Document:

EXHIBIT 10.2

                         CUSTOM IC DEVELOPMENT AGREEMENT
                                TABLE OF CONTENTS

1.    Definitions......................................................
2.    Design of RON....................................................
3.    Design Schedule..................................................
4.    Fees.............................................................
5.    Program Management...............................................
6.    Delivery of RON Prototypes.......................................
7.    Prototype Acceptance.............................................
8.    Production of RON................................................
9.    Ownership, License of Rights and Restrictions....................
10.   Term of Agreement................................................
11.   Termination of Agreement.........................................
12.   Indemnification..................................................
13.   Limitation of Liability..........................................
14.   Force Majeure....................................................
15.   Confidential Information.........................................
16.   Notices..........................................................
17.   General Terms....................................................

Exhibits
 1 - Unique Conditions
 2 - Schedule of Work
 3 - RON Specification
 4 - RON IC Design Change Request
 5 - RON IC Release
 6 - RON IC Prototype Approval Notification
 7 - RON volume pricing
 8 - Motorola's Standard Terms and Conditions of Sale
 9 - Motorola IP
10 - PowerDsine IP
11 - Motorola Design Flow Deliverables
12 - Sample List of Motorola Competitors

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                              Page 1

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                          CUSTOM DEVELOPMENT AGREEMENT

        This Custom Development Agreement (the "AGREEMENT"), effective as of the
date of last signature below ("EFFECTIVE DATE"), is by and between Motorola,
Inc., acting through its Semiconductor Products Sector, having offices at 6501
William Cannon Drive, Austin, Texas, 78735 ("MOTOROLA"), and PowerDsine, Ltd.,
having a having offices at 1 hanagar St., P.O. Box 7220, Neve Ne'eman Industrial
Zone, Hod Hasharon 45421, Israel ("PowerDsine").

                                    RECITALS

    A.  PowerDsine has developed technology and IP related to Power/Data
        products for the Power Over Ethernet market ("PoE").

    B.  Motorola has semiconductor design and manufacturing resources and
        expertise.

    C.  Motorola and PowerDsine want to work together to specify and develop a
        custom integrated circuit for the PoE market.

    D.  PowerDsine agrees to purchase and Motorola agrees to sell the RON under
        the terms of this Agreement.

                                   AGREEMENT

1.      DEFINITIONS

        The following capitalized terms used in this Agreement have the meaning
set forth below:

        "AFFILIATE" means, in relation to any party, any corporation or entity
directly or indirectly controlling, controlled by, or under common control with
that party whether through the ownership of voting securities, management
control, contract or similar arrangement.

        "CONFIDENTIAL INFORMATION" means the information that is set forth in
the "technology disclosure" Section of Exhibit 2 attached hereto that was
actually disclosed by each party to the other, as well as any information
disclosed by one party to the other party that (i) if disclosed in writing or in
some other tangible form, is marked at the time of disclosure as being
"Confidential" or "Proprietary" or with words of similar import, or (ii) if
disclosed orally or by inspection, is identified at the time of disclosure as
confidential and is summarized in a written memorandum transmitted to the
receiving party within 30 days after the disclosure with enough specificity for
identification purpose. Confidential Information does not include any
information that, based on

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                              Page 2

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documented evidence: (a) is, or becomes, publicly known through no wrongful act
on the receiving party's part; (b) is already known to the receiving party, or
becomes known to the receiving party without restriction on disclosure; or (c)
is independently developed by the receiving party. The PowerDsine IP and the
Motorola IP are Confidential Information

        "ENGINEERING SAMPLES"shall mean samples that meet the main functional
requirements of the Specification; they may not be used for the Qualification of
the integrated circuit. Such circuits shall be tested and used in accordance
with Section 6 hereof.

        "PROTOTYPES"shall mean integrated circuits meeting all requirements of
the Specifications. The integrated circuits shall be tested with the latest
stage of the test program that is to be used for Qualification and may be used
for a full Qualification procedure to determine if such circuits can be mass
produced as provided in Section 7 hereof.

        "EXHIBITS" means the following exhibit(s) attached to this Agreement, as
modified from time to time, pursuant to a mutual writing executed by the
parties, which are incorporated into this Agreement:

        Exhibit 1  - Unique Conditions
        Exhibit 2  - Schedule of Work
        Exhibit 3  - RON Specification
        Exhibit 4  - RON IC Design Change Request
        Exhibit 5  - RON IC Release
        Exhibit 6  - RON Prototype Approval Notification
        Exhibit 7  - RON volume pricing
        Exhibit 8  - Motorola's Standard Terms and Conditions of Sale
        Exhibit 9  - Motorola IP
        Exhibit 10 - PowerDsine IP
        Exhibit 11 - Motorola Design Flow Deliverables
        Exhibit 12 - Sample list of Motorola Competitors

        "INTELLECTUAL PROPERTY RIGHTS" means any patents, utility models,
copyright works, moral rights, know how, trade secrets, and any applications of,
or right to apply for, any of the foregoing rights in any country.

        "MOTOROLA IP" means the Motorola Intellectual Property Rights to be
provided under this Agreement as expressly set forth in Exhibit 9.

        "POWERDSINE IP" means the PowerDsine Intellectual Property Rights
provided to Motorola as contemplated in this Agreement, including but not
limited to the items set

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                              Page 3

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forth in the "12 Port Power over LAN IC (PD 64012 Specification RON)" dated
November 12th, 2002, Draft 01, from Amir Peleg." and in Exhibit 10.

        "QUALIFICATION" means the testing procedure to verify whether the
integrated circuit, meets all functional and other requirements provided in the
Specification.

        "SPECIFICATION" means the behavior, function environmental conditions
design and other features of the integrated circuits, Engineering Samples and
Prototypes. It is the working basis for the development and describes the
objective of the development task. The latest mutually agreed Specifications are
set forth in Exhibit 3.

        "RON" means a custom integrated circuit from Motorola/PowerDsine for the
PoE market, which meets the specifications set forth in Exhibit 3 and contains
PowerDsine IP and Motorola IP.

        "SUBSIDIARY" means, in relation to any party, any corporation or entity
directly or indirectly controlled by that party whether through the ownership of
voting securities, management control, contract or similar arrangement.

        "MOTOROLA DESIGN FLOW" elements can be found in Exhibit 11.

2.      DESIGN OF RON

        2.1.    The agreed specifications for the RON are identified in the RON
                Integrated Circuit Specifications (Exhibit 3). After the
                Effective Date, changes to the specifications may only be made
                via a RON IC Design Change Request (Exhibit 4), agreed upon and
                signed by both parties. If the parties agree upon a change to
                the specifications, they will update the Schedule of Work
                (Exhibit 2) accordingly.

        2.2.    Exhibit 1 identifies Unique Conditions that must be met as a
                condition to Motorola's ability to accomplish such development.

        2.3.    Prior to the production of tooling, PowerDsine and Motorola will
                each authorize such production by signing the RON IC Release
                (Exhibit 5), thereby acknowledging that all necessary state of
                the art verifications have been successfully completed.

        2.4.    The RON will contain a hardware digital block, developed by
                PowerDsine using design tools and methodologies mutually agreed
                to by both Motorola and PowerDsine and compatible with the
                Motorola Design Flow. Deliverables associated with satisfactory
                completion of this design block are outlined in Exhibit 1.

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                              Page 4

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        2.5.    The analog and mixed signal design will be performed by Motorola
                according to the Specifications.

        2.6.    Motorola and PowerDsine will work cooperatively on the
                integration of the digital block with the analog and
                mixed-signal design blocks. Responsibilities and delivery dates
                are outlined in the Schedule of Work (Exhibit 2.)

3.      DESIGN SCHEDULE

        3.1.    The target dates for completion of the design of the RON will be
                as shown in the Schedule of Work (Exhibit 2). Motorola and
                PowerDsine will use commercially reasonable efforts to meet the
                target dates. The target dates are subject to adjustments in
                accordance with mutually agreed material change(s) to the RON
                Specification.

4.      FEES

        4.1.    In consideration for Motorola's efforts in developing the RON,
                PowerDsine will pay Motorola a non-recurring engineering fee
                ("NRE") of ** payable as follows: **

        4.2.    The NRE takes into account the expenses for two full sets of
                masks for the RON. In case of specification changes, mistakes in
                the digital block, mistakes associated with the PowerDsine IP,
                or any other changes/mistakes relating to PowerDsine, **

        4.3.    Motorola will begin work under this Agreement upon receipt of
                the initial NRE payment of **. All payments are due within
                thirty (30) days from the event triggering payment. Late
                payments will bear interest at the maximum non-usurious rate
                allowed under applicable law.

5.      PROGRAM MANAGEMENT

        5.1.    Motorola and PowerDsine will each assign a Program Manager to
                this effort. The Program Managers will be the primary contact
                within each party and will be responsible for all formal
                communications between Motorola and PowerDsine. The Program
                Managers will have the following functions, in addition to those
                functions identified elsewhere in this Agreement:

                o   Act as a liaison across the functional organizations
                    participating in the RON development.

                o   Manage the project and ensure the Schedule of Work is
                    maintained and achieved.

                o   Implement a Risk Management program (identify, analyze,
                    prioritize, assign, and monitor project risks throughout the
                    project's life cycle).

                o   Ensure regular communications as necessary between
                    PowerDsine and Motorola, and distribute information to the
                    project team.

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                              Page 5

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                o   Ensure the project is completed on time and within budget.

        The Program Managers for the respective companies will be:

    o   PowerDsine:**

    o   Motorola: **

        5.2.    Formal communications for purpose of program management between
                Motorola and PowerDsine will consist of:

                o   Weekly conference calls to review progress of the RON to the
                    specification set forth in this Agreement. Distribute
                    minutes of each call to all parties.

                o   Monthly meetings corresponding to key milestones in the
                    schedule of work.

6.      DELIVERY OF RON

        6.1.    Engineering Samples: Motorola will deliver to PowerDsine **
                pieces of Engineering Samples (** in ceramic package and ** in
                plastic package) in accordance with the Schedule of Work. Both
                Motorola and PowerDsine will begin analysis of these Engineering
                Samples to ensure compliance with the Specification and any
                design changes. Should the Engineering Samples meet the
                Prototype acceptance guidelines (Exhibit 6) they will be
                considered Prototypes. Motorola and PowerDsine will jointly
                review the Engineering Samples to determine if the Engineering
                Samples are acceptable for Customer Sampling even though
                additional engineering work is required to meet the Prototype
                guidelines. Upon acceptance of the Engineering Samples for
                customer sampling by PowerDsine, Motorola will provide up to **
                RON's in plastic package at no cost to PowerDsine within two to
                four (2-4) weeks after such acceptance. These RON's are only for
                development and for customer sampling in order to promote and
                develop the commercial market for the RON and cannot be sold.

        6.2.    ITERATION OF THE ENGINEERING SAMPLES - If the Engineering
                Samples do not meet the functional requirements of the
                Specification (based on mutual agreement), Motorola will perform
                a revision of the circuit ( e.g. modification of the circuit,
                new simulation, production of new Engineering Samples,
                preparation of masks, etc) at its own expense.

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                              Page 6

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        6.3.    DELIVERY OF PROTOTYPES: Motorola shall deliver to PowerDsine **
                pieces of RON Prototypes at no cost (part of the NRE payment)
                following the approval of the Engineering Samples . These
                Prototypes shall meet the Design Release specification (as per
                Exhibits 3 & 4) mutually signed by both parties. PowerDsine must
                accept those Prototypes in accordance with the acceptance
                criteria contained in Section 7 before Motorola will commence
                production of additional RONs.

7.      PROTOTYPE ACCEPTANCE

        7.1.    PowerDsine will evaluate the RON Prototypes to determine if
                those RON Prototypes comply with the specifications established
                in Exhibit 3. Minor deviations from the specifications that do
                not impact the RON's form, fit, or function are allowed. Within
                eight (8) weeks after Motorola ships the RON Prototypes to
                PowerDsine, PowerDsine will submit a written notice of
                acceptance or rejection to Motorola using the RON Prototype
                Approval Notification form (Exhibit 6). Approval will not be
                unreasonably conditioned, withheld, or delayed. If Motorola has
                not received this form from PowerDsine within this eight (8)
                week period, all RON Prototypes shipped will be deemed accepted.

        7.2.    If PowerDsine rejects the RON prototypes, the parties will
                jointly analyze the issues associated with that rejection in
                order to establish the extent and basis for rework. If rework is
                needed due to PowerDsine's error, PowerDsine will be responsible
                for costs associated with such rework. There will be no charge
                to PowerDsine for rework needed due to Motorola's error.

        7.3.    Production orders are required to be placed in accordance with
                standard lead times established by Motorola. Motorola will use
                commercially reasonable efforts to ensure that delivery will
                occur no later then thirteen (13) weeks from the date Motorola
                receives any order. Motorola will accept first production orders
                after the signing of the Custom Design Prototype Approval
                Notification (Exhibit 6) by PowerDsine.

8.      PRODUCTION OF RON

        8.1.    During the term of this Agreement, PowerDsine will exclusively
                obtain from Motorola the RON, or any

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                              Page 7

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                substantially similar integrated circuit having the same fit and
                function described in the Specification attached hereto as
                Exhibit 3. Pricing terms for the RON are set forth in Exhibit 7.
                All sales by Motorola to PowerDsine will be governed by
                "Motorola's Standard Terms and Conditions of Sale" (Exhibit 8).
                If there is a conflict between the terms of this Agreement and
                the terms contained in "Motorola's Standard Terms and Conditions
                of Sale," this Agreement controls.

        8.2.    Motorola will exclusively sell the RON to PowerDsine. In the
                event that Motorola identifies a business opportunity at
                customers that are not yet served by PowerDsine, Motorola may
                recommend that PowerDsine call upon such customers. PowerDsine
                may, at its discretion, ask Motorola to support PowerDsine in
                penetrating such customers.

        8.3.    It is expected that Motorola will have a cumulative sales of **
                units of the RON integrated circuit by the second anniversary of
                the date that Motorola ships the first fully qualified RON to
                PowerDsine, or June 30, 2006 which ever is last to occur (the
                "Anniversary Date"), and that such sales will fully compensate
                Motorola for the remaining development cost of the RON
                integrated circuit (** U.S dollars on top of the NRE).

                In the event, Motorola has not sold such quantity of the RON
                integrated circuit by the Anniversary Date, and PowerDsine has
                not terminated this agreement pursuant to the terms of 11.1 or
                11.2,or Motorola has not terminated this Agreement pursuant to
                Sections 11.4 and 17.9, PowerDsine or its assignee pursuant to
                the terms of 17.9 agrees to compensate Motorola for the
                remaining portion of un-recovered development costs by selecting
                one of the following options:

                        1.      PowerDsine will pay Motorola the remaining value
                                of the development cost that is not covered by
                                the cumulative procurement of the RON integrated
                                circuit within 30 days after the Anniversary
                                Date.

                        2.      PowerDsine will order from Motorola within 30
                                days after the Anniversary Date the remaining
                                units to complete a cumulative quantity sold by
                                Motorola of ** units.

                        3.      PowerDsine will provide Motorola the rights to
                                sell the RON integrated circuit to the open
                                market. In such case PowerDsine and Motorola
                                will enter in good faith negotiations to
                                establish fair and reasonable terms. If the
                                parties are unable to agree on such terms within
                                45 days after the Anniversary Date, or at any
                                time prior to

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                              Page 8

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                                the parties' agreement on such terms, Motorola
                                may decide that it does not desire to sell the
                                RON to the open market, and in such an event
                                PowerDsine shall elect, at its own discretion
                                either options 8.3.1 or 8.3.2 hereof. :

        8.4.    PowerDsine will not use Motorola IP or Confidential Information
                of Motorola for any purpose other than for the performance of
                express obligations under this Agreement. Motorola will not use
                PowerDsine IP or Confidential Information of PowerDsine for any
                purpose other than for Motorola's performance of express
                obligations under this Agreement. This provision does not
                restrict Motorola from using independently conceived or
                developed ideas, concepts, techniques, designs and/or devices to
                develop intellectual property that does not contain any
                PowerDsine IP and are not "RON-like" (as such term is defined in
                this Section 8.4).

                Notwithstanding the foregoing, for a period of 12 months after
                the Qualification of the RON, Motorola shall not design any
                devices for the PoE market that are Ron-like or are used for the
                same purpose or perform the same functions as the RON.

                After this period of time, if Motorola desires to develop for
                other customers PoE devices that are Ron-Like or are used for
                the same purpose and perform the same functions as the RON then
                the following steps will occur in the order prescribed herein:

                        a)      First, Motorola will use commercially reasonable
                                efforts to offer the RON through PowerDsine to
                                such other customers

                        b)      Second, if modification to the Specification is
                                required, Motorola and PowerDsine will work in
                                good faith to design a revision of the
                                Specification to meet the needs of the customers
                                and if successful, Motorola and PowerDsine will
                                negotiate in good faith, and enter into an
                                agreement substantially similar to this
                                Agreement governing the manufacture of the
                                modified RON by Motorola and its sale to
                                customers by PowerDsine

                        c)      Third, if (i) any customer involved desires to
                                work only with Motorola, without any involvement
                                by PowerDsine, , or (ii) Motorola and
                                PowerDsine, after a commercially reasonable good
                                faith effort are not able to agree on the
                                modifications necessary to implement Section
                                8.4(b) above,then Motorola and PowerDsine will
                                enter into good faith negotiations and shall
                                develop and enter into a fair agreement to cover
                                use of

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                              Page 9

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                    PowerDsine IP and  PowerDsine  patents and the  intellectual
                    property jointly developed by PowerDsine and Motorola during
                    the terms of this agreement.

