Document:

Exhibit
        10.5

      

      Amendment
        to Employment Agreement

      Fuel
        Tech, Inc. – J.F. Norris Jr.

      

      Amendment
        No. 1 dated as of February 28, 2007 to the Agreement of February 28, 2006
        (the
“Agreement”) between Fuel Tech, Inc., a Delaware corporation (the “Company”) of
        512 Kingsland Drive, Batavia, Illinois 60510 and John (Johnny) F. Norris
        Jr. of
        2140 Wingate Drive, Delaware, Ohio 43015 (“Employee”).

      

      The
        Company and the Employee agree, as authorized by the Board of Directors of
        the
        Company on February 28, 2007, that the dates of June 30, 2007; July 1, 2007;
        and
        July 1, 2007 set out, respectively, in Subsections 1(g), 1(h) and 1(i) of
        the
        Agreement, be and they hereby are replaced with the dates of June 30, 2008,
        July
        1, 2008 and July1, 2008.

      

      In
        witness hereof, the Company and the Employee have each executed this Amendment
        No. 1 to the Agreement as of the date first written above.February
      28, 2008

     

     

     

     

     

      
        

      

    

    AGREEMENT
      FOR 

    THE
      ISSUE AND SALE OF SHARES IN 

    LAPIS
      TECHNOLOGIES, INC.

    AND

    THE
      TRANSFER OF SHARES IN 

    STAR
      NIGHT TECHNOLOGIES LTD.

    
      
        

      

    

    

     

     

    BY
      AND BETWEEN

     

     

    Lapis
      Technologies, Inc.

     

     

    AND

     

     

    Harry
      Mund

     

     

    AND

     

     

    Mordechai
      Solomon

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      
        
          
            
               

              
                
                  THIS
                    AGREEMENT is made and entered into as of this 28th
                    day of
                    February, 2008 by and among: 

                  

                  
                    	
                            (1)

                          	
                            Lapis
                              Technologies, Inc.,
                              a
                              corporation organized under the laws of the State of
                              Delaware,
                              the
                              common stock of which is quoted and traded on the OTC
                              Bulletin Board under
                              the symbol LPST.OB. (“Lapis”);
                              and

                          

                  

                  
                    	
                            (2)

                          	
                            Harry
                              Mund,
                              I.D. 068255470, of 73 Ben-Gurion Street, Kiriat Motzkin,
                              Israel
                              (“Mund”);
                              and 

                          

                  

                  
                    	
                            (3)

                          	
                            Mordechai
                              Solomon,
                              I.D. 30458954, of 11 Dganya St. Ra’anana, Israel (hereinafter: the
                              “Investor”).

                          

                  

                  

                  WHEREAS,
                    the Investor is active, through companies under his control,
                    including
S.D.S.
                    (Star Defense Systems) Ltd.
                    a
                    public company registered in the State of Israel, traded on the
                    Tel-Aviv Stock
                    Exchange under the symbol SDS (א.ס.ד.ס)
                    (“SDS”),
                    in
                    the field of the defense industry, inter
                    alia,
                    in the
                    development, manufacturing and marketing of applications for
                    night vision
                    equipment, airplane equipment and airborne systems upgrading
                    and various safety
                    equipment; and

                  

                  WHEREAS,
                    Lapis is a holding company, which is active, through its subsidiaries:
                    (i)
                    Enertec Systems 2001 Ltd. (“Systems”),
                    a
                    private company registered in Israel and active, inter alia,
                    in Israel, in the
                    field of design, development and manufacturing of test systems,
                    airborne, ship
                    borne and land electronic equipment and other various military
                    systems, for
                    military manufacturers; and (ii) Enertec
                    Electronics Ltd. (“Electronics”),
                    a
                    private company registered and active in Israel, in the field
                    of manufacturing,
                    marketing and distribution of power supplies and other related
                    power products
                    and power supply testing equipment, both on behalf of third party
                    manufacturers;
                    and

                  

                  WHEREAS,
                    Mund, who is the controlling shareholder of Lapis, acts as chairman
                    of the
                    board, CEO, president and secretary of Lapis and also as a director
                    of Systems;
                    and

                  

                  WHEREAS,
                    Lapis and the Investor wish that Lapis shall issue shares to
                    the Investor in
                    consideration for his holdings in Star Night Technologies Ltd.
                    (“SN”),
                    an
                    Israeli company with company number 52-003325-9, whose shares
                    are quoted and
                    traded on the Tel Aviv Stock Exchange Ltd. under the symbol STNT
                    ((סטנט,
                    which
                    holdings the Investor shall transfer to Lapis. 

