience in
reference only, and shall not be deemed to constitute a part hereof.

15.  GOVERNING  LAW;  JURISDICTION.  Any claim arising under or relating to this
Warrant, shall be governed by the laws of the State of Israel, without regard to
principles of conflict of laws. Each party hereto consents that any legal action
or proceeding against it under, arising out of or in any manner relating to this
Warrant  shall be  brought  exclusively  in the  courts of the State of New York
located  in New York  County  or in the  United  States  District  Court for the
Southern District of New York. Each party hereto expressly waives any right to a
trial by jury in any action or proceeding  under this  Warrant,  and agrees that
any such  action or  proceeding  shall be tried  before a court and not before a
jury.

                                       7
<PAGE>

16. NO  IMPAIRMENT.  The Company  will at all times in good faith  assist in the
carrying  out of all such terms and in the  taking of all such  action as may be
necessary or appropriate in order to protect the rights of the Registered Holder
of this Warrant  against  impairment.  Without  limiting the  generality  of the
foregoing,  the  Company  (a) will not  increase  the par value of any shares of
stock  issuable  upon the  exercise  of this  Warrant  above the amount  payable
therefor  upon  such  exercise,  and (b) will  take all  such  action  as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and  non-assessable  shares of Warrant  Shares upon  exercise of this
Warrant.

17. NOTICES OF RECORD DATE. In case:

         17.1.  the  Company  shall take a record of the  holders of its Warrant
Shares (or other stock or securities at the time receivable upon the exercise of
this  Warrant),  for the purpose of  entitling  them to receive any  dividend or
other  distribution,  or any right to  subscribe  for or purchase  any shares of
stock of any class or any other securities or to receive any other right; or

         17.2.  of any  consolidation  or  merger  of the  Company  with or into
another   corporation,   any  capital   reorganization   of  the  Company,   any
reclassification  of the share capital of the Company,  or any conveyance of all
or  substantially  all of the assets of the  Company to another  corporation  in
which  holders  of the  Company's  stock are to  receive  stock,  securities  or
property of another corporation; or

         17.3. of any voluntary  dissolution,  liquidation  or winding-up of the
Company; or

         17.4.  of any  redemption or  conversion  of all  outstanding  Ordinary
Shares or Warrant Shares;

then, and in each such case, if applicable, the Company will mail or cause to be
mailed to the Registered Holder of this Warrant a notice specifying, as the case
may be,  (i) the date on which a record is to be taken for the  purpose  of such
dividend,  distribution or right, or (ii) the date on which such reorganization,
reclassification,  consolidation, merger, conveyance, dissolution,  liquidation,
winding-up,  redemption or conversion is to take place,  and the time, if any is
to be fixed,  as of which the  holders  of record of  Warrant  Shares,  Ordinary
Shares  or (such  stock or  securities  as at the time are  receivable  upon the
exercise of this Warrant), shall be entitled to exchange their shares of Warrant
Shares,  Ordinary Shares (or such other stock or securities),  for securities or
other  property   deliverable   upon  such   reorganization,   reclassification,
consolidation,  merger, conveyance, dissolution, liquidation or winding-up. Such
notice  shall be  delivered  at least  ten (10) days  prior to the date  therein
specified.

18.  SEVERABILITY.  If any term,  provision,  covenant  or  restriction  of this
Warrant is held by a court of  competent  jurisdiction  to be  invalid,  void or
unenforceable,   the   remainder  of  the  terms,   provisions,   covenants  and
restrictions  of this Warrant shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.

19. COUNTERPARTS. For the convenience of the parties, any number of counterparts
of  this  Warrant  may be  executed  by the  parties  hereto  and  delivered  by

                                       8
<PAGE>

facsimile,  and each such executed  counterpart shall be, and shall be deemed to
be, an original instrument.

20. NO  INCONSISTENT  AGREEMENTS.  The Company  will not on or after the date of
this  Warrant  enter into any  agreement  with respect to its  securities  which
prohibits the rights granted to the Holders of this Warrant.  The rights granted
to  the  Holders  hereunder  do not  in  any  way  conflict  with  and  are  not
inconsistent  with the rights  granted to  holders of the  Company's  securities
under any other agreements, except rights that have been waived or lapsed.

         IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
July 11, 2003.

Sands Brothers International, Ltd.          On Track Innovations Ltd.

By: /s/ Steven Sands                        By: /s/ Oded Bashan

Steven Sands                                Oded Bashan
Printed Name                                Printed Name

Chairman                                    President
Title                                       Title

                                       9
<PAGE>

                                    EXHIBIT 1

                               NOTICE OF EXERCISE

                    (To be executed upon exercise of Warrant)

On Track Innovations Ltd.                                    WARRANT NO. __

The  undersigned  hereby  irrevocably  elects to exercise  the right of purchase
represented by the within Warrant  Certificate for, and to purchase  thereunder,
the securities of On Track Innovations Ltd., as provided for therein, and (check
the applicable box):

|_|      Tenders  herewith  payment of the exercise price in full in the form of
         cash or (by check) or by wire transfer in same-day  funds in the amount
         of  $____________  for  _________  such  securities,  pursuant  to  the
         Warrant.

|_|

Please issue a certificate or  certificates  for such securities in the name of,
and pay any cash for any  fractional  share to (please  print name,  address and
social security number):

Name:             _____________________________________________________

Address:          _____________________________________________________

Signature:        _____________________________________________________

Note: The above signature should  correspond  exactly with the name on the first
page of this Warrant Certificate.

If said  number of  shares  shall not be all the  shares  purchasable  under the
within  Warrant  Certificate,  a new Warrant  Certificate is to be issued in the
name of said  undersigned  for the balance  remaining of the shares  purchasable
thereunder rounded up to the next higher whole number of shares.

                                       10

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