                "RON-Like" is defined as a device that has the basic
                functionalities of input and output as the Specification
                outlined in Exhibit 3 regardless of the number of ports
                involved.

        8.5.    Motorola will notify PowerDsine in accordance with Motorola's
                standard End-of-Life policy to allow final orders and shipments
                of RON.

9.      OWNERSHIP, LICENSE OF RIGHTS AND RESTRICTIONS

        9.1     PowerDsine owns and will continue to own all rights title and
                interest in the PowerDsine IP. PowerDsine hereby grants to
                Motorola a worldwide, non-assignable royalty free right and
                license to use, make, have made, import, reproduce and modify
                the PowerDsine IP solely for purposes set forth in this
                Agreement and during the term hereof. Further, subject to
                Section 8.3.3, the licenses granted to Motorola herein are
                conditioned and contingent upon the fact that Motorola may sell
                or offer to sell the RON solely to PowerDsine and its permitted
                assignees during the term of this Agreement.

        9.2     Motorola owns and will continue to own all rights title and
                interest in the Motorola IP. Motorola hereby grants to
                PowerDsine a worldwide, non-assignable royalty free right and
                license to use, sell and offer to sell the Motorola IP solely
                for the purposes set forth in this Agreement.

        9.3     Nothing in this Agreement shall be construed to grant to either
                party (either expressly, by implication, or by way of estoppel)
                any license to any Intellectual Property Right of the other
                party, other than as expressly provided in Section 9.1 and 9.2
                of this Agreement.

        9.4     Mask sets, design tapes, processing information, internal ASIC
                block circuit design data, test pattern data and any other
                rights and information relating to the foregoing needed to
                manufacture the RON are the sole property of Motorola.

        9.5     All discoveries, improvements, inventions, copyrights, and trade
                secrets, made in the performance of this Agreement solely by
                Motorola personnel will be the sole and exclusive property of
                Motorola, subject

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 10

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                only to a grant to PowerDsine of licenses thereto in accordance
                with Section 9.2 above. Motorola will retain any and all rights
                to file any patent applications thereon.

        9.6     All discoveries, improvements, inventions, copyrights, and trade
                secrets, made in the performance of this Agreement solely by
                PowerDsine personnel will be the sole and exclusive property of
                PowerDsine subject to the licenses granted in Section 9.1 above
                and PowerDsine will retain any and all rights to file any patent
                applications thereon.

        9.7     All discoveries, improvements, inventions, copyrights, and trade
                secrets, made in the performance of this Agreement jointly by
                PowerDsine personnel and Motorola personnel, will be the
                property jointly owned by PowerDsine and Motorola, each party
                having an equal and undivided interest therein.

        9.8     In the case of each discovery, improvement or invention jointly
                owned by PowerDsine and Motorola in accordance with section 9.7,
                each party claiming such a joint invention that desires to file
                a patent applications with respect thereto shall notify the
                other party, in writing, of its intent and provide sufficient
                details to enable the other party to review the claimed
                invention (the "Filing Notification"). Within 30 days from the
                date of the Filing Notification Motorola will have the first
                right of election to file patent applications in the United
                States and other countries in the names of PowerDsine and
                Motorola as joint owners. Motorola will notify PowerDsine in
                writing, within such 30-day period, whether or not, and in which
                countries of the world, Motorola elects to file such patent
                application. PowerDsine will have the right to file patent
                applications on such discovery improvement or invention in all
                other countries in the names of PowerDsine and Motorola as joint
                owners. The filing party shall provide the other party a for
                review a copy of any application(s) or other documents related
                thereto it intends to file and allow the other party sufficient
                time, under the circumstances involved, to provide its comments.
                Each party, at its own expense, will cooperate fully with the
                filing party as may be reasonably necessary for the proper
                preparation, filing and prosecution of each such patent
                application and the maintenance, renewal and defense of each
                patent covering such discovery, improvement or invention. The
                expense for preparing, filing and prosecuting each joint
                application, and for issuance of the respective patent will be
                borne by the party that prepares and files the application.
                Where (i) such joint application for patent is filed by either
                party in a country which requires the payment of taxes or
                annuities on a pending application or on an issued patent, or
                (ii) where payment is required in connection

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 11

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                with the defense of any such patent issued or application, then
                the filing party or the party making the decision to defend such
                patent prior to filing, or the taking of any action to so defend
                the patent or application, will notify the other party
                requesting the other party to indicate whether it will agree to
                pay one-half of such taxes, annuities or defense costs.. If
                within sixty (60) days after receiving such notice, the
                non-filing party fails to assume in writing the obligation to
                pay its one-half (1/2) share of such taxes, annuities or defense
                costs, or if either party subsequently fails, within sixty (60)
                days of demand to continue such payments, it relinquishes to the
                other party, providing the other party continues such payments,
                its right, title and interest to such application and patent,
                subject, however, to retention of paid-up nonexclusive,
                nonassignable and irrevocable license, in favor of the
                relinquishing party and its Subsidiaries to make have made, use,
                lease, sell, or otherwise dispose of apparatus and/or methods
                under that application and patent If time is of the essence with
                respect on any filing, then prior to the date of the Filing
                Notification, the relevant party may, upon five-days notice to
                the other party and providing the other party the opportunity to
                participate in the process, file a provisional patent
                application in the name of Motorola and PowerDsine, and
                thereafter the provisions of this Section shall apply with
                respect to such application and the prosecution thereof and
                subsequent related non-provisional filing.

        9.9     If the filing party decides to abandon, or otherwise is unable
                to prosecute, any jointly owned patent application, or is unable
                to maintain, defend or renew any jointly owned patent, it will
                notify the other party thereof, in writing, at the earliest
                practicable date and will assign to the other party its rights
                in such invention, and such other party will have the right, at
                its expense, to prosecute such application or to take up such
                maintenance or defense, or prosecute such renewal, as the case
                may be. The filing party agrees, at the other party's expense,
                to cooperate fully with the other party to assist the other
                party in obtaining, maintaining, defending and renewing such
                patent right hereunder. The party exercising its right under
                this Section 9.9 will be deemed "the filing party" for purposes
                of Sections 9.8 and 9.9.

        9.10    Except with respect to any patent that has been abandoned by it,
                from and after the date of such abandonment, each party may use
                and may grant licenses (that do not preclude the other
                non-abandoning party from granting similar licenses) under any
                terms and conditions that it desires under each jointly owned
                patent application or patent, provided that it has fulfilled its
                obligation, if any, to pay its share of taxes or annuities
                imposed on such pending application or patent; and such party
                will retain any consideration that it may receive therefore
                without

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 12

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                having to account to the other joint owner. Each party consents
                to the granting of such non-exclusive licenses by the other
                party, and agrees not to assert any claim with respect to any
                such patent or application used or licensed by the other party
                (except to a permitted assignee hereunder) against the licensee
                or licensees thereunder for the terms of any such license.
                Neither party will assign to a third party such party's joint
                ownership of patents developed hereunder.

        9.11    Except with respect to any copyright that has been abandoned by
                it, from and after the date of such abandonment, each party may
                grant licenses (that do not preclude the other non-abandoning
                party from granting similar licenses) under any terms and
                conditions that it desires under any jointly owned copyrights
                without accounting to the other party. A party will be deemed to
                abandon the its claims to a jointly owned copyright if it
                decides not to participate in any defense of such copyright or
                fails to pay half of the costs associated with such defense, as
                long as the other party has continued to make such payments.

10.     TERM OF AGREEMENT

        The term of this Agreement is from the Effective Date through December
31, 2007. If the parties fail to reach a mutual agreement in writing to extend
the terms of this agreement by March 30, 2008, then the Agreement will
automatically terminate. Both parties agree to work in good faith to negotiate
an extension based on current market conditions.

11.     TERMINATION OF AGREEMENT

        11.1.   Either party may terminate this Agreement immediately upon
                written notice if the other party (i) becomes insolvent or
                bankrupt or admits its inability to pay its debts as they
                mature, (ii) makes an assignment for the benefit of its
                creditors, or (iii) ceases to function as a going concern or to
                conduct its operations in the normal course of business.

        11.2.   Either party may terminate this Agreement due to the other
                party's material breach if (i) the party alleging the breach
                provides written notice to the other party of the occurrence and
                nature of the breach, and (ii) the party receiving the notice
                fails to correct the breach within thirty (30) days of receipt
                of the notice.

        11.3.   After acceptance of the RON, pursuant to Section 7.1 then upon
                termination or expiration of this Agreement for any reason and
                for a period of eighteen (18) months thereafter, Motorola shall
                continue to supply RON to PowerDsine pursuant to the terms
                hereof, provided, however, that if such termination was due to a
                payment default by PowerDsine, Motorola, prior to shipping any
                such post-termination orders may request and obtain from
                PowerDsine adequate assurances of payment of any such orders.

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 13

<PAGE>

                Orders must be placed within the first 9 months after the
                termination, and delivery of all orders so placed shall be
                within 18 months after termination. Orders will be made in a
                minimum order quantity equal to 10,000 units and will be
                non-cancelable and non-returnable (except according to the
                provisions of 17.2)

        11.4.   For the puposes of this Agreement "Technical Infeasibility"
                shall mean a situation in which Motorola, after using
                commercially reasonable efforts, is unable to develop a
                manufacturable or qualifiable mass produced version of the RON
                after 5 mask sets and 12 months of effort from the time that the
                Engineering Samples were approved by PowerDsine pursuant to
                Section 6 hereof. . Motorola shall give PowerDsine prompt
                written notice of the occurrence of a Technical Infeasibility,
                and within 10 days of the date of said notice, Motorola and
                PowerDsine shall cooperate and work together in good faith for
                at least 30 days to develop a plan to have the specifications
                modified so that the RON is so manufacturable or qualifiable In
                the event that after working together for such 30 day period,
                PowerDsine and Motorola are unable to modify the specifications
                in order for Motorola to develop a manufacturable or qualifiable
                RON, then Motorola may terminate this Agreement ("Technical
                Infeasibility Termination") upon thirty (30) days written notice
                to PowerDsine. In the event of Technical Infeasibility
                Termination Motorola shall provide RON product to PowerDsine for
                a period of 12 months from the Technical Infeasibility
                Termination date at a price that will be negotiated by the
                parties in good faith.

        11.5.   Upon the expiration or termination of this Agreement for any
                reason, the parties will, upon request of the other party,
                return or submit evidence of destruction of all Confidential
                Information of the other party.

        11.6.   If PowerDsine terminates this Agreement under Sections 11.1 or
                11.2 before acceptance of the RON prototype, Motorola will
                return the entire NRE payment to PowerDsine. Otherwise, no
                termination of this Agreement obligates Motorola to refund NRE
                payments.

12.     INDEMNIFICATION

        PowerDsine agrees to defend, at its expense, any claim, suit, or
        proceeding asserted against Motorola based upon a claim that the
        PowerDsine IP infringes a valid U.S. patent, or copyright, or
        misappropriates a trade secret. PowerDsine will also pay costs and
        damages finally awarded in any such suit or proceeding. PowerDsine's
        obligations hereunder are subject to the conditions that PowerDsine

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 14

<PAGE>

        is: (1) promptly notified by Motorola in writing as soon as reasonably
        practicable after Motorola first becomes aware of the claim of
        infringement or misappropriation, but in no event later than fifteen
        (15) days of the date on which Motorola first received notice of the
        claim; and (2) at PowerDsine's request and expense, given sole control
        of the suit and all requested assistance for defense of same. PowerDsine
        shall not be liable for any settlement made without its written consent.
        This indemnity does not extend to any suit based upon any infringement
        or alleged infringement arising from products containing PowerDsine IP :
        (1) that are alterations of the RON not directed or approved by
        PowerDsine or the combination of the RON with products or elements not
        furnished by PowerDsine, without PowerDsine's direction or approval, if
        the alleged infringement would not have occurred but for such alteration
        or combination; (2) to the extent such suit is based on Motorola IP
        contained in such products, or to elements of the RON designed or
        manufactured in accordance with Motorola's designs, specifications or
        instructions if the alleged infringement would not have occurred but for
        such Motorola IP, designs, specifications or instructions; or (3) that
        are designed or manufactured in compliance with standards issued by any
        public or private standards body if the alleged infringement would not
        have occurred but for compliance with such standards The foregoing
        states PowerDsine's entire liability for intellectual property
        infringement.

13.     LIMITATION OF LIABILITY

        IN NO EVENT WILL EITHER PARTY BE LIABLE, WHETHER IN CONTRACT, TORT, OR
        OTHERWISE, FOR ANY INCIDENTAL, SPECIAL, INDIRECT, CONSEQUENTIAL OR
        PUNITIVE DAMAGES, TO THE FULL EXTENT THESE MAY BE DISCLAIMED BY LAW. THE
        FOREGOING LIMITATION DOES NOT LIMIT THE PARTIES' EXPRESS INDEMNITY
        OBLIGATIONS UNDER THIS AGREEMENT, OR LIMIT THE PARTIES' LIABILITY FOR
        BREACH OF CONFIDENTIALITY OBLIGATIONS EXPRESSLY SET FORTH IN THIS
        AGREEMENT.

14.     FORCE MAJEURE

        No party will be liable for any delay or non-performance of its
        obligations under this Agreement resulting from a "Force Majeure Event".
        "Force Majeure Event" means an event that is: (1) beyond the reasonable
        control of the party claiming a Force Majeure Event, (2) not reasonably
        foreseeable, (3) not due to the fault or negligence of the party
        claiming a Force Majeure Event, and (4) not capable of being overcome
        without unreasonable expense. The party claiming a Force Majeure Event
        will notify the other party immediately upon learning of the likelihood
        or existence of the Force Majeure Event. The party claiming a Force
        Majeure Event must exercise reasonable efforts to mitigate the effect of
        the Force Majeure Event. A party impacted by a Force Majeure Event will
        be

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 15

<PAGE>

        entitled to an equitable adjustment in the performance of its
        obligations that were excused by the Force Majeure Event. If the
        duration or impact of a Force Majeure Event becomes material, the
        parties can determine whether to terminate the Agreement.

15.     CONFIDENTIAL INFORMATION

        15.1    GENERAL. During the term of this Agreement and for a period of 3
                years from the expiration or termination of this Agreement, a
                receiving party will (i) not disclose Confidential Information
                to any third party; (ii) restrict disclosure of Confidential
                Information to only those employees, agents or consultants of
                the receiving party, or any Affiliate of the receiving party,
                who must be directly involved with the Confidential Information
                for the purposes of this Agreement and who are bound by
                confidentiality terms substantially similar to those in this
                Agreement; (iii) not reverse engineer, de-compile or disassemble
                any Confidential Information; (iv) use the same degree of care
                as for its own information of like importance, but at least use
                reasonable care, in safeguarding against disclosure of
                Confidential Information; and (v) promptly notify the disclosing
                party upon discovery of any unauthorized use or disclosure of
                the Confidential Information and take reasonable steps to regain
                possession of the Confidential Information and prevent further
                unauthorised actions or other breach of this Agreement.

        15.2    REQUIRED DISCLOSURE. If a party is required by law in any
                judicial or governmental proceeding or otherwise to disclose any
                Confidential Information belonging to the other party, the first
                party will give to the other party prompt written notice of the
                request so that the other party may seek a protective order or
                appropriate remedy. If, in the absence of a protective order,
                the first party determines, upon the advice of counsel, that it
                is required to disclose Confidential Information belonging to
                the other party, it may disclose the documentation only to the
                extent compelled to do so.

        15.3    OWNERSHIP AND RETURN. Confidential Information remains the
                property of the disclosing party and will not be copied without
                the express written permission of the disclosing party, except
                for copies that are absolutely necessary in order to perform its
                obligations under this Agreement. Upon expiration or termination
                of this Agreement, a receiving party will return all
                Confidential Information to the disclosing party along with all
                copies and portions thereof, or, if acceptable to the disclosing
                party, certify in writing that all Confidential Information has
                been destroyed. However, the receiving party may retain one
                archival copy of the Confidential Information, which it may use
                only in case of a dispute concerning this Agreement.

        15.4    Neither party is obligated to limit or restrict the assignment
                of employees or agents, or to pay any royalties or other
                consideration subject to the Confidentiality provisions of this
                Agreement.

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 16

<PAGE>

16      NOTICES

        All notices and other communications under this Agreement will be made
in writing, and will be effective when received at the following addresses:

Motorola:         Ciaran Connell and Luc Darmon
                  Motorola Semiconductors SAS
                  TSPG - APD
                  Le Mirail - BP 1029
                  31023 Toulouse cedex
                  FRANCE

                  cc: Stacy McCracken
                  Group Contracts Manager - TSPG
                  6501 William Cannon Drive West
                  Austin, TX 78735

PowerDsine:       Ilan Atias
                  Asaf Silberstein

                  1 Hanagar St.,
                  P.O. Box 7220
                  Neve Ne'eman Industrial Zone
                  Hod Hasharon 45421, Israel

                  With a copy to:
                  David Goren
                  PowerDsine, Inc.
                  1865 New Highway, Suite 2
                  Farmingdale, New York 11735

Either party may change its notice information upon notice to the other party.