                  

                  WHEREAS,
                    Mund is to be granted the Mund Option (as defined below) in respect
                    of certain
                    shares in Lapis.

                  

                  NOW,
                    THEREFORE, in consideration of the foregoing and the representation,
                    warranties,
                    conditions and covenants contained in this Agreement and other
                    good and valuable
                    consideration, the receipt and sufficiency of which is hereby
                    acknowledged, and
                    intending to be legally bound hereby, the Parties (as defined
                    below) hereto
                    agree as follows.

                  

                   

                  
                    	1.	
                            INTERPRETATION
                              & DEFINITIONS

                          

                  

                   

                  1.1. The
                    preamble and Schedules to this Agreement are an integral part
                    hereof.

                  

                  
                    
                       

                    

                    
                      2

                      
                        

                      

                    

                    
                       

                    

                  

                  1.2. In
                    this
                    Agreement, the following expressions shall bear the meanings
                    set forth alongside
                    them, insofar as the context does not require otherwise or such
                    meaning does not
                    contradict the contents or context thereof:

                  

                  1.2.1. "Acquisition
                    Transaction"
                    shall
                    mean any transaction involving:

                   

                  1.2.1.1. The
                    sale,
                    license, disposition or acquisition of all or a material portion
                    of
                    Lapis;

                   

                   

                  1.2.1.2. The
                    issuance, disposition or acquisition of: (i) any capital stock or other
                    equity security of Lapis; (ii) any option, call, warrant or right (whether
                    or not immediately exercisable) to acquire any capital stock
                    or other equity
                    security of Lapis; or (iii) any security, instrument or obligation that is
                    or may become convertible into or exchangeable for any capital
                    stock or other
                    equity security of Lapis; or

                   

                  1.2.1.3. Any
                    merger, consolidation, business combination, reorganization or
                    similar
                    transaction involving Lapis.

                  

                  1.2.2. “Agreed
                    Form”
means,
                    in relation to a document, the form of that document which has
                    been agreed by
                    the Parties, acting reasonably, and attached to this Agreement
                    as a Schedule on
                    the date of this Agreement and/or on Closing.

                  

                  1.2.3. "Agreement"
                    shall
                    mean this agreement including all Schedules hereto.

                  

                  1.2.4. "Business"
                    means
                    the business of Lapis as carried out on the date of this Agreement.

                  

                  1.2.5. "Certificate
                    of Incorporation"
                    shall
                    mean the Certificate of Incorporation and By-laws of Lapis and
                    the Memorandum
                    and Articles of Association in the case of SN.

                  

                  1.2.6. "Claim"
                    means
                    any claim for breach of the Mund and Lapis Warranties under this
                    Agreement.

                  

                  1.2.7. "Closing
                    Date"
                    means
                    the 21st
                    day
                    following the date on which an information statement under the
                    Exchange Act is
                    mailed to the shareholders of Lapis, provided that all Conditions
                    have been
                    fulfilled or waived in writing, by the relevant Party, in accordance
                    with the
                    terms of this Agreement, and on which the Closing shall take
                    place.

                  

                  
                    
                       

                    

                    
                      3

                      
                        

                      

                    

                    
                       

                    

                  

                  1.1.1. "Conditions"
                    means
                    the conditions to Closing set out in clauses 10,
                    11
                    and 12,
                    and a “Condition” means
                    any
                    of them.

                  

                  1.2.8. "Costs"
                    means
                    losses, damages, costs (including reasonable legal costs) and
                    expenses, in each
                    case of any nature whatsoever.

                  

                  1.2.9. "Common Shares"
                    means
                    the shares of common stock of Lapis, par value $0.001 per share.