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 17

<PAGE>

17.     GENERAL TERMS

        17.1.   EXPORT. If, at the time or times of Motorola's performance
                   hereunder, an export license is required for Motorola to
                   lawfully export materials necessary for the design activities
                   contemplated in this Agreement, then the issuance of the
                   appropriate licenses to Motorola or its subcontractor
                   constitutes a condition precedent to Motorola's obligations
                   under this Agreement. The parties will comply with all
                   applicable export laws, regulations and orders.

        17.2.   WARRANTY. RON warranty is outlined in Motorola's Standard Terms
                   and Conditions of Sale (Exhibit 8) in section 3 a.

        17.3.   SURVIVAL. Upon the expiration or termination of this Agreement
                   for any reason, the following Sections survive: 9,10, 11.3,
                   12,13,15,16,17

        17.4.   PUBLICITY. Neither party may issue any press release or make any
                   public disclosure regarding this Agreement or its contents
                   without the prior written consent of the other party, which
                   consent will not be unreasonably withheld or delayed.

        17.5.   RELATIONSHIP OF THE PARTIES. The parties are independent
                   contractors. Nothing in this Agreement will be construed to
                   create any partnership, joint venture, or similar
                   relationship. Neither party is authorized to bind the other
                   to any obligations with third parties.

        17.6.   SEVERABILITY. If any provision of this Agreement is held invalid
                   or unenforceable, the remaining provisions of this Agreement
                   will be unimpaired and the invalid or unenforceable provision
                   will be replaced with a provision that is valid and
                   enforceable and that comes closest to the parties' intention
                   underlying the invalid or unenforceable provision. However,
                   if the proposed modification or replacement of the invalid or
                   unenforceable provision is held to deprive a party of a
                   material benefit, the Agreement will terminate immediately.

        17.7.   AMENDMENTS AND WAIVERS. No amendment of this Agreement will be
                   valid unless stated in writing and signed by authorized
                   representatives of the parties. No waiver of any default,
                   misrepresentation or covenant will affect any prior or
                   subsequent default, misrepresentation, or covenant.

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 18

<PAGE>

        17.8.   NO THIRD PARTY BENEFICIARIES. This Agreement is for the
                   exclusive benefit of the parties and does not create any
                   rights enforceable by any third party.

        17.9.   SUCCESSION AND ASSIGNMENT. This Agreement binds and inures to
                   the benefit of the parties and their permitted successors and
                   assigns. Neither party may assign this Agreement in whole or
                   in part, or any of its rights, interests, duties or
                   obligations under this Agreement, without the prior written
                   approval of the other party which approval will not be
                   unreasonably withheld or delayed. Notwithstanding the
                   foregoing, upon no less than 45 days' advance written notice
                   to the other party each party shall have the right to assign
                   this Agreement without the other party's prior written
                   approval to any third party in connection with the transfer
                   of all or substantially all of its assets or the assets of
                   the business unit relating to this Agreement, or the sale,
                   exchange or transfer of the stock or shares of such
                   transferring party resulting in a change in its effective
                   control where such transferring party is not the surviving
                   entity, if (i) such assignee executes an undertaking to be
                   bound by all of the obligations of the assigning party under
                   this Agreement; and (ii) with respect to a proposed
                   assignment by PowerDsine, if such assignee or proposed
                   assignee is deemed, by Motorola, in its sole discretion to be
                   a competitor of Motorola, then Motorola, within 20 days of
                   receipt of notice from PowerDsine concerning the identity of
                   such acquiring party (which notice may be given by PowerDsine
                   at any time prior to the closing of the transaction but in
                   any event no later then 30days prior to the closing date of
                   the proposed transaction), at its sole discretion, subject to
                   the provisions of the last paragraph of this Section 17.9,
                   may terminate this Agreement upon giving written notice of
                   termination ( the "17.9 Termination Notice"), and the
                   termination will be effective upon PowerDsine's receipt of
                   the 17.9 Termination Notice or the date on which the first
                   qualified mass produced version of the RON has

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 19

<PAGE>

                   been received by PowerDsine, which ever is last to occur (the
                   "17.9 Termination Date"). For purposes of the foregoing (i)
                   "control" means the direct or indirect ability or power to
                   direct, or cause the direction of, the management and
                   policies of a party, whether through the ability to vote a
                   party's securities, by contract or otherwise. As of Effective
                   Date of this Agreement, Motorola considers the companies
                   listed on Exhibit 12 to be competitors. This list of
                   competitors is not intended to be inclusive of all companies
                   deemed to be competitors by Motorola, but is only intended to
                   provide PowerDsine with a list of the types of companies that
                   Motorola deems competitors as of the Effective Date.

                   During the period between the 17.9 Termination Notice and the
                   17.9 Termination Date PowerDsine will isolate the employees
                   of PowerDsine that have access to Motorola Confidential
                   Information.. At no time should Confidential Information
                   subject to this agreement, be made accessible to an assignee
                   or a proposed assignee. Upon termination of this Agreement by
                   Motorola pursuant to this Section 17.9, Motorola shall
                   continue to sell RON product to PowerDsine for a period of
                   eighteen (18) months from the 17.9 Termination Date and the
                   provisions of Section 11.3 shall apply with respect to such
                   post-termination sales.

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 20

<PAGE>

        17.10.  COUNTERPARTS. This Agreement may be executed in one or more
                   original counterparts, all of which together will constitute
                   one agreement, and facsimile signatures will have the same
                   effect as original signatures.

        17.11.  HEADINGS AND CAPTIONS. Section headings and captions contained
                   in this Agreement are for convenience only and will not
                   affect the meaning or interpretation of this Agreement.

        17.12.  CONSTRUCTION. Both parties have had adequate opportunity to
                   obtain legal representation and this Agreement reflects arms'
                   length negotiations. Neither party will be deemed the drafter
                   and no ambiguity in the Agreement will be construed against
                   either party.

        17.13.  DISPUTE RESOLUTION. The parties will attempt to settle all
                   disputes arising under or in connection with this Agreement
                   through consultation and negotiation in good faith and a
                   spirit of mutual cooperation. If those attempts fail the
                   parties may also agree to consider (but will not be obligated
                   to engage in) forms of binding or non-binding alternative
                   dispute resolution ("ADR") such as neutral fact-finding,
                   mediation, arbitration or a minitrial. Any dispute that is
                   not resolved by the parties through negotiation or ADR within
                   4 months of the date of the initial demand for resolution by
                   either party may then be submitted to the courts for
                   resolution. Exclusive jurisdiction and Venue for any
                   litigation will be in New York County, New York. The use of
                   ADR procedures will not be construed under the doctrines of
                   laches, waiver or estoppel to affect adversely the rights of
                   either party. Nothing in this Section will prevent either
                   party from resorting to judicial proceedings if: (i) good
                   faith efforts to resolve the dispute under these procedures
                   have been unsuccessful; (ii) interim relief from a court is
                   necessary to prevent material and irreparable injury to one
                   party or to third parties; (iii) necessary to prevent or stop
                   a breach of any confidentiality provision or intellectual
                   property rights set forth in this Agreement; or (iv)
                   necessary to avoid the expiration of any applicable statute
                   of limitations.

        17.14.  GOVERNING LAW. This Agreement will be governed by, construed,
                   and enforced in accordance with the laws

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 21

<PAGE>

                   of the State of New York as if entered into in that State by
                   citizens of that State to be performed wholly within that
                   State, and without regard to its conflict of laws provision.
                   The United Nations Convention on Contracts for the
                   International Sale of Goods will not apply to this Agreement.

        17.15.  AUTHORITY. Each party represents and warrants that (i) it has
                   the authority to enter into this Agreement without any
                   additional approvals or consents, (ii) the person executing
                   this Agreement on its behalf is duly authorized, and (iii) to
                   the best of its knowledge, this Agreement is fully
                   enforceable in accordance with its terms.

        17.16.  ENTIRE AGREEMENT. This Agreement, including its attachments,
                   constitutes the entire agreement between the parties
                   regarding its subject matter, and supersedes all prior
                   communications, negotiations, understandings, agreements or
                   representations, either written or oral, between the parties
                   regarding its subject matter.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed in
their respective names by their duly authorized representatives.

MOTOROLA, INC.

By (Signature):
               ----------------------------------

Printed Name:
               ----------------------------------

Title:
               ----------------------------------

Date Signed:
               ----------------------------------

POWERDSINE, INC.

By (Signature):
               ----------------------------------

Printed Name:
               ----------------------------------

Title:
               ----------------------------------

Date Signed:
               ----------------------------------

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 22

<PAGE>

RON IC PRODUCTS

                                    EXHIBIT 1

                                UNIQUE CONDITIONS

POWERDSINE PART NO:  PD-64012                DATE:
                                                  ------------------------------

The POWERDSINE RON product will have a Part Number:

MANUFACTURING ASSUMPTIONS

        1.      Motorola reserves the right to select both internal and external
                factories to perform all or part of the manufacture of RON.
                Every reasonable effort will be made to accommodate customer's
                Qualification requirements for bringing on additional capacity
                or factories.

        2.      Customer is required to qualify RONs from new factories within
                six months of receiving Motorola qualified samples from the new
                facility.

DESIGN DELIVERABLES TO ACCOMPANY DIGITAL DESIGN BLOCK

Design Deliveries will be as per PowerDsine and Motorola technical kick off
meeting in Toulouse, on Jan. 7, 2003. Design documentation will be as per
PowerDsine IC specification - as discussed and summarized during the technical
kick off meeting that tool place in Toulouse, on Jan 7, 2003.

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 23

<PAGE>

                                    EXHIBIT 2

                                SCHEDULE OF WORK

                   CURRENT DATA TAKEN FROM MOU AND RFQ REV 2.0

POWERDSINE RON NO:        DATE:
                                 --------------------------------------------

The deliverables and their time scales will be monitored according to the
Program Management responsibilities outlined in the Agreement.

TECHNOLOGY DISCLOSURE:

     FROM POWERDSINE TO MOTOROLA:
     ----------------------------
     .
     ** REDACTED TABLE

     FROM MOTOROLA TO POWERDSINE:

** REDACTED TABLE

   KEY RON DEVELOPMENT MILESTONES:

------------------------------------------------------------------------------
                         SUBJECT                                 DATE
------------------------------------------------------------------------------

** REDACTED TABLE

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 24

<PAGE>

                                    EXHIBIT 3

                               RON SPECIFICATIONS

FILES:

** REDACTED TABLE

MOTOROLA CUSTOM RON

for

POWERDSINE __________PROGRAM

FUNCTIONAL DESCRIPTION

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 25

<PAGE>

             RON DESIGN SPECIFICATIONS AND PERFORMANCE REQUIREMENTS

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 26

<PAGE>

                                    EXHIBIT 4

                          RON IC DESIGN CHANGE REQUEST

DATE OF REQUEST:                         POWERDSINE:
                ------------------------            ----------------------------

RON IC NO.                               CHANGE NO.
          ------------------------------           -----------------------------

DESCRIPTION OF CHANGE:

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

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

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

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

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

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

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

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

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

ATTACHMENTS SUPPORTING THE REQUESTED CHANGE:

Specification No.                        Rev. No.
                 -----------------------         -------------------------------

Schematics No.                           Rev No.
              --------------------------        --------------------------------

Test Vector Set                          Rev. No.
               -------------------------         -------------------------------

Other
       ---------------------------------

Submitted By:                            Date:
             ---------------------------      ----------------------------------

DESIGN IMPACT:

Impact on design schedule or a specific milestone

Impact on the product cost

Number of mask layers requiring change:
                                       -----------------------------------------
Number of man-weeks to implement change:
                                       -----------------------------------------

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 27

<PAGE>

Total cost to implement change:
                               -------------------------------------------------
Motorola:                                PowerDsine:
         -------------------------------            ----------------------------

Does change require assignment of new part number:  YES/NO

Package type will change from                          to
                             -------------------------     ---------------------

COMPLETION DATE CHANGE:  ORIGINAL                     REVISED
                                 ---------------------       -------------------

APPROVED BY:

---------------------------------------- ---------------------------------------
          Product Marketing/Date               Design Center/Manager Date

POWERDSINE ACCEPTANCE:

By:                                      Date:
   -------------------------------------      ----------------------------------

Name:
     -----------------------------------
              (Printed/Typed)

Title:
      ----------------------------------

MOTOROLA ACCEPTANCE:

By:                                      Date:
   -------------------------------------      ----------------------------------

Name:
     -----------------------------------
              (Printed/Typed)

Title:
      ----------------------------------

Upon POWERDSINE acceptance and signature, forward copies of the Design Change
Request to:

         Motorola

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 28

<PAGE>

                                    EXHIBIT 5

                              FINAL DESIGN RELEASE

RON IC PART NO:                                   DATE:
               ----------------------------------      -------------------------

       Prototype Part Number
                                                       -------------------------
       Device Type/Technology:
                                                       -------------------------
       Prototype Package:
                                                       -------------------------
       Workstation Type/Software Version:
                                                       -------------------------
       Design Verification Module Revision #:
                                                       -------------------------

In signing this form, POWERDSINE acknowledges that all necessary tests have been
successfully completed. Furthermore, design release for prototypes is
authorized.

POWERDSINE:
           ---------------------------------------------------------------------
APPROVED BY:                             DATE:
            ---------------------------       ----------------------------------
              (Authorized Signature)

NAME:
     ---------------------------------------------------------------------------
TITLE:
      --------------------------------------------------------------------------
APPROVED BY:                             DATE:
            ---------------------------       ----------------------------------
              (Authorized Signature)

NAME:
     ---------------------------------------------------------------------------
TITLE:
      --------------------------------------------------------------------------

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 29

<PAGE>

                                    EXHIBIT 6

                       RON PROTOTYPE APPROVAL NOTIFICATION

DATE:
     -----------------------------------

     TO: Motorola, Inc.                  FROM:
                                              ----------------------------------

SELECT ONE OPTION

1.      This notification reflects that PowerDsine has approved the RON IC
        prototypes provided by Motorola to PowerDsine as meeting the
        specification provided in the Agreement between the parties and related
        functionality requirements and do hereby approve release of this device
        to Motorola's production process.

                                       or

1.      This notification reflects that PowerDsine has rejected the prototypes
        provided by Motorola to PowerDsine as not meeting the specifications
        provided in the agreement between the parties and related functionality
        requirements and do not approve release of this device to Motorola's
        production process

----------------------------------------- --------------------------------------
        POWERDSINE Representative (Print)
        (Signature)

----------------------------------------- --------------------------------------
        Representative's Title                        Phone Number

NOTE:   Upon completion, forward this form to Motorola

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 30

<PAGE>

                                    EXHIBIT 7

RON PRICING SCHEDULE

                RON IC PRICING (US $)

    **  REDCTED TABLE

        1.  All mentioned prices are in US Dollars ($)

        2.  Pricing assumes flexibility in use of foundries, subcontractors and
            new Motorola manufacturing sites

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 31

<PAGE>

                                    EXHIBIT 8
                MOTOROLA'S STANDARD TERMS AND CONDITIONS OF SALE
                                 (COUNTER-OFFER)

        1.      PRODUCTS AND SALE TERMS. Buyer agrees to purchase and Motorola,
Inc., through its Semiconductor Products Sector ("Motorola") agrees to sell
products, which may include hardware, software, or a combination of hardware and
software (collectively "Products") under the terms of this document. Any terms
or conditions asserted by Buyer as applicable to this transaction, in a purchase
order, on a web site, or otherwise, are inapplicable.

        2.      DELIVERY AND PAYMENT; TITLE & RISK OF LOSS; TAXES. Delivery will
be FOB Motorola's point of shipment, with title and risk of loss passing to
Buyer at that point. Payment will be due thirty (30) days from the date of
invoice. Motorola will use commercially reasonable efforts to deliver Products
pursuant to a mutually agreeable schedule; however, delivery dates are
approximate and Motorola is not liable for delivery delays for any reason.
Notwithstanding anything in this document to the contrary, in the event of any
Product shortages Motorola reserves the right to adopt an equitable plan of
allocation and to adjust delivery schedules accordingly. Products must be
scheduled for delivery within six (6) months of receipt of Buyer's P.O. Buyer
agrees to pay all applicable taxes.

        3.      WARRANTY. Except as provided in subsection (c) below, Motorola
warrants that its Products sold hereunder will, at the time of shipment, be free
from defects in material and workmanship and will conform to Motorola's approved
specifications. If Products are not as warranted, Motorola shall, at its option,
and as Buyer's exclusive remedy, either refund the purchase price, repair, or
replace with the same or equivalent Products that meet this warranty. Buyer must
obtain a Return Material Authorization ("RMA") number and return nonconforming
Products FOB Motorola's designated facility. If Products are nonconforming,
Motorola shall reimburse Buyer's reasonable transportation charges for return of
Products. This warranty does not apply to Products that have been subjected to
improper testing, assembly, mishandling or misuse, whether by Buyer or others.
This warranty shall not be expanded, and no obligation or liability will arise,
due to technical advice or assistance, qualification or testing data,
computerized data, facilities or service Motorola may provide in connection with
Buyer's purchase.

        THIS WARRANTY EXTENDS TO BUYER ONLY AND MAY BE INVOKED ONLY BY BUYER FOR
ITS CUSTOMERS. MOTOROLA WILL NOT ACCEPT WARRANTY RETURNS FROM BUYER'S CUSTOMERS.
THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, INCLUDING IMPLIED WARRANTIES
OF MERCHANTABILITY, SATISFACTORY QUALITY OR FITNESS, AND THE WARRANTY AGAINST
INFRINGEMENT SPECIFIED IN THE UNIFORM COMMERCIAL CODE. ALL OTHER WARRANTIES ARE
EXPRESSLY DISCLAIMED TO THE FULL EXTENT SUCH MAY BE DISCLAIMED BY LAW.

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 32

<PAGE>

        (a)     TIME PERIOD. Except as provided in subsection (b) below,
Products are warranted for the longer of a period of three (3) years from date
of shipment, or for the same time period as specified in Buyer's standard
warranty, provided that Buyer warrants its product in writing and extends such
warranty to its customers at no additional charge.

        (b)     TIME PERIOD FOR DEVICE CHIPS AND WAFERS. Device chips and wafers
have received electrical probe/test and visual inspection and are warranted for
a period of ninety (90) days from date of shipment by Motorola. This warranty
shall not apply to device chips or wafers improperly removed from their original
shipping container, not stored per Motorola's recommended procedures, or
subjected to testing or operational procedures not accepted by Motorola in
writing.

        (c)     PRODUCTS PROVIDED "AS IS". Development products, including
without limitation prototypes and pre-production samples (whether or not paid
for by Buyer) are provided "AS IS".

        4.      INTELLECTUAL PROPERTY INDEMNIFICATION.

        (a)     Motorola agrees to defend, at its expense, any suits asserted
against Buyer based upon a claim that any Product purchased hereunder directly
infringes a valid U.S. patent or copyright, or misappropriates a trade secret,
and to pay costs and damages finally awarded based upon such claim in any such
suit, provided that Motorola is: (1) promptly notified by Buyer in writing as
soon as reasonably practicable after Buyer first becomes aware of the claim of
infringement or misappropriation, but in no event later than fifteen (15) days
of the date on which Buyer first received notice of the claim; and (2) at
Motorola's request and expense, given sole control of the suit and all requested
assistance for defense of same. Motorola shall not be liable for any settlement
made without its written consent. If the use or sale of any Products sold under
this document is enjoined as a result of such suit, Motorola at its option and
at no expense to Buyer, will: (1) obtain for Buyer the right to use and sell
such Products; (2) substitute an equivalent Product reasonably acceptable to
Buyer and extend this indemnity thereto; or (3) accept the return of the
Products and refund the purchase price less reasonable charge for prior use. If
an infringement or misappropriation claim related to the Products is alleged
prior to completion of delivery, Motorola shall have the right to decline to
make further shipments notwithstanding any other provision of this document.
This indemnity does not extend to any suit based upon any infringement or
alleged infringement arising from Products furnished by Motorola that are: (1)
altered in any way by Buyer or any third party if the alleged infringement would
not have occurred but for such alteration; (2) combined with any other products
or elements not furnished by Motorola if the alleged infringement would not have
occurred but for such combination; (3) designed or manufactured in accordance
with Buyer's designs, specifications or instructions if the alleged infringement
would not have occurred but for such designs, specifications or instructions; or
(4) designed or manufactured in compliance with standards issued by any public
or private standards body if the alleged infringement would not have occurred
but for compliance with such standards. In no event shall Motorola indemnify
Buyer, or be

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 33

<PAGE>

liable in any way, for royalties payable based on a per use basis, or any
royalty basis other than a reasonable royalty based upon revenue derived by
Motorola from Buyer from sales or license of the infringing Products. The
foregoing states Motorola's entire liability for intellectual property
infringement.

        Buyer agrees to defend any claim, suit, or proceeding asserted against
Motorola based upon a claim that any Product sold hereunder made to Buyer's
designs, specifications or instructions directly infringes a patent, or
copyright, or misappropriates a trade secret, and to pay costs and damages
finally awarded therefrom.

        (b)     The sale of Products does not convey any license, other than
those expressly granted herein, by implication, estoppel, or otherwise. THE
INDEMNITY PROVIDED BY MOTOROLA IN THIS SECTION IS THE SOLE, EXCLUSIVE AND ENTIRE
LIABILITY OF MOTOROLA AND THE REMEDIES PROVIDED IN THIS SECTION SHALL BE BUYER'S
EXCLUSIVE REMEDIES AGAINST MOTOROLA FOR PATENT OR COPYRIGHT INFRINGEMENT OR
TRADE SECRET MISAPPROPRIATION.

        (c)     Buyer, without the express prior written consent of Motorola,
has no right to use Motorola's trademarks, trade names, corporate slogans,
corporate logos, or corporate designations in the sale, lease or advertising of
any products, or any product container, component part, business forms, sales,
advertising or promotional materials, or other business supplies or materials,
whether in writing, orally or otherwise.

        5.      CONFIDENTIAL INFORMATION. All materials and Products furnished
by Motorola or Buyer and identified as containing confidential information must
be held in confidence by the recipient using at least the degree of care the
recipient uses for its own confidential information, but no less than reasonable
care. Recipient may not disclose such materials or confidential information
except to employees or agents who require use of the materials in the
performance of their duties. Confidential information does not include
information in the public domain, information known to the recipient prior to
any disclosure hereunder, information developed independently of any disclosure
hereunder, information later communicated to the recipient by another without
obligation of confidence, or information communicated by the owner to a third
party free of any obligation of confidence. The recipient shall hold all
confidential information and materials containing confidential information in
confidence for five (5) years after receipt. If the terms of this section
conflict with any confidentiality or nondisclosure terms agreed to by the
parties in a separate written agreement governing this transaction, the terms of
such separate agreement shall control.

        6.      LICENSED PROGRAMS. In the absence of a separate software
agreement between Buyer and Motorola, the following terms and conditions apply
to any software or firmware (software embedded in Products) in all forms,
including any documentation ("Licensed Programs") provided by Motorola:

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 34

<PAGE>

        (a)     Title to Licensed Programs delivered hereunder remains vested in
Motorola or Motorola's licensor and cannot be assigned or transferred. Buyer
agrees not to reverse engineer, disassemble, decompile, or modify any Licensed
Program or any portion thereof, provided that if Buyer violates this
restriction, Buyer hereby irrevocably assigns to Motorola all right, title and
interest to any modifications to a Licensed Program.

        (b)     At Motorola's discretion, Motorola may provide a single copy of
the Licensed Program to Buyer (a "Master Copy") or may provide individual copies
of the Licensed Program to Buyer in a number equal to the number of copies
purchased by Buyer.

(1)     Use and Reproduction Rights. If Motorola provides a Master Copy to
        Buyer, then Motorola grants to Buyer a non-exclusive license to
        reproduce up to the number of copies purchased by Buyer and to use such
        copies of the Licensed Program. If Motorola provides individual copies
        of the Licensed Program to Buyer, then Motorola grants to Buyer a
        non-exclusive license to use such individual copies of the Licensed
        Program and to make one archival copy of such Licensed Program.

(2)     Distribution Rights. Motorola grants to Buyer a non-exclusive license to
        distribute the number of copies of the Licensed Programs purchased,
        solely in conjunction with Buyer's subsequent sale of Buyer's products,
        and for execution on Motorola processors. Unless specifically authorized
        by Motorola in writing, the number of copies distributed must correspond
        on a one to one basis with the number of Motorola processors in Buyer's
        products. Buyer may grant end user licenses to end customers of Buyer's
        products as necessary for end customers to use such products.

(3)     Legends. Buyer agrees to reproduce all of Motorola's copyright notices
        and other proprietary legends on copies of Licensed Programs.

        (c)     Use of Licensed Programs is provided with RESTRICTED RIGHTS.
Use, duplication or disclosure by the U.S. Government is subject to restrictions
as set forth in subparagraph (c)(1)(ii) of The Rights in Technical Data and
Computer Software clause at DFARS 252.227-7013 or subparagraphs (c)(l) and (2)
of the Commercial Computer Software--Restricted Rights at 48 CFR 52.227-19, as
applicable. Manufacturer is Motorola, Inc., 6501 William Cannon Drive West,
Austin, TX, 78735.

        (d)     If Buyer is in default of any of the terms and conditions of
this document, the rights granted herein by Motorola may be terminated on thirty
(30) days prior written notice. Within thirty (30) days after termination, Buyer
will furnish to Motorola a certificate certifying that the original and all
copies of the Licensed Programs and derivative versions thereof, in whole or in
part and in any form, have been destroyed.

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 35

<PAGE>

        7.      ORDER CANCELLATION; RESCHEDULED SHIPMENT

        (a)     Buyer may cancel orders for Products from Motorola's standard
products catalogue ("Standard Product") only if Motorola receives a written
cancellation notice no less than thirty (30) days prior to Motorola's planned
dock date.

        (b)     Buyer may cancel orders for non-standard, custom, semi-custom,
special product, or product unique to a customer, as such categories are defined
by Motorola (collectively "Special Product"), only if Motorola receives a
written cancellation notice no less than ninety (90) days prior to Motorola's
planned dock date, except that Buyer shall remain liable to pay for all
non-transferable and non-cancelable raw materials not retained by Motorola (as
determined by Motorola at Motorola's sole discretion) and work in process as of
the date that Motorola receives the notice. Buyer shall be entitled to such raw
materials following payment therefor, including payment of all applicable
transportation expenses. Buyer shall not be entitled to any work in process.

        (c)     Cancellation of orders for Standard Product or Special Product
on less than the required notice period shall be at Motorola's sole discretion.

        (d)     Buyer may reschedule the shipment date for Standard Product or
Special Product only if written notice is provided to Motorola no less than
thirty (30) days prior to Motorola's existing planned dock date. The rescheduled
shipment date for Special Product may not be more than ninety (90) days later
than the original scheduled planned dock date.

        (e)     Motorola reserves the right to cancel all or any part of an
order, without any liability to Buyer, if inaccurate information is supplied by
Buyer on Motorola's required OEM Certification Form, or if Buyer is in default
under any of the terms and conditions of this document.

        8.      SPECIAL PRODUCT. Shipment of Special Product within 5% of the
quantity ordered constitutes full shipment.

        9.      GOVERNMENT CONTRACT COMPLIANCE. If Buyer sells Products to the
U.S. Government, Motorola makes no representations, certifications, or
warranties whatsoever about compliance with acquisition statutes or regulations,
except Motorola will comply with the following clauses applicable to
subcontracts for commercial items: FAR 52.222-26, Equal Opportunity; FAR
52.222-35, Affirmative Action for Special Disabled and Vietnam Era Veterans; and
FAR 52.222-36, Affirmative Action for Handicapped Workers. Notwithstanding, if
Buyer sells Products to any other public entity, state, or local or
international, or to a prime contractor or subcontractor of such entities, Buyer
remains solely and exclusively liable for compliance with all acquisition
statutes and regulations. Except as expressly provided in this section, Motorola
makes no representations, certifications, or warranties whatsoever about
compliance with acquisition statutes and regulations, including, without
limitation, those that may relate to pricing, quality, origin or content.

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 36

<PAGE>

        10.     EXPORT CONDITIONS. If, at the time or times of Motorola's
performance hereunder, an export license is required for Motorola to lawfully
export Products, materials or technical data, then the issuance of the
appropriate licenses to Motorola or its subcontractor shall constitute a
condition precedent to Motorola's obligations hereunder. Buyer agrees to comply
with all applicable export laws, regulations and orders. Specifically, but
without limitation, Buyer agrees that it will not resell, re-export or ship,
directly or indirectly, any Products or technical data in any form without
obtaining appropriate export or re-export licenses. Buyer acknowledges that the
applicable export laws, regulations and orders may differ from item to item
and/or from time to time.

        11.     ANTI-PERSONNEL LANDMINES. Products are not intended or
authorized for use in anti-personnel landmines, and Buyer agrees they shall not
be used for such purpose. Upon request from Motorola, Buyer shall furnish a
written certification that neither Buyer nor Buyer's customers use or permit the
use of Products in anti-personnel landmines.

        12.     RESALE PROHIBITED. Buyer shall not resell Products, through
brokers, exporters, or otherwise, except as integrated into a product sold by
Buyer that contains substantial value added circuitry or software. If Buyer
breaches the terms of this section, in addition to Motorola's cancellation
rights, Buyer agrees to fully indemnify Motorola, its officers, employees and
distributors, from any and all liability related to such resale, including
attorneys' fees and costs.

        13.     DISCLAIMER FOR CRITICAL APPLICATIONS. Products are not intended
or authorized for use in products surgically implanted into the body, for life
support products or for other products for which a Product failure could cause
personal injury or death. If Buyer or Buyer's customers use or permit the use of
Products for such unintended or unauthorized uses, Buyer agrees to fully
indemnify Motorola, its officers, employees and distributors, from all liability
related to such use, including attorneys' fees and costs.

        14.     LIMITATION OF LIABILITY. EXCEPT FOR PERSONAL INJURY, AND EXCEPT
FOR THE LIMITED LIABILITIES OTHERWISE PROVIDED IN SECTIONS 3 AND 4, MOTOROLA'S
TOTAL LIABILITY, WHETHER FOR BREACH OF CONTRACT, WARRANTY, NEGLIGENCE, STRICT
LIABILITY IN TORT OR OTHERWISE, IS LIMITED TO THE PRICE OF THE PARTICULAR
PRODUCTS SOLD HEREUNDER WITH RESPECT TO WHICH LOSSES OR DAMAGES ARE CLAIMED. IN
NO EVENT SHALL MOTOROLA BE LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES TO THE FULL EXTENT SUCH MAY BE DISCLAIMED BY LAW.

        16.     GENERAL. (a) ENTIRE AGREEMENT; AMENDMENT. This document
constitutes the entire and final agreement and supersedes all other
communications. No modifications shall be binding unless made in a written
amendment signed by both parties. (b) SEVERABILITY. If any provision is held
invalid, all other provisions

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 37

<PAGE>

shall remain valid. (c) NO ASSIGNMENT. Neither party may assign its rights and
obligations without the prior written consent of the other. (d) EXCUSABLE DELAY.
Motorola shall not be liable for any delay or failure to perform due to any
cause beyond its control. (e) DISPUTE RESOLUTION. Motorola and Buyer will
attempt to settle all claims (other than claims relating to intellectual
property issues) through negotiation or non-binding mediation prior to
commencement of court proceedings. Any dispute that is not resolved within two
(2) months of the date of the initial demand may then be submitted to a court of
competent jurisdiction. (f) GOVERNING LAW. This document will be enforced and
construed in accordance with the laws of the State of Arizona.

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 38

<PAGE>

                                    EXHIBIT 9
                                   MOTOROLA IP

This exhibit includes the initial list of Motorola intellectual property to be
provided under this Agreement. It includes but is not limited to the items set
forth in Appendix 1 of the quote dated Dec 11th, 2002.

MOTOROLA IP

    1.  MOTOROLA DESIGN FLOW **

    2.  ARCHITECTURE **

    3.  DIGITAL **

    4.  ANALOG **

    5.  TESTABILITY / VALIDATION **

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 39

<PAGE>

                                   EXHIBIT 10
                                  POWERDSINE IP

**

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 40

<PAGE>

                                   Exhibit 11
                        Motorola Design Flow Deliverables

                                ** Redacted Chart

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 41

<PAGE>

                                   EXHIBIT 12
                       SAMPLE LIST OF MOTOROLA COMPETITORS

                                ** Redacted List

** Represents material which has been redacted and separately filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.                             Page 42EXHIBIT 10.3

                          COMMUNICATIONS BUSINESS UNIT

                           DEVELOPMENT AND PRODUCTION
                                    AGREEMENT
                                 POWERDSINE LTD.

<PAGE>

Development and Production Agreement: PowerDsine/ Austria Mikro Systeme

--------------------------------------------------------------------------------
Development and Production Agreement concluded by and between

POWERDSINE LTD.
1 HANAGAR ST., P.O. BOX 7220
45421 HOD HASHARON
ISRAEL

hereinafter "PowerDsine"

and

AUSTRIA MIKRO SYSTEME INTERNATIONAL AG
SCHLOSS PREMSTATTEN
A 8141 UNTERPREMSTATTEN
AUSTRIA

hereinafter "Austria Mikro Systeme"

(In the present  AGREEMENT,  PowerDsine  and Austria Mikro Systeme shall also be
referred to jointly as "PARTIES" or individually as "PARTY" respectively)

WHEREAS,  Austria Mikro Systeme is engaged in the  development and production of
integrated MOS circuits; and

WHEREAS,  PowerDsine  requires a design  and/or  manufacturing  of a  particular
semiconductor  product,  as described  in greater  detail in Section 3 herein to
this AGREEMENT; and

WHEREAS, Austria Mikro Systeme has the expertise in the design and manufacturing
of such  semiconductor  products,  including but not limited to analog circuits,
Austria Mikro Systeme has established  processes and practices for manufacturing
such activities and has the ability to perform the obligations described in this
AGREEMENT in accordance with their terms; and

WHEREAS, the Parties desire to develop and produce integrated MOS circuits (with
the Austria Mikro Systeme project name "Placido 4906-001" and by PowerDsine with
the project name "IDO" as more fully described herein.