                  

                  1.2.10. "Consent"
                    shall
                    mean any approval, consent, ratification, permission, waiver
                    or authorization
                    (including any Governmental Authorization) made in writing duly
                    signed by the
                    consenting party. 

                  

                  1.2.11. "Due
                    Diligence Information "
                    shall
                    mean the due diligence information and documentation relating
                    to Systems, Lapis
                    and its subsidiaries comprising the correspondence, contracts,
                    agreements,
                    licences, documents and other information made available to the
                    Investor and its
                    advisers as listed in the Due Diligence Information Index List
                    attached to this
                    Agreement.

                  

                  1.2.12. "Due
                    Diligence Information Index List"
                    shall
                    mean the list of documents provided to the Investor and his advisors
                    in respect
                    of such due diligence conducted, which is attached hereto as
Schedule
                    1.2.13.
                    

                  

                  1.2.13. "Disclosure
                    Letter"
                    means
Schedule
                    1.2.13,
                    the
                    Schedules to clause 5 (save for Schedule
                    5.30.1)
                    and
Schedule
                    11.4.1
                    to this
                    Agreement.

                  

                  1.2.14. "Dollar(s)
                    "
                    or
"$"
                    shall
                    mean United States dollar(s).

                  

                  1.2.15. "Encumbrance"
                    shall
                    mean any lien, pledge, hypothecation, charge, mortgage, security
                    interest,
                    encumbrance, claim, any restriction on the transfer of any security
                    or other
                    asset, any restriction on exercise or transfer of any other attribute
                    of
                    ownership of any asset.

                  

                  
                    
                       

                    

                    
                      4

                      
                        

                      

                    

                    
                       

                    

                  

                  1.2.16. "Entity"
                    shall
                    mean any corporation (including any non-profit corporation),
                    general
                    partnership, limited partnership, limited liability partnership,
                    joint venture,
                    estate, trust, company (including any limited liability company),
                    firm or other
                    enterprise, association or organization.

                  

                  1.2.17. "Exchange
                    Act"
                    shall
                    mean the Securities Exchange Act of 1934, as amended.

                  

                  1.2.18.  "Fully
                    Diluted Basis"
                    shall
                    mean Lapis’ issued share capital assuming: (i) the exercise of all outstanding
                    options and warrants exercisable into shares of Lapis, if any;
                    (ii) the exercise
                    of all options and warrants exercisable into shares of Lapis,
                    reserved under
                    stock option plans of Lapis, if any; (iii) the conversion of
                    all outstanding
                    convertible securities of Lapis that are convertible
                    into
                    shares of Lapis, if any; and (iv) the enforcement of all and
                    whatsoever
                    obligations and undertakings by Lapis, both oral or in writing,
                    under which
                    Lapis is obligated to grant or issue any option or warrant, exercisable,
                    or any
                    security, convertible, into shares of Lapis, if any. 

                  

                  1.2.19. "Governmental
                    Authorization"
                    shall
                    mean any: (a) permit, license, certificate, franchise, permission,
                    clearance, registration, qualification or authorization issued,
                    granted, given
                    or otherwise made available by or under the authority of any
                    Governmental Body
                    or pursuant to any Legal Requirement; or (b) right under any contract with
                    any Governmental Body.

                  

                  1.2.20. "Governmental
                    Body"
                    shall
                    mean any nation, commonwealth, province, territory, county, municipality,
                    district or other jurisdiction of any nature, federal, state, local,
                    foreign or other governmental or quasi-governmental authority
                    of any nature
                    (including any governmental division, department, agency, commission,
                    official,
                    organization, unit, body or entity and any court or other
                    tribunal).

                  

                  1.2.21. "Intellectual
                    Property" shall
                    mean the following items of intangible and tangible property:

                   

                  1.2.21.1. Patents,
                    whether in the form of utility patents or design patents and
                    all pending
                    applications for such patents; 

                   

                  
                    
                       

                    

                    
                      5

                      
                        

                      

                    

                    
                       

                    

                  

                  1.2.21.2. Trademarks,
                    trade names, service marks, designs, logos, trade dress, and
                    trade styles,
                    whether or not registered, and all pending applications for registration
                    of the
                    same; and

                   

                  1.2.21.3. Copyrights,
                    whether or not registered, and all pending applications for registration
                    of the
                    same.