NOW,  THEREFORE,  in  consideration  of their mutual  promises and  undertakings
contained herein, the parties agree as follows:

WITNESSETH

--------------------------------------------------------------------------------
                                                                    Page 2 of 27
<PAGE>

Development and Production Agreement: PowerDsine/ Austria Mikro Systeme

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

1.       DEFINITIONS...........................................................4
2.       DEVELOPMENT TASKS.....................................................5
         2.1      DUTIES OF AUSTRIA MIKRO SYSTEME..............................5
         2.2      DUTIES OF POWERDSINE.........................................6
3.       SPECIFICATION.........................................................7
4.       CIRCUIT ATTRIBUTES....................................................7
5.       DEVELOPMENT...........................................................8
         5.1      DEVELOPMENT STAGES...........................................8
         5.2      DEVELOPMENT COST.............................................8
         5.3      CO-OPERATION DURING THE DEVELOPMENT..........................9
         5.4      ALTERATIONS OF THE SPECIFICATION OR CIRCUIT ATTRIBUTES.......9
         5.5      CONFIRMATION OF THE SIMULATION...............................9
         5.6      APPROVAL OF THE ENGINEERING SAMPLES.........................10
         5.7      REVISION OF THE CIRCUIT.....................................10
         5.8      REDESIGN AT POWERDSINE'S REQUEST............................10
         5.9      REDESIGN AT THE REQUEST OF BOTH PARTIES.....................11
         5.10     PROBABILITY OF A REDESIGN...................................11
         5.11     DELIVERY OF PROTOTYPES......................................11
         5.12     APPROVAL OF THE PROTOTYPES..................................11
6.       QUALITY OF THE MASS PRODUCTION CIRCUITS..............................12
         6.1      QUALITY ASSURANCE...........................................12
         6.2      AOQ (AVERAGE OUTGOING QUALITY)..............................12
7.       QUANTITIES AND CONDITIONS............................................13
         7.1      PURCHASING VOLUME AND TERM..................................13
         7.2      ORDERS......................................................13
         7.3      START OF DELIVERY...........................................14
         7.4      VARIATIONS IN QUANTITIES....................................14
8.       UNIT PRICES..........................................................14
         8.1      PRICES FOR ADDITIONAL PROTOTYPES............................14
         8.2      CIRCUIT PRICES..............................................14
9.       TERMS OF PAYMENT AND DELIVERY........................................15
10.      CO-OPERATION DURING THE TERM OF PRODUCTION...........................15
10A.     SHIPMENTS, SCHEDULE CHANGE...........................................15
10B.     PRODUCT ACCEPTANCE AND WARRANTS......................................16
10C.     TERM AND TERMINATION.................................................16
11.      FORCE MAJEURE........................................................18
12.      NONDISCLOSURE........................................................18
13.      LIABILITY LIMITATION.................................................18
14.      JURISDICTION AND APPLICABLE LAW......................................19
15.      SEVERABILITY.........................................................19
16.      MODIFICATION OF AGREEMENT............................................19
17.      LANGUAGE OF AGREEMENT................................................20
18.      AUSTRIA MIKRO SYSTEME REPRESENTATION.................................20
19.      MISCELLANEOUS........................................................20
20.      ENCLOSURES TO THIS AGREEMENT.........................................22

--------------------------------------------------------------------------------
                                                                    Page 3 of 27
<PAGE>

Development and Production Agreement: PowerDsine/ Austria Mikro Systeme

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

1.        DEFINITIONS

          "SPECIFICATION"

          shall mean the behaviour, function and environmental conditions of the
          Mass Production  Circuits,  Engineering Samples and Prototypes.  It is
          the working basis for the  development  and describes the objective of
          the development task.

          "ENGINEERING SAMPLES"

          shall  mean  samples  that  meet all  functional  requirements  of the
          Specification;  they  may not be used  for  the  Qualification  of the
          integrated  circuit as the production of such  Engineering  Samples is
          not realised under mass production conditions.

          "QUALIFICATION"

          shall mean the testing  procedure  to verify  whether  the  integrated
          circuit  meets  all  functional   requirements  provided  for  in  the
          Specification.

          "INTELLECTUAL PROPERTY RIGHTS"

          shall  mean,  all  rights  arising  from  patents,  copyrights,  trade
          secrets,  Confidential  Information (as defined in the confidentiality
          agreement  between the Parties and attached  hereto as Annex 2), trade
          marks, service marks, trade names, mask works,  applications and other
          proprietary  rights in any  jurisdiction,  and to (i) all  inventions,
          discoveries, works of authorship know-how, technical information, work
          product and/or other information related to the Mass Produced Circuits
          and (ii)  any  improvements,  enhancements  or  modifications  related
          thereto and developed during the term of this Agreement.

          "PROTOTYPES"

          shall  mean  integrated  circuits  meeting  all  requirements  of  the
          Specifications.  The  integrated  circuits shall be tested with a full
          production  test  program  and  may be used  for a full  qualification
          program.

          "MASS PRODUCTION CIRCUITS" OR "PRODUCTS"

          shall mean mass produced integrated  circuits.  Following the approval
          by PowerDsine of the Prototypes,  PowerDsine shall,  during the agreed
          Purchasing  Period,  acquire the Mass  Production  Circuits at a fixed
          price and at lead-time of eighteen (18) weeks ("LEADTIME").

          "PURCHASING PERIOD"

          shall mean the fifteen (15) month period  beginning after the approval
          of the Prototype by PowerDsine.

          "PURCHASE VOLUME"

          PowerDsine commits to purchase a minimum quantity of CIRCUITS within a
          defined purchasing period.

          Further  specific terms of this AGREEMENT  shall be defined when first
          used herein; such terms shall be printed in CAPITALS.

--------------------------------------------------------------------------------
                                                                    Page 4 of 27

** Represents  material  which has been redacted and  separately  filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.

<PAGE>

Development and Production Agreement: PowerDsine/ Austria Mikro Systeme

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

2.        DEVELOPMENT TASKS

2.1       DUTIES OF AUSTRIA MIKRO SYSTEME

          2.1.1     Austria Mikro Systeme shall perform the work detailed below,
                    in accordance with the terms of this AGREEMENT (the "WORK").

          2.1.2     Austria  Mikro  Systeme  shall.  provide  the  services  and
                    deliverables and their . schedule is as specified in Exhibit
                    2.2.

                    2.1.2.1   Generation  of the  Specification,  which shall be
                              comprised of the following:

                              --   Definition of inputs and outputs

                              --   Block   diagram  with   detailed   functional
                                   description

                              --   Definition of the electrical parameters

                              --   Definition of the environmental conditions

                              --   Definition of the absolute maximum ratings;

                    2.1.2.2   Provision of AHDL  description  of ADC (as defined
                              in the  Specifications),  DAC's  and  other  mixed
                              signal components.

                    2.1.2.3   Circuit design with CAD system

                              --   Design,  Layout and  Simulation  of  analogue
                                   blocks

                              --   Synthesis of VHDL

                              --   Timing simulation of gatelevel netlist

                              --   Clock tree and test insertion

                              --   Scan  insertion  and  Automatic  Test Pattern
                                   Generation Perform Place & Route

                              --   Backannotation

                              --   Static timing analysis for race conditions

                              --   Completion of Layout;

                    2.1.2.4   Definition of the absolute maximum ratings;

                    2.1.2.5   Participation in design reviews;

--------------------------------------------------------------------------------
                                                                    Page 5 of 27

** Represents  material  which has been redacted and  separately  filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.

<PAGE>

Development and Production Agreement: PowerDsine/ Austria Mikro Systeme

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

                    2.1.2.6   Preparation of the layout;

                    2.1.2.7   Preparation of the bonding diagram;

                    2.1.2.8   Manufacture of the masks;

                    2.1.2.9   Production    and   delivery   of   fifteen   (15)
                              ENGINEERING SAMPLES;

                    2.1.2.10  Development of the test program;

                    2.1.2.11  Preparation of a performance  board for production
                              test and of a probe card;

                    2.1.2.12  Installation of a test program;

                    2.1.2.13  Preparation of all production documents;

                    2.1.2.14  Testing   of    prototypes   at   hot   and   cold
                              temperatures, ESD and Latchup and;

                    2.1.2.15  Production   and  delivery  of  twenty  five  (25)
                              Prototypes.

2.2       DUTIES OF POWERDSINE

          PowerDsine   shall  assist  with  the  development  by  providing  the
          following:

          2.2.1     Provision to Austria Mikro  Systeme of the documents  listed
                    in this subsection 2.2.1 (together the "DOCUMENTS"):

                    2.2.1.1   System   specification  or  any  part  thereof  at
                              PowerDsine's  sole  discretion,  strictly  for the
                              aims of this AGREEMENT;

                    2.2.1.2   Block diagram or any part thereof at  PowerDsine's
                              sole  discretion,  strictly  for the  aims of this
                              AGREEMENT;

                    2.2.1.3   Description  of inputs and  outputs (as defined in
                              the Specifications;

                    2.2.1.4   Description of external  components (as defined in
                              the Specifications); and

                    2.2.1.5   Description  of electrical  parameters (as defined
                              in the Specifications).

          2.2.2     Examination and confirmation of the SPECIFICATION

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                    2.2.2.1   Provision of VHDL  description  of digital part of
                              the integrated circuit;

                    2.2.2.2   Approval of timing simulation results (which shall
                              be  provided  to   PowerDsine   by  Austria  Mikro
                              Systeme);

                    2.2.2.3   Participation in design reviews;

                    2.2.2.4   Examination and approval of ENGINEERING SAMPLES;

                    2.2.2.5   Assistance   with  the  correlation  of  the  test
                              program; and

                    2.2.2.6   Examination and approval of PROTOTYPES.

3.        SPECIFICATION

3.1       Austria Mikro Systeme  shall  prepare the  SPECIFICATION  based on the
          DOCUMENTS specified in section 2.2 herein within [**] after receipt of
          the latter and present said SPECIFICATION to PowerDsine.

3.2       During these [**],  both PARTIES  shall use their best  endeavours  to
          reach an agreement concerning the SPECIFICATION.

3.3       The  agreement  concerning  the  SPECIFICATION  and - in the  event of
          technical or commercial alterations - any amendments to this AGREEMENT
          shall be confirmed in writing by both PARTIES. The SPECIFICATION shall
          be the basis for the agreed  development  Work and is an integral part
          of this AGREEMENT.  If no agreement  concerning the  Specification  is
          reached within a reasonable period of time, either PARTY may terminate
          this AGREEMENT in writing by giving 2 weeks notice.

3.4       In the case of termination as described in subsection 3.3 herein only,
          there shall be no financial  obligations  between the Parties  arising
          from such termination.

4.        CIRCUIT ATTRIBUTES

          Based on the  information  received  from  PowerDsine,  the  following
          circuit  attributes   (hereinafter  the  "CIRCUIT   ATTRIBUTES")  were
          determined by Austria Mikro Systeme.

         [** Redacted Table]

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          [**]

5.        DEVELOPMENT

5.1       DEVELOPMENT STAGES

          The  development  of the  Product  shall  commence  when an  agreement
          concerning  the  SPECIFICATION  is  reached;  it  shall  end  when the
          PROTOTYPES are approved by PowerDsine.

          The development comprises the following phases:

          ------------------------------- ------------------------- ------------
                                          RESPONSIBILITY            DURATION
          ------------------------------- ------------------------- ------------
          Development of the Product
            including simulation          Austria Mikro Systeme     [**]
          ------------------------------- ------------------------- ------------
          Production of the
            ENGINEERING SAMPLES           Austria Mikro Systeme     [**]
          ------------------------------- ------------------------- ------------
          Approval of the
            ENGINEERING SAMPLES           PowerDsine                [**]
          ------------------------------- ------------------------- ------------
          Production of the PROTOTYPES    Austria Mikro Systeme     [**]
          ------------------------------- ------------------------- ------------
          Approval of the PROTOTYPES      PowerDsine                [**]
          ------------------------------- ------------------------- ------------

          (x)       Estimate based on the  information  available at the time of
          conclusion of the AGREEMENT.

          In addition,  the Parties hereby  represent that they shall  cooperate
          fully and in good  faith to reach the above  specified  schedule,  and
          shall take all reasonable steps to solve any circumstances  unforeseen
          at the  time of the  conclusion  of the  AGREEMENT.  If  either  party
          believes  that it shall not be able to meet the  schedule  as detailed
          above,  or if either  party has reason to believe that the other party
          is  in  breach  of  said  representation,   the  following  escalation
          procedure shall apply:

          (a)       the  senior  management  representatives  (in  the  case  of
                    PowerDsine - the project manager,  Vice President of R&D and
                    Vice President of  Operations;  in the case of Austria Mikro
                    Systeme - Director Marketing and Director Engineering of the
                    Business  Unit  Communications)  of both  parties  are to be
                    immediately notified fully of the event; and

          (b)       the senior  management  representatives  of both  parties as
                    specified above shall, as soon as feasibly possible, convene
                    whether by phone or in person,  to resolve the circumstances
                    jeopardizing  the completion of the project within the above
                    schedule  and  to   immediately   implement  all  reasonably
                    necessary steps to such effect.

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5.2      DEVELOPMENT COS

          The development costs are [**].

          The partial  amounts of the  development  costs  listed below shall be
          payable as follows:

          -------------------------------------- --------------- ---------------
          1. Upon agreement of the
             SPECIFICATION                       [**]            US $
          -------------------------------------- --------------- ---------------
          2. Upon delivery of the
             ENGINEERING SAMPLES                 [**]            US $
          -------------------------------------- --------------- ---------------
          3. Upon delivery of the PROTOTYPES     [**]            US $
          -------------------------------------- --------------- ---------------

5.3       CO-OPERATION DURING THE DEVELOPMENT

          PowerDsine nominates the following contact persons for the realization
          of the Work:

          ----------------------- ----------------------------------------------
          Name:                   Natan Baron
          ----------------------- ----------------------------------------------
          Function:               Asic Manager
          ----------------------- ----------------------------------------------
          Tel. no.:               +972 9 7755100
          ----------------------- ----------------------------------------------
          Fax no.:
          ----------------------- ----------------------------------------------
          Address:                PowerDsine Ltd.
          ----------------------- ----------------------------------------------
                                  1 Hanagar St., P.O. Box 7220
          ----------------------- ----------------------------------------------
                                  IL-45421 Hod Hasharon
          ----------------------- ----------------------------------------------
          E-mail:                 natanb@powerdsine.com
          ----------------------- ----------------------------------------------

         Austria  Mikro Systeme  nominates  the  following  persons who shall be
         responsible to PowerDsine for the realization of the project:

          ----------------------- ----------------------------------------------
          Name:                   Karl Ilzer
          ----------------------- ----------------------------------------------
          Function:               Group Leader M/S Design Group
          ----------------------- ----------------------------------------------
          Tel. no.:               +43 3136 500 5341
          ----------------------- ----------------------------------------------
          Fax no.:                +43 3136 500 5692
          ----------------------- ----------------------------------------------
          Address:                Austria Mikro Systeme International AG
          ----------------------- ----------------------------------------------
                                  Schloss Premstaetten
          ----------------------- ----------------------------------------------
                                  A-8141 Unterpremstaetten, Austria
          ----------------------- ----------------------------------------------
          E-mail:                 karl.ilzer@amsint.com
          ----------------------- ----------------------------------------------

5.4       ALTERATIONS OF THE SPECIFICATION OR CIRCUIT ATTRIBUTES

          Both PARTIES may at any time propose  alterations to the SPECIFICATION
          in writing.  The other  PARTY may,  where  possible,  comply with such
          requests  for  alterations.  The  resulting  effects  on  the  project
          schedule,  the  development  cost,  the  CIRCUIT  ATTRIBUTES  and,  if
          applicable,  the UNIT PRICE shall be documented  in writing,  together
          with the agreed alterations,  and duly undersigned by the PARTIES as a
          supplement to this AGREEMENT.

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5.5       CONFIRMATION OF THE SIMULATION

          At a design  review,  PowerDsine  shall  declare in  writing  that the
          results  of the  circuit  simulation  match  the  SPECIFICATION.  This
          confirmation  is a  precondition  for the  production  of  ENGINEERING
          SAMPLES.

5.6       APPROVAL OF THE ENGINEERING SAMPLES

          5.6.1     PowerDsine  shall  communicate  to Austria  Mikro Systeme in
                    writing  within  [**]  weeks  after  the  delivery  of  [**]
                    ENGINEERING SAMPLES whether the ENGINEERING SAMPLES meet the
                    functional requirements specified in the SPECIFICATION.

          5.6.2     Should    PowerDsine    note   any   deviations   from   the
                    SPECIFICATION,  it shall prepare a  comprehensive  technical
                    report of its  investigations and submit the same to Austria
                    Mikro Systeme to enable the latter to verify such deviations
                    and if necessary to rectify them without further delay.

          5.6.3     PowerDsine will do its best efforts to approve or disapprove
                    the ENGINEERING SAMPLES within the agreed [**] week period.

          5.6.4     The approval of the ENGINEERING  SAMPLES by PowerDsine shall
                    be deemed to constitute an order to Austria Mikro Systeme to
                    proceed with the production of PROTOTYPES and to prepare the
                    circuit for production pursuant to clause 2.1 herein.

          5.6.5     In default of such notification as specified in clause 5.6.2
                    above (the  "DEFAULT"),  and if PowerDsine has not given any
                    other written  notification  to Austria Mikro Systeme of any
                    problem with the approval of the Engineering  Samples within
                    the agreed period,  the Engineering  Samples shall be deemed
                    approved.  Equally the  Engineering  Samples shall be deemed
                    approved  if   PowerDsine   has  made  the  first  call  for
                    Prototypes  with the  authorized  signature of  PowerDsine's
                    Placido project manager as named in Clause 5.3 herein.

          5.6.6     In addition,  fourteen  (14) days prior to a default  event,
                    Austria Mikro Systeme shall notify PowerDsine Vice President
                    of  Operations  as  to  the  non-provision  of  approval  by
                    PowerDsine to Austria Mikro Systeme.

5.7       REVISION OF THE CIRCUIT

          If the ENGINEERING SAMPLES do not meet the functional  requirements of
          the  SPECIFICATION  and  PowerDsine  cannot be reasonably  expected to
          compensate the deviating  behaviour of the circuits by taking external
          measures,  Austria  Mikro  Systeme  shall  perform a  revision  of the
          circuit (e.g. modification of the circuit, new simulation,  production
          of new  ENGINEERING  SAMPLES,  preparation of masks,  etc.) at its own
          expense as part of a so-called "REDESIGN".

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5.8       REDESIGN AT POWERDSINE'S REQUEST

          Austria  Mikro  Systeme  undertakes  to  redesign  the  circuit if the
          ENGINEERING SAMPLES, while meeting the SPECIFICATION,  fail to fulfill
          PowerDsine's  expectations  for any  reason  whatsoever.  In such case
          however, PowerDsine shall bear the costs of the REDESIGN.

5.9       REDESIGN AT THE REQUEST OF BOTH PARTIES

          If the ENGINEERING  SAMPLES do not fully meet the SPECIFICATION and if
          PowerDsine also requests  additional  alterations of the SPECIFICATION
          during the REDESIGN  phase,  both PARTIES  shall bear the costs of the
          REDESIGN.

          Before starting the REDESIGN, the PARTIES hereto shall agree the costs
          and the way of sharing them.

5.10      PROBABILITY OF A REDESIGN

          Because of the risks inherent to the development of complex integrated
          circuits,  it cannot be guaranteed that the first ENGINEERING  SAMPLES
          will meet all functional requirements. PowerDsine is therefore advised
          to  make  a  time   allowance   in  its   planning  for  any  REDESIGN
          requirements.

          The time required for a REDESIGN  depends on the scope  thereof.  As a
          rule, it should be less than 8 weeks.

5.11      DELIVERY OF PROTOTYPES

          Austria Mikro Systeme  shall  deliver to  PowerDsine  [**]  PROTOTYPES
          within  [**]  following  the  approval of the  ENGINEERING  SAMPLES or
          following any revision of the circuit  according to clauses 5.7 - 5.9,
          respectively.

5.12      APPROVAL OF THE PROTOTYPES

          5.12.1    PowerDsine  shall advise  Austria Mikro Systeme  within [**]
                    weeks of receipt of the [**]  PROTOTYPES in writing  whether
                    such  PROTOTYPES  meet  the  requirements  specified  in the
                    SPECIFICATION.

          5.12.2    Should    PowerDsine    note   any   deviations   from   the
                    SPECIFICATION,  it shall prepare a  comprehensive  technical
                    report of its  investigations and submit the same to Austria
                    Mikro  Systeme to enable the latter to check and rectify the
                    established defects without further delay.

          5.12.3    In  default  of such  notification  as  specified  in clause
                    5.12.2  above,  and if  PowerDsine  has not  given any other
                    written notification to Austria Mikro Systeme of any problem
                    with  the  approval  of the  Prototypes  within  the  agreed
                    period, the PROTOTYPES shall be deemed approved. Equally the
                    PROTOTYPES  shall be deemed  approved if PowerDsine has made
                    the  first  order  for  MASS  PRODUCTION  CIRCUITS  with the
                    authorized signature of PowerDsine's Placido project manager
                    as named in clause 5.3 herein.

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          5.12.4    In  addition,  [**] days prior to a default  event,  Austria
                    Mikro  Systeme  shall notify  PowerDsine  Vice  President of
                    Operations as to the non-provision of approval by PowerDsine
                    to Austria Mikro Systeme.

6.        QUALITY OF THE MASS PRODUCTION CIRCUITS

6.1       QUALITY ASSURANCE

          Austria Mikro Systeme  represents  that it shall aspire to deliver the
          highest quality and reliable the MASS PRODUCTION CIRCUITS. The quality
          control,  quality  assurance and  reliability  of the MASS  PRODUCTION
          CIRCUITS manufactured according to this AGREEMENT are specified in the
          "Austria Mikro Systeme - Product Assurance  Reliability  Manual" QTY-1
          Rev. 13.0, May 2001.

6.2       AOQ (AVERAGE OUTGOING QUALITY)

          6.2.1     The AOQ target value for the MASS PRODUCTION  CIRCUITS to be
                    produced  according  to this  AGREEMENT  shall  be a  defect
                    density of less than 100 DPM (defects per million). This AOQ
                    target value shall refer to the  mechanical  and  electrical
                    ratings of the circuit described in the  SPECIFICATION.  The
                    MASS PRODUCTION  CIRCUITS shall be tested by means of a test
                    program developed by Austria Mikro Systeme. This test covers
                    the  Specification's  electrical values to the best possible
                    extent.

          6.2.2     PowerDsine  agrees  to  assess  the AOQ  only  with the test
                    program  having been in use at the time of production of the
                    MASS PRODUCTION  CIRCUITS.  If PowerDsine  suspects that the
                    MASS PRODUCTION  CIRCUITS may not be in full compliance with
                    the SPECIFICATION,  it may return a number of representative
                    MASS  PRODUCTION  CIRCUITS  from that batch to Austria Mikro
                    Systeme,  together  with a  description  of  the  deviation.
                    Austria  Mikro  Systeme  shall then submit to  PowerDsine  a
                    written failure analysis promptly.

6A.       INTELLECTUAL PROPERTY

          6A.1      PowerDsine  shall have all rights,  titles and  interests in
                    the  Intellectual  Property  Rights  and  the  like  it  has
                    provided to Austria  Mikro  Systeme.  Austria  Mikro Systeme
                    shall  not have any  proprietary  rights  whatsoever  in the
                    PowerDsine Intellectual Property.

          6A.2      Austria  Mikro  Systeme  shall have all  rights,  titles and
                    interests in all  Intellectual  Property Rights that it has,
                    independent of its cooperation  with  PowerDsine,  developed
                    prior to this  AGREEMENT  (collectively  the "Austria  Mikro
                    Systeme  Intellectual  Property"),  and such  Austria  Mikro
                    Systeme   Intellectual   Property  shall  be  the  sole  and
                    exclusive property of Austria Mikro Systeme.

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          6A.3      PowerDsine  shall have all rights,  titles and  interests in
                    all   Intellectual   Property  Rights   resulting  from  the
                    implementation  of  the  Specifications  and  Austria  Mikro
                    Systeme  shall  assist  PowerDsine  and  sign  any  and  all
                    documents reasonably deemed necessary by PowerDsine, for the
                    protection of such Intellectual Property Rights.

          6A.4      Austria Mikro Systeme  represents that it has all rights and
                    licenses for all third party  Intellectual  Property  Rights
                    necessary for the performance of its obligations  under this
                    AGREEMENT.

          6A.5      Austria Mikro Systeme hereby grants  PowerDsine a perpetual,
                    worldwide  royalty-free   irrevocable  license  to  use  all
                    intellectual    property,    which   is   not   PowerDsine's
                    intellectual property,  embodied or incorporated in the Mass
                    Production Circuit.

7.        QUANTITIES AND CONDITIONS

7.1       PURCHASING VOLUME AND TERM

          PowerDsine  commits  to  purchase  directly  or  indirectly  [**] MASS
          PRODUCTION  CIRCUITS   ("PURCHASING  VOLUME")  within  the  Purchasing
          Period,  if approved by PowerDsine.  MASS Production orders will begin
          only after the  approval of the  PROTOTYPES  by  PowerDsine.  Indirect
          purchase  shall be done through  PowerDsine's  contract  manufacturers
          subject to Austria Mikro Systeme's prior approval of the financial and
          commercial  good  standing  of any such  contract  manufacturer.  Such
          approval shall not be unreasonably withheld.

7.2       ORDERS

          7.2.1     The committed  delivery Lead Time by Abustria  Mikro Systeme
                    shall be [**] weeks to delivery.

          7.2.2     In the interest of an  economical  and  environment-friendly
                    use of packaging  material,  a single  call-off should be at
                    least 65.000 pieces or multiples thereof.

          7.2.3     Austria Mikro Systeme  undertakes to deliver the  quantities
                    of the Product(s),  after such Product(s) have undergone all
                    required  quality  assurance  tests,  by the  delivery  date
                    stipulated   in  the  order   acknowledgement.   Such  order
                    acknowledgement  shall be in  accordance  with the  Leadtime
                    provided  for in Section  7.2.1 If for any reason such order
                    cannot be filled by the stipulated  delivery  date,  Austria
                    Mikro Systeme shall immediately notify PowerDsine in writing
                    of the  delay  and its  reasons,  if  known,  and will  keep
                    PowerDsine informed throughout the period of delay.  Austria
                    Mikro  Systeme  shall use its best  efforts to minimize  the
                    effects of any such delays,  including  by the  selection of
                    the fastest shipping means available,  in which case Austria
                    Mikro Systeme shall bear any such  additional  expenses.  In
                    case of a delay, PowerDsine shall give Austria Mikro Systeme
                    a two week grace period from

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                    the delivery date  stipulated in the order  acknowledgement,
                    to deliver the delayed products. If after such grace period,
                    Austria Mikro Systeme has not delivered the Product pursuant
                    to the order, PowerDsine shall be entitled to reschedule the
                    delivery dates of the delayed Products for a period of up to
                    six (6) months.  The above shall be  PowerDsine's  exclusive
                    remedy for the delay in delivery  of Products  and any other
                    remedies  which  may be  available  to  PowerDsine  shall be
                    expressly excluded.

7.3       START OF DELIVERY

          In the event that PowerDsine places an order on or before the approval
          of the Prototype, Austria Mikro Systeme undertakes to be in a position
          to deliver 2.500 MASS PRODUCTION CIRCUITS,  at the latest, twelve (12)
          weeks after the approval of the  PROTOTYPES and a further 63.000 after
          fifteen (15) weeks of the order.

7.4       VARIATIONS IN QUANTITIES

          The actually delivered  quantity of MASS PRODUCTION  CIRCUITS may vary
          at the rate of +0/-10%  with  respect  to the  ordered  quantity.  Any
          deviations from the specified  delivery  quantities not exceeding this
          tolerance  band  shall be  deemed  to  constitute  fulfillment  of the
          AGREEMENT.

          If PowerDsine should be unable to meet its purchasing  obligations due
          to such deviations,  PowerDsine  shall have no financial  disadvantage
          with regard to the applicable unit price (see clause 8.2).

8.        UNIT PRICES

8.1       PRICES FOR ADDITIONAL PROTOTYPES

          Additional  PROTOTYPES may be ordered up to a maximum  quantity of two
          hundred  (200) pieces at a UNIT PRICE of [**].  The delivery  time for
          this  special  call-off  shall  be  four  (4)  weeks  at  the  latest.
          PowerDsine   shall  be  under  no  obligation   to  order   additional
          PROTOTYPES.

8.2       CIRCUIT PRICES

          [** Redacted Table]

          In SPECIFICATION  the delivery of MASS PRODUCTION  CIRCUITS in TQFP 44
          package  is  defined.  If  PowerDsine  decide  to buy MASS  PRODUCTION
          CIRCUITS  without  TQFP4  package   (die-form),   the  testsection  of
          SPECIFICATION has to be changed accordingly.

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          With its first  order of MASS  PRODUCTION  CIRCUITS  PowerDsine  shall
          choose a price band corresponding to the anticipated PURCHASING VOLUME
          for  the  current  PERIOD.  If  PowerDsine   subsequently  acquires  a
          different  quantity  associated  with  another  price band  during the
          Purchasing Period, the price shall be adjusted by recalculation at the
          PARTIES'  earliest  convenience,  but no  later  than  the  end of the
          Purchasing Period.

9.        TERMS OF PAYMENT AND DELIVERY

          Prices  shall be FCA Graz  (Incoterms  2000),  30 days net,  excluding
          customs duties and taxes but including packaging.  Any other terms and
          conditions  which  may be  printed  on  orders,  order  confirmations,
          invoices etc. shall be null and void.

10.       CO-OPERATION DURING THE TERM OF PRODUCTION

          PowerDsine   nominates   the   following   contact   persons  for  the
          co-operation with Austria Mikro Systeme during the TERM:

          ----------------------- ----------------------------------------------
          Name:                   Igal Carmi
          ----------------------- ----------------------------------------------
          Function:               Director of Material and Purchasing
          ----------------------- ----------------------------------------------
          Tel. no.:               +972 9 7755108
          ----------------------- ----------------------------------------------
          Fax no.:
          ----------------------- ----------------------------------------------
          Address:                PowerDsine Ltd.
          ----------------------- ----------------------------------------------
                                  1 Hanagar St., P.O. Box 7220
          ----------------------- ----------------------------------------------
                                  IL-45421 Hod Hasharon
          ----------------------- ----------------------------------------------
          E-mail:                 igalc@powerdsine.com
          ----------------------- ----------------------------------------------

         Austria  Mikro Systeme  nominates  the  following  persons who shall be
         responsible for the co-operation with PowerDsine during the TERM:

         ----------------------- -----------------------------------------------
         Name:                   Michaela Fricek
         ----------------------- -----------------------------------------------
         Function:               Customer Service
         ----------------------- -----------------------------------------------
         Tel. no.:               +43 3136 500 5455
         ----------------------- -----------------------------------------------
         Fax no.:                +43 3136 500 5457
         ----------------------- -----------------------------------------------
         Address:                Austria Mikro Systeme International AG
         ----------------------- -----------------------------------------------
                                 A-8141 Unterpremstatten
         ----------------------- -----------------------------------------------
         E-mail                  michaela.fricek@amsint.com
         ----------------------- -----------------------------------------------

10A.      SHIPMENTS, SCHEDULE CHANGE

10A.1     Austria  Mikro  Systeme  hereby  undertakes  to  follow   PowerDsine's
          shipping  address as it may be provided from time to time, as same may
          be provided to it from time to time.

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10A.2     Each shipment made by Austria Mikro  Systeme,  shall include a copy of
          the invoice,  a packing list,  certificate of origin and other related
          and  necessary  documents,  as  are  customary  for  shipping  similar
          products.

10A.3     All  Products  shall be packed and  prepared  for  shipment by Austria
          Mikro Systeme in a manner which: (a) follows good commercial practice;
          and (b) is  acceptable  to common  carriers for  shipment;  and (c) is
          adequate to ensure safe arrival at Customer's designated destination.

10A.4     Austria  Mikro  Systeme  shall  be   responsible   for  obtaining  all
          appropriate  licenses or permits  necessary  to export the  Product(s)
          from the country of origin.

10B.      PRODUCT ACCEPTANCE AND WARRANTS

10B.1     Austria Mikro Systeme  warrants to PowerDsine the following:  (a) that
          each Product, or any parts thereof, sold pursuant to this AGREEMENT or
          any  Order  issued  hereunder,  when  sold,  will  conform  to  all of
          PowerDsine's  Specifications,   and  will  be  free  from  defects  in
          workmanship and materia1s for a period of at least fifteen (15) months
          from the date of shipment;  (b) that each  shipment of Products  shall
          carry with it a certificate of conformance; This express warranty does
          not apply to (i)  materials  consigned by  PowerDsine to Austria Mikro
          Systeme; (ii) defects resulting from PowerDsine's faulty design of the
          Products,  insofar as applicable;  or (iii)  Product(s)  that has been
          abused,  damaged,  altered or  misused  by any person or entity  after
          title  passes to  PowerDsine.  Notwithstanding  anything  else in this
          AGREEMENT,   Austria  Mikro  Systeme   assumes  no  liability  for  or
          obligation  related to the  Specifications,  designs  or  instructions
          produced or supplied by PowerDsine and PowerDsine  shall be liable for
          direct costs or expenses  incurred by Austria Mikro Systeme  resulting
          therefrom.

10B.2     When title to the Products will pass to PowerDsine,  the Products will
          be free  from  any  security  interest  or other  lien or third  party
          rights.

10B.3     Upon any failure of the  Product to comply with the above  warranties,
          the Parties hereby undertake to execute the RMA procedure provided for
          in Enclosure 2. For the avoidance of doubt,  PowerDsine shall bear the
          cost of  transportation  of the  defective  Product to  Austria  Mikro
          Systeme and Austria Mikro Systeme shall bear the  transportation  cost
          of the  replaced  Product  to  PowerDsine  or  any  other  address  as
          PowerDsine may instruct  Austria Mikro Systeme.  Austria Mikro Systeme
          shall waive any expedite  charges to PowerDsine in order to effect the
          earliest reasonable replacement of the defective Product(s).

10C.      TERM AND TERMINATION

10C.1     This  AGREEMENT  shall be effective  from the last  signature  date of
          parties  (the  "EFFECTIVE  DATE") and shall remain in effect until the
          end of the  Purchasing  Period (the  "TERM").  This  AGREEMENT  may be
          renewed by mutual  consent of both

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          parties.  In  addition  to any  other  right  to  terminate  contained
          elsewhere  in  this  AGREEMENT  and  notwithstanding  anything  to the
          contrary,  either  party  shall  have  the  right  to  terminate  this
          AGREEMENT for cause as a result of any of the following:

          10C.1.1   The  filing  by  or  against  a  Party  of  a  petition  for
                    reorganization or liquidation under local bankruptcy laws or
                    corresponding   laws  or   procedures   of  any   applicable
                    jurisdiction; If such filing is involuntary and is contested
                    to in good faith,  this AGREEMENT shall terminate only after
                    the passage of sixty (60) days without the dismissal of such
                    proceedings; or

          10C.1.2   The  filing   against  a  Party  of  any  other   proceeding
                    concerning bankruptcy, insolvency, dissolution, cessation of
                    operations,  or  reorganization  of  indebtedness;  If  such
                    proceeding is involuntary and is contested to in good faith,
                    this  AGREEMENT  shall  terminate  only after the passage of
                    sixty (60) days without the  dismissal of such  proceedings;
                    or

          10C.1.3   The voluntary or  involuntary  execution of an assignment or
                    conveyance to a  liquidating  agent,  trustee,  mortgagee or
                    assignee  of  whatever  description  or  the  making  of any
                    judicial levy against a substantial  percentage of a Party's
                    assets, for the benefit of its creditors; or

          10C.1.4   The  appointment  of  a  receiver,   keeper,  liquidator  or
                    custodian  of  whatever  sort of  description,  for all or a
                    substantial portion of a Party's assets.

10C.2     Termination  of this  AGREEMENT  shall not affect the  obligations  of
          either  party which exist as of the date of  termination.  The parties
          agree that their respective rights, obligations and duties in sections
          6A, lOB, and 13 shall survive any expiration or  termination  thereof.
          Furthermore,  upon  termination  of this  AGREEMENT  each party  shall
          return to the other any  Confidential  Information  of the other party
          and all copies thereof.

10C.3     Termination  of  the  AGREEMENT   during   Development  and  up  until
          completion of Development. If either PARTY materially and persistently
          fails  to  perform  its  obligations   under  this  AGREEMENT   during
          Development and up until  completion of  Development,  the other PARTY
          shall be entitled to terminate  this  AGREEMENT by giving  thirty (30)
          days  notice  after first  having  granted the other PARTY a period of
          grace of sixty  (60) days to make good such  failure.  In the event of
          termination, costs of termination shall be settled according to clause
          10C.4 and 10C.5 below. -

10C.4     In the event of  termination  by Austria  Mikro  Systeme  according to
          clause 10C.3 above,  PowerDsine shall pay a lump sum  corresponding to
          the  development  cost as  compensation  as  specified  in section 5.2
          herein.  This refund  constitutes  Austria Mikro Systeme's sole remedy
          and any further  claims made by Austria  Mikro  Systeme are  expressly
          excluded.

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10C.5     In the event of  termination  by PowerDsine  according to clause 10C.3
          above, Austria Mikro Systeme shall pay PowerDsine any payments made by
          PowerDsine  to Austria Mikro  Systeme as a  compensation.  This refund
          constitutes  PowerDsine's  sole remedy and any further  claims made by
          PowerDsine are expressly excluded.

11.       FORCE MAJEURE

          Neither  PARTY  shall be  liable  to pay  damages  or be  entitled  to
          terminate the AGREEMENT on the grounds of any delay or non-performance
          during   the  term  of  this   AGREEMENT,   provided   such  delay  or
          non-performance is due to circumstances outside its control, including
          force majeure,  the  imposition of duties by a competent  authority or
          enduring domestic or international problems (such as war or rebellion,
          strikes, natural disasters, stoppage of work and embargoes).  However,
          the aforesaid shall apply with the restriction that both PARTIES shall
          be entitled to  terminate  this  AGREEMENT  in writing if the delay or
          non-performance  of the other PARTY for the above named reasons should
          last for more than three (3)  months.  If such delay  should  last for
          more than  three (3)  months,  Austria  Mikro  Systeme  shall  provide
          PowerDsine with the mask control tapes (GDSII format).

          However, Austria Mikro Systeme shall not be required to disclose trade
          secrets or confidential information except for the GDSII format.

12.       NONDISCLOSURE

          The  obligation  of  keeping  confidential  information  secret and in
          particular the protection of the intellectual  property of the parties
          are set out in a separate confidentiality agreement between PowerDsine
          and Austria Mikro Systeme dated  09/Feb/01 (see Enclosure 1) and is an
          integral part of this AGREEMENT

13.       LIABILITY LIMITATION

13.1      PowerDsine  will  indemnify and defend  Austria Mikro Systeme and keep
          Austria Mikro Systeme fully and  effectively  indemnified  against all
          direct  and  indirect   costs,   damages,   judgments  and  reasonable
          attorney's fees (the  "Expenses")  Austria Mikro Systeme incurs due to
          any  infringement or other violation by PowerDsine of any Intellectual
          Property  Rights of third parties,  provided  however,  that: (i) such
          Expenses were incurred  solely in connection  with the  performance of
          the Work by  Austria  Mikro  Systeme,  (ii) in  performing  the  Work,
          Austria Mikro Systeme strictly adhered to the Specifications  provided
          to  it  by  PowerDsine,  (iii)  Austria  Mikro  Systeme  shall  notify
          PowerDsine  promptly  in  writing  of  any  allegations  or  claim  of
          infringement  of which it has notice  and will not make any  admission
          without  PowerDsine's  prior written  consent,  and (iv) Austria Mikro
          Systeme, at PowerDsine's  request and expense,  shall allow PowerDsine
          to conduct and/or settle all  negotiations  and  litigation  resulting
          from such allegation or claim.

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13.2      Austria Mikro  Systeme  hereby  represents  and warrants to PowerDsine
          that Austria  Mikro  Systeme's  Intellectual  Property  Rights used by
          Austria  Mikro  Systeme in performing  its  obligations  hereunder and
          which is ultimately  incorporated or embodied in the Product(s),  does
          not infringe upon any Intellectual Property Rights of any third party.

13.3      Austria Mikro Systeme will  indemnify and defend  PowerDsine  and keep
          PowerDsine  fully and effectively  indemnified  against all direct and
          indirect Expenses arising out of or in connection with infringement or
          violation by Austria Mikro Systeme of any Intellectual Property Rights
          of  any  third  party  in  connection  with  the  performance  of  its
          obligations  under this AGREEMENT  provided that: (i) PowerDsine shall
          notify Austria Mikro Systeme promptly in writing of any allegations or
          claim of  infringement  of which it has  notice  and will not make any
          admission  without Austria Mikro Systeme's prior written consent;  and
          (ii) PowerDsine, at Austria Mikro Systeme's request and expense, shall
          allow Austria Mikro Systeme to conduct and/or settle all  negotiations
          and litigation  resulting from such allegation or claim. Austria Mikro
          Systeme shall not be liable for any claim to the extent arising solely
          out of or resulting solely from (i) any modification or reworking made
          by PowerDsine or upon  instruction of PowerDsine  performed by Austria
          Mikro  Systeme if such  infringement  would not have  occurred but for
          such modification or (ii) use of the Product in combination with other
          equipment or computer  programs not supplied by Austria  Mikro Systeme
          if  such   infringement   would  not  have   occurred  but  from  such
          combination.

13.4      However,  the  aggregate  liability  of  either  Party for any and all
          claims that may result  from this  Section or any other  claims  based
          upon the  infringement  of third party  Intellectual  Propet1y  Rights
          shall be limited to a maximum of USD 100.000. THE FOREGOING STATES THE
          ENTIRE LIABILITY OF THE PARTIES TO EACH OTHER CONCERNING  INFRINGEMENT
          OF INTELLECTUAL PROPERTY RIGHTS.

14.       JURISDICTION AND APPLICABLE LAW

          All disputes arising out of or in connection with this AGREEMENT shall
          be finally settled in compliance  with the Rules of  Conciliation  and
          Arbitration  of the  International  Chamber of  Commerce  by one.  The
          arbitration  proceedings shall be held in London.  The language of the
          arbitration shall be English.

15.       SEVERABILITY

          Should  any  provision  of  this   AGREEMENT   contravene   compulsory
          regulations and become null and void as a result,  the validity of the
          remaining  provisions of the AGREEMENT  shall remain  unaffected.  The
          PARTIES  shall in this case replace the  ineffective  provisions  with
          such provisions which, while being  enforceable,  most closely reflect
          the original intention of the AGREEMENT.

          Should any provisions of this AGREEMENT  contravene  another agreement
          between the PARTIES and become  ineffective as a result, the remaining
          provisions of this AGREEMENT shall remain unaffected.

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16.       MODIFICATION OF AGREEMENT

          It is agreed  between the PARTIES that no amendment,  deletion from or
          addition  to this  AGREEMENT  shall be valid  unless  made in writing,
          signed  by  both  PARTIES  and  expressed  to be  supplemental  to the
          agreement.

17.       LANGUAGE OF AGREEMENT

          It is agreed  between  the PARTIES  that only the English  language is
          valid  for  this  AGREEMENT  or its  appendices  irrespective  whether
          translations  into other languages wholly or in part have been made or
          used for convenience  during the  establishment  and execution of this
          AGREEMENT.

18.       AUSTRIA MIKRO SYSTEME REPRESENTATION

18.1      Austria Mikro Systeme represents that it has the skills, expertise and
          experience required to perform its duties and obligations set forth in
          this AGREEMENT and its annexes,  and that such duties and  obligations
          shall be performed  diligently,  in good faith and utilizing  good and
          acceptable design, quality and manufacturing practices.

18.2      Austria Mikro Systeme  further  represents that the performance of its
          duties and  obligations  hereunder is not in violation of and will not
          violate,  is not  limited  and  will  not  be  limited  by  any  other
          obligations  Austria Mikro Systeme has or may have towards other third
          parties,  or of any  contractual  provision  by  which  Austria  Mikro
          Systeme is bound.

19.       MISCELLANEOUS

19.1      ENTIRE  AGREEMENT.  This AGREEMENT and all annexes hereto are intended
          as the  complete,  final and  exclusive  statement of the terms of the
          agreement between the parties regarding the subject matters hereof and
          supersedes  any and all other prior or  contemporaneous  agreements or
          understandings,  whether written or oral, between them relating to the
          subject matters hereof. In particular, Austria Mikro Systeme's general
          terms   and   conditions   of  sale   shall   not  apply  to  any  PO,
          acknowledgement or other instrument  submitted by PowerDsine  pursuant
          to this AGREEMENT.

19.2      RELATIONSHIP OF THE PARTIES.  Neither party shall, for any purpose, be
          deemed to be an agent of the other party and the relationship  between
          the parties shall be that of independent contractors. Each party shall
          assume  sole  and  exclusive  responsibility  for  its  employees  and
          contractors. Neither party shall have any right or authority to assume
          or create any obligations or to make any representations or warranties
          on behalf of any other party,  whether express or implied,  or to bind
          the other party in any respect whatsoever.

19.3      EXPENSES.  In any action to enforce  this  AGREEMENT or in any dispute
          arising between the parties pursuant to this AGREEMENT, the prevailing
          party shall be awarded all  arbitration or courts costs and reasonable
          attorney's  fees incurred,  including  such costs and attorney's  fees
          incurred in enforcing and collecting any judgment.

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19.4      SUCCESSORS, ASSIGNMENT. This AGREEMENT shall be binding upon and inure
          to the benefit of the parties hereto and their respective  successors,
          assigns and legal  representatives.  Both  parties  shall not have the
          right to assign or otherwise  transfer its rights or obligations under
          this  AGREEMENT   except  (i)  with  the  prior  written   consent  of
          PowerDsine,  not to be unreasonably  withheld, and (ii) PowerDsine may
          assign this AGREEMENT to any entity which is the successor to any part
          of its business  related to this AGREEMENT by merger,  or to any party
          which acquires all or substantially  all of its assets related to this
          AGREEMENT and which agrees to assume all  obligations of the assigning
          party under this AGREEMENT from and after the date of such assignment.
          Any attempted assignment in violation of this provision, shall be null
          and void as against the non-assigning party.

19.5      NOTICES.  Except  for PO's  which may be sent by normal  carrier,  all
          notices and  communications  hereunder  are required to be sent to the
          address or  telecopier  number  stated below (or such other address or
          telecopier  number as  subsequently  notified  in writing to the other
          party):  (a) by  facsimile  with  confirmation  of  transmission,  (b)
          personal same or next day delivery or (c) sent by commercial overnight
          courier with written  verification  of delivery.  All notices so given
          shall be deemed given upon the earlier of receipt or one (l) day after
          dispatch.

          Any notices sent to PowerDsine hereunder should be sent to:

          PowerDsine Ltd.

          1 Hanagar Street, Neve Nee'man B Industrial Zone
          Hod Hasharon, Israel
          Attn: Asaf Silberstein
          Fax: 972-9-7755111

          Any notices sent to Austria Mikro Systeme hereunder should be sent to:

          Austria Mikro Systeme International AG
          Schloss Premstaetten
          A-8141 Unterpremstaetten
          Attn: Heribert Hochrinner
          Fax No. +43 3136 500 5692

19.6      PHOTOCOPY  OF  ORIGINAL.  Neither  party shall  object to the use of a
          photocopy of the original of this  AGREEMENT for the purpose of making
          any required or allowed public filings.

19.7      COUNTERPARTS.   This   AGREEMENT  may  be  executed  in  two  or  more
          counterparts,  each of which shall be deemed an  original,  but all of
          which shall constitute one and the same instrument.

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19.8      VISITATION.  It is agreed  that  PowerDsine  may visit  Austria  Mikro
          Systeme's  facilities  during the performance of the Work upon one (1)
          week prior co-ordination.

20.       ENCLOSURES TO THIS AGREEMENT

          Enclosure 1: Confidentiality Agreement (see clause 12)
          Enclosure 2: RMA procedure (see clause 10B.3)
          Enclosure 3: Project Schedule

-------------------------------------- -----------------------------------------
AUSTRIA MIKRO SYSTEME                  PowerDsine
INTERNATIONAL AG
-------------------------------------- -----------------------------------------

Name:            Alexander Harrer      Name:                  Ilan Atias

---------------- --------------------- ---------------------- ------------------
                 General Manager
Function:        Communication         Function:              President
                 Business Unit
---------------- --------------------- ---------------------- ------------------

Signature:                             Signature:
---------------- --------------------- ---------------------- ------------------
Date:            JUL 24 2001           Date:                  15 Aug. 2001
--------------------------------------------------------------------------------

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

Name:            Gernot Proske         Name:                  Igal Roten
---------------- --------------------- ---------------------- ------------------

Function:        General Counsel       Function:              C.E.O.
---------------- --------------------- ---------------------- ------------------

Signature:                             Signature:
---------------- --------------------- ---------------------- ------------------
Date:            JUL 24 2001           Date:                  28 Aug. 2001
--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT to be executed
by their duly authorized  representatives effective as of the effective Date (as
defined above).

Enclosure 3: Project Schedule:

As agreed between the parties and sent by Austria Mikro Systeme to PowerDsine in
PDF file.

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                      CONFIDENTIAL DISCLOSURE AGREEMENT

Entered  into  this 09 day of FEB , 2001,  by and  between  POWERDSINE  LTD.,  a
company  organized under the laws of Israel with its principal place of business
at 1 Hanagar  st.,  Hod-Hasharon,  Israel  ("the  Company"),  and AUSTRIA  MIKRO
SYSTEME  INTERNATIONAL,  a  corporation/partnership/individual,  with offices at
SCHLOSS PREMSTATTEN, A 8141 UNTERPREMSTATTEN, AUSTRIA ("Participant").

                                   WITNESSETH:

WHEREAS The Company and  Participant  desire to continue to exchange or provide,
access to their  respective  confidential  and/or  proprietary  information  and
technology  for  purposes  of  evaluation  of a possible  business  relationship
between  the  Company  and  Participant  (the  "Evaluation")  and to induce such
disclosure  desired to undertake  certain  obligations  of  confidentiality  and
nondisclosure as set forth herein;

NOW THEREFORE,  in consideration of the mutual undertakings and promises herein,
the parties hereto hereby agree as follows:

1.1       The  term  "Information"   means  any  and  all  confidential   and/or
proprietary  information  and  technology  of the  Company  or  Participant,  in
whatever   form,   including   but  not   limited  to  any  and  all   formulas,
specifications,  prototypes,  designs,  equipment,  samples, analyses,  computer
programs, trade secrets, data, methods, techniques, processes, memoranda, notes,
marketing  and  customer   information,   projections  and  any  other  data  or
information (in whatever form),  as well as  improvements  and know-how  related
thereto.  Information  shall be deemed to include any and all Information  which
has  been  or  may  be  disclosed  by or on  behalf  of  the  disclosing  party,
irrespective  of form but  which is  either  (i)  marked  "Confidential"  by the
disclosing party or otherwise  identified as confidential and proprietary to the
disclosing party, or (ii) in the case of oral disclosures,  is identified at the
time of disclosure  as being  proprietary  and  confidential  to the  disclosing
party.

1.2       "Information"  shall not  include  information  or matter that (a) was
already  known  to or  independently  developed  by the  recipient  prior to its
disclosure  by the  other  party as  demonstrated  by  reasonable  and  tangible
evidence  satisfactory to the disclosing  party;  (b) shall have appeared in any
printed  publication  or  patent  or  shall  have  become  a part of the  public
knowledge  except as a result of breach of this Agreement by the recipient;  (c)
shall have been received by the recipient  from another  person or entity having
no obligation to the disclosing  party or its affiliates;  or (d) is approved in
writing by the disclosing party for release by the recipient.

2.        Each  party  agrees to treat all the  Information  disclosed  to it as
strictly confidential and not to exploit or make use, directly or indirectly, of
such  Information  without the express written consent of the disclosing  party,
except for  purposes  of the  Evaluation.  Notwithstanding  the  foregoing,  the
recipient  may  disclose  Information  to a  person  or  entity  controlled  by,
controlling or under common control with the recipient, provided such disclosure
is for the purposes of the

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Evaluation and provided that such person or entity is bound by the terms of this
Agreement.  Each party  shall  assume full  responsibility  for  enforcing  this
Agreement  and shall take  appropriate  measures  with its  employees  and other
persons  acting on its behalf to insure  that such  persons  are bound by a like
covenant of secrecy,  including but not limited to informing any employee of the
recipient  receiving  such  Information  that  such  Information  shall  not  be
disclosed  except as provided  herein.  Neither party shall reverse  engineer or
disassemble any hardware,  software or other  Information  provided by the other
party,  nor shall a party open for any purpose any item of hardware which may be
provided by the other party.

2.1       It is understood and agreed that the disclosure of the  Information by
the disclosing party shall not grant the recipient any express, implied or other
license  or rights to patents or trade  secrets of the  disclosing  party or its
suppliers,  whether or not  patentable,  nor shall it constitute or be deemed to
create a partnership,  joint venture or other undertaking.  Further,  each party
agrees that it shall not remove or otherwise alter any of the disclosing party's
trademarks or service marks, serial numbers, logos, copyrights, notices or other
proprietary  notices or indicia, if any, fixed or attached to Information or nay
part thereof.

2.2       Neither this  Agreement nor the  disclosure or receipt of  Information
shall  constitute  or imply any promise or intention by either party to make any
purchase  of  products  or  services  of the  other  or the  other's  affiliated
companies,  or any commitment by either party or its  affiliated  companies with
respect to present or future  marketing of any products or services or any other
business relationship.

3.        Unless otherwise  required by statute or government rule or regulation
all  copies  of the  Information  shall  be  returned  to the  disclosing  party
immediately upon request without retaining copies thereof.

4.        In the  event  that the  recipient  or  anyone  to whom the  recipient
transmits the Information  pursuant to this Agreement  becomes legally compelled
to disclose any of the  Information,  the recipient  will provide the disclosing
party  with  prompt  notice  thereof  so that the  disclosing  party  may seek a
protective  order or other  appropriate  remedy and/or waive compliance with the
provisions of this Agreement.

5.        This Agreement shall constitute the full Agreement between the parties
with respect to the  confidentiality  and  non-disclosure of the Information and
shall  supersede  any and  all  prior  agreements  and  understandings  relating
thereto. No change, modification,  alteration or addition of or to any provision
of this  Agreement  shall be binding  unless in writing  and  executed  by or on
behalf of both parties by a duly authorized  representative.  This Agreement may
not be assigned by either party without the consent of the other party.

6.        The  undertakings  herein  shall be binding upon the parties and their
respective affiliates,  subsidiaries or successors and shall continue until such
time as the substance of the disclosure has entered the public domain through no
fault  or  negligence  on the part of the  recipient,  or  until  permission  is
specifically  granted in writing to the  recipient  by the  disclosing  party to
release or make use of the Information otherwise than as stated herein.

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7.        If any one or more of the terms  contained in this Agreement shall for
any reason be held to be excessively broad with regard to time, geographic scope
or  activity,  that  term  shall be  construed  in a manner  to  enable it to be
enforced to the extent compatible with applicable law. A determination  that any
term is void or unenforceable shall not affect the validity or enforceability of
any other term or condition.

8.        This  Agreement  shall be governed by and construed  under the laws of
the State of Israel.

IN WITNESS WHEREOF the parties have executed this Agreement as of the date first
written above.

THE COMPANY                              PARTICIPANT

By:                                      By:
   -------------------------------------     -----------------------------------
Title:                                   Title:       GENERAL COUNSEL
      ----------------------------------       ---------------------------------

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                          CUSTOMER RETURNS - GUIDELINES

Austria  Mikro  Systeme Int. AG is  committed to deploy first class  quality and
reliability  assurance  for  its  products,  delivery  performance  and  service
activities  and  to  achieve  continuous  improvement  in an its  processes  and
products.  To realize our goals every area focuses on quality in order to ensure
total  customer  satisfaction.  This enables  Austria  Mikro  Systeme Int. AG to
achieve delivery quality of 10ppm (AOQ) or even better.  However, if you do have
problems with our products, please follow the guidelines as stated below.

STEP 1:

Please contact our customer service  department and ask for a Returned Materials
Authorisation Reference Number.

AUSTRIA MIKRO SYSTEME AG
CUSTOMER SERVICE
SchloB Premstatten
A-8141 Unterpremstatten, Austria
Tel.: ++43 3136 500 0
Fax.: ++43 3136 500 5457

For correct  identification  you are kindly  requested  to provide the  original
purchase order number,  the Invoice number,  the type of material,  the affected
quantity and the reason for the complaint.  Our customer service department wi1l
then issue a Returned  Materials  Authorisation  Reference Number.

PLEASE NOTE: This Returned Materials Authorisation expires after 60 days. Do not
ship  material  after  60  days  without  obtaining  a  new  Returned  Materials
Authorisation.

STEP 2

Please prepare all necessary  documents for the return and indicate the Returned
Materials Authorisation Reference Number on all your shipping documents.

STEP 3

Please pack samples of the affected products  carefully.  Use original packaging
if possible and note the Returned  Materials  Authorisation  Reference Number on
the outside of the package. Return the samples of the affected products and send
back the rest of the complaint  quantity after  completion of failure  analysis.
PLEASE  NOTE:  Devices  with  cut or  damaged  leads  can  not be  retested  for
functionality.

RESPONSES TO YOUR COMPLAINT

1.        CUSTOMER COMPLAINT ACKNOWLEDGMENT

A  Complaint  Acknowledgement  will be  provided  to you  within 24 hours  after
receiving your samples.

--------------------------------------------------------------------------------
                                                                   Page 26 of 27

** Represents  material  which has been redacted and  separately  filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.

<PAGE>

Development and Production Agreement: PowerDsine/ Austria Mikro Systeme

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

2.        FAILURE ANALYSIS

The returned devices will be checked retested and investigated  physiochemically
if necessary.

3.        CORRECTIVE ACTION

Austria Mikro Systeme Int. AG uses the disciplined 8-D problem solving approach,
when corrective actions are necessary to be implemented.

4.        RESPONSE

Austria Mikro Systeme Int. AG will send you the detailed failure analysis report
and the 8D-Report,  when corrective  actions are required.  Defect parts will be
replaced or credited.

--------------------------------------------------------------------------------
                                                                   Page 27 of 27

** Represents  material  which has been redacted and  separately  filed with the
commission pursuant to a Request for Confidential Treatment pursuant to Rule 406
under he securities Act of 1933, as amended.

<PAGE>

                                                  ENCLOSURE 3

Project Schedule
Customer:  POWERDSINE
Project:  PLACIDO (14906)
Author:  K. IIZER
Date:  JULY 9, 2001 (CW28)                            \/ 9.7.2001
<TABLE>
<CAPTION>
                                                Responsible
---------------------------------------------- ---------------- ---- ---- ---- ----- ---- ---- --- ---- ----- ---- ---- ----
Calendar week                                                    28   29   30   31    32   33   34  35   36    37   38   39
---------------------------------------------- ---------------- ---- ---- ---- ----- ---- ---- --- ---- ----- ---- ---- ----
<S>                                                              <C>  <C>  <C>  <C>   <C>  <C>  <C> <C>  <C>   <C>  <C>  <C>
Friday of cw                                                                   3.8.                     7.9.
---------------------------------------------- ---------------- ---- ---- ---- ----- ---- ---- --- ---- ----- ---- ---- ----
Device Specification                           AMS / PowerDsine  X
---------------------------------------------- ---------------- -------------------- ---- ---- --- ---- ----- ---- ---- ----
Dev.  Spec. Signed                             AMS / PowerDsine  \/  12.7.2001
---------------------------------------------- ---------------- ---- ---- ---- ----- ---- ---- --- ---- ----- ---- ---- ----
Design, Layout                                 AMS                    X    X     X     X    X   X   X     X    X    X    X
---------------------------------------------- ---------------- ---- ---- ---- ------------------- ---- ----- ---- ---- ----
Preliminary VHDL netlist of dig. part          PowerDsine                      \/  3.8.2001
---------------------------------------------- ---------------- ---- ---- ---- ----- ---- ------------------- ---- ---- ----
Final VHDL netlist of dig. part                PowerDsine                                 \/  16.8.2001
---------------------------------------------- ---------------- ---- ---- ---- ----- ---- ---- --- -------------------- ----
Provide Backannotation Simulation              AMS                                                 \/  31.8.2001
---------------------------------------------- ---------------- ---- ---- ---- ----- ---- ---- --- ---- --------------------
Approval of Backannotation Sim.                PowerDsine                                               \/  6.9.2001
---------------------------------------------- ---------------- ---- ---- ---- ----- ---- ---- --- ---- ----- ---- ---- ----
PG Tape                                        AMS
---------------------------------------------- ---------------- ---- ---- ---- ----- ---- ---- --- ---- ----- ---- ---- ----
Fabrication and Assembly                       AMS
---------------------------------------------- ---------------- ---- ---- ---- ----- ---- ---- --- ---- ----- ---- ---- ----
ES Delivery ceramic 15 pcs                     AMS
---------------------------------------------- ---------------- ---- ---- ---- ----- ---- ---- --- ---- ----- ---- ---- ----
ES Approval (on ceramic ES)                    PowerDsine
---------------------------------------------- ---------------- ---- ---- ---- ----- ---- ---- --- ---- ----- ---- ---- ----
Generation of Prototypes                       AMS
---------------------------------------------- ---------------- ---- ---- ---- ----- ---- ---- --- ---- ----- ---- ---- ----
Prototype delivery 25 pcs                      AMS
---------------------------------------------- ---------------- ---- ---- ---- ----- ---- ---- --- ---- ----- ---- ---- ----
Qualification at PowerDsine                    PowerDsine
---------------------------------------------- ---------------- ---- ---- ---- ----- ---- ---- --- ---- ----- ---- ---- ----
Prototype Approval by PowerDsine               PowerDsine
---------------------------------------------- ---------------- ---- ---- ---- ----- ---- ---- --- ---- ----- ---- ---- ----

<CAPTION>
                                             Responsible
-------------------------------------------- ----------------  ---- ---- ---- ---- ------ ---- ---- ---- ---- ------ ---- ---- ---
Calendar week                                                   40   41   42   43   44     45   46   47   48   49     50   51   52
-------------------------------------------- ----------------  ---- ---- ---- ---- ------ ---- ---- ---- ---- ------ ---- ---- ---
<S>                                          <C>               <C>  <C>  <C>  <C>  <C>    <C>  <C>  <C>  <C>  <C>    <C>  <C>  <C>
Friday of cw                                                   5.10                2.11.                      7.12.
-------------------------------------------- ----------------  ---- ---- ---- ---- ------ ---- ---- ---- ---- ------ ---- ---- ---
Device Specification                         AMS / PowerDsine
-------------------------------------------- ----------------  ---- ---- ---- ---- ------ ---- ---- ---- ---- ------ ---- ---- ---
Dev.  Spec. Signed                           AMS / PowerDsine
-------------------------------------------- ----------------  ---- ---- ---- ---- ------ ---- ---- ---- ---- ------ ---- ---- ---
Design, Layout                               AMS                X
-------------------------------------------- ----------------  ---- ---- ---- ---- ------ ---- ---- ---- ---- ------ ---- ---- ---
Preliminary VHDL netlist of dig. part        PowerDsine
-------------------------------------------- ----------------  ---- ---- ---- ---- ------ ---- ---- ---- ---- ------ ---- ---- ---
Final VHDL netlist of dig. part              PowerDsine
-------------------------------------------- ----------------  ---- ---- ---- ---- ------ ---- ---- ---- ---- ------ ---- ---- ---
Provide Backannotation Simulation            AMS
-------------------------------------------- ----------------  ---- ---- ---- ---- ------ ---- ---- ---- ---- ------ ---- ---- ---
Approval of Backannotation Sim.              PowerDsine
-------------------------------------------- ----------------  ------------------- ------ ---- ---- ---- ---- ------ ---- ---- ---
PG Tape                                      AMS               \/ 5.10.2001
-------------------------------------------- ----------------  ------------------- ------ ---- ---- ---- ---- ------ ---- ---- ---
Fabrication and Assembly                     AMS                     X    X    X     X     X    X
-------------------------------------------- ----------------  ---- ---- ---- ---- ------ ---- --------------------- ---- ---- ---
ES Delivery ceramic 15 pcs                   AMS                                               \/  6.11.2001
-------------------------------------------- ----------------  ---- ---- ---- ---- ------ ---- ---- ---- ---- ------ -------------
ES Approval (on ceramic ES)                  PowerDsine                                                             \/  13.12.2001
-------------------------------------------- ----------------  ---- ---- ---- ---- ------ ---- ---- ---- ---- ------ ---- ---- ---
Generation of Prototypes                     AMS                                                                           X    X
-------------------------------------------- ----------------  ---- ---- ---- ---- ------ ---- ---- ---- ---- ------ ---- ---- ---
Prototype delivery 25 pcs                    AMS
-------------------------------------------- ----------------  ---- ---- ---- ---- ------ ---- ---- ---- ---- ------ ---- ---- ---
Qualification at PowerDsine                  PowerDsine
-------------------------------------------- ----------------  ---- ---- ---- ---- ------ ---- ---- ---- ---- ------ ---- ---- ---
Prototype Approval by PowerDsine             PowerDsine
-------------------------------------------- ----------------  ---- ---- ---- ---- ------ ---- ---- ---- ---- ------ ---- ---- ---

<CAPTION>
                                               Responsible
---------------------------------------------- ---------------- ----  --- -- --- ----- --- --- -- ------ ---- ---
Calendar week                                                    1     2   3  4   5     6   7   8  9      10   11
---------------------------------------------- ---------------- ----  --- -- --- ----- --- --- -- ------ ---- ---
<S>                                            <C>              <C>   <C> <C><C> <C>   <C> <C> <C><C>    <C>  <C>
Friday of cw                                                    4.1.             1.2.             1.3.
---------------------------------------------- ---------------- ----  --- -- --- ----- --- --- -- ------ ---- ---
Device Specification                           AMS / PowerDsine
---------------------------------------------- ---------------- ----  --- -- --- ----- --- --- -- ------ ---- ---
Dev.  Spec. Signed                             AMS / PowerDsine
---------------------------------------------- ---------------- ----  --- -- --- ----- --- --- -- ------ ---- ---
Design, Layout                                 AMS
---------------------------------------------- ---------------- ----  --- -- --- ----- --- --- -- ------ ---- ---
Preliminary VHDL netlist of dig. part          PowerDsine
---------------------------------------------- ---------------- ----  --- -- --- ----- --- --- -- ------ ---- ---
Final VHDL netlist of dig. part                PowerDsine
---------------------------------------------- ---------------- ----  --- -- --- ----- --- --- -- ------ ---- ---
Provide Backannotation Simulation              AMS
---------------------------------------------- ---------------- ----  --- -- --- ----- --- --- -- ------ ---- ---
Approval of Backannotation Sim.                PowerDsine
---------------------------------------------- ---------------- ----  --- -- --- ----- --- --- -- ------ ---- ---
PG Tape                                        AMS
---------------------------------------------- ---------------- ----  --- -- --- ----- --- --- -- ------ ---- ---
Fabrication and Assembly                       AMS
---------------------------------------------- ---------------- ----  --- -- --- ----- --- --- -- ------ ---- ---
ES Delivery ceramic 15 pcs                     AMS
---------------------------------------------- ---------------------  --- -- --- ----- --- --- -- ------ ---- ---
ES Approval (on ceramic ES)                    PowerDsine
---------------------------------------------- ---------------- ----  --- -- --- ----- --- --- -- ------ ---- ---
Generation of Prototypes                       AMS                X    X
---------------------------------------------- ---------------- ----  ---------------- --- --- -- ------ ---- ---
Prototype delivery 25 pcs                      AMS                    \/  11.1.2002
---------------------------------------------- ---------------- ----  --- -- --- ----- --- --- -- ------ ---- ---
Qualification at PowerDsine                    PowerDsine                 X   X    X    X   X  X
---------------------------------------------- ---------------- ----  --- -- --- ----- --- --- -------------- ---
Prototype Approval by PowerDsine               PowerDsine                                      \/  22.2.02
---------------------------------------------- ---------------- ----  --- -- --- ----- --- --- -------------- ---
</TABLE>

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