                   

                  1.2.22. "Investor's
                    SN Shares" shall
                    mean the Investor’s entire personal holdings of shares in SN, being 4,539,557
                    common shares of SN, par value NIS 0.01 per share.

                  

                  1.2.23. "Issued
                    Shares" shall
                    mean 75,129,500
                    of Common Shares that will grant the Investor 92% of the issued
                    and outstanding
                    share capital and voting rights in Lapis on the Closing Date
                    on a Fully Diluted
                    Basis.

                  

                  1.2.24. "Legal
                    Proceeding"
                    shall
                    mean any legal action, suit, litigation, arbitration, proceeding
                    (including any
                    civil, criminal, administrative, investigative or appellate proceeding),
                    hearing, inquiry, audit, examination or investigation commenced,
                    brought,
                    conducted or heard by or before, or otherwise involving, any
                    court or other
                    Governmental Body or any arbitrator or arbitration panel.

                  

                  1.2.25. "Legal
                    Requirement"
                    shall
                    mean any federal, state, local, municipal, foreign or other law,
                    statute,
                    constitution, principle of common law, resolution, ordinance,
                    code, edict,
                    decree, rule, regulation, ruling or requirement issued, enacted,
                    adopted,
                    promulgated, implemented or otherwise put into effect by or under
                    the authority
                    of any Governmental Body.

                  

                  1.2.26. "LoI"
                    means
                    the Letter of Intent dated 11 October 2007, entered by Lapis,
                    Mund, the Investor
                    and SDS.

                  

                  1.2.27. "material
                    adverse effect"
                    means
                    such event, change or effect which is materially adverse to:
                    (i) the businesses
                    or results of operations of Lapis as a whole; or (ii) the ability
                    of Lapis to
                    consummate the transactions contemplated in the Transaction Documents,
                    for the
                    purposes of this Agreement, material shall be deemed any single
                    or series of
                    connected actions and/or transactions amounting to an amount
                    that is equal to or
                    greater than five percent (5%) of the aggregate of Lapis’ and its Subsidiaries’
revenues over the year 2007. 

                  

                  
                    
                       

                    

                    
                      6

                      
                        

                      

                    

                    
                       

                    

                  

                  1.2.28. "Material
                    Agreement" shall
                    mean any agreement that is not in the ordinary course of, and
                    which has a
                    material effect on, the Business.

                  

                  1.1.2. "Mund
                    Option"
                    shall
                    mean the put option granted to Mund by the Investor as set out
                    under clause
15
                    of this
                    Agreement.

                  

                  1.2.29. "NIS"
                    means
                    New
                    Israeli Shekel(s).

                  

                  1.2.30. "Parties"
                    shall
                    mean Lapis, Mund and the Investor and each a "Party".

                  

                  1.2.31. "Permitted
                    Transferee" shall
                    mean: (i) each member of the immediate family of Mund, meaning
                    for the purposes
                    of this definition: mother, wife and/or children; (ii) a company
                    in which Mund
                    holds at least fifty (50) per cent of the issued and outstanding
                    shares; or
                    (iii) a company in which Mund can appoint at least half of the
                    members of the
                    board of directors.

                  

                  1.2.32. "Person"
                    shall
                    mean any individual, Entity or Governmental Body.

                  

                  1.2.33. "Preferred
                    Shares" shall mean
                    the preferred
                    stock of Lapis, par value $0.001 per share.

                  

                  1.2.34. "Related
                    Party"
                    shall
                    mean: (i) each of Lapis’ stockholders that owns an aggregate of five
                    percent (5%) or more of the capital stock of Lapis; (ii) each individual
                    who is an officer or director of Lapis; (iii) each member of the immediate
                    family, meaning for the purposes of this definition: next of
                    kin, parents and
                    children, of each of the individuals referred to in "(i)" and
                    "(ii)" above; and
                    (iv) any Entity (other than Lapis or any of its Subsidiaries)
                    in which any one
                    of the individuals referred to in "(i)", "(ii)" and "(iii)" above
                    holds (or in
                    which more than one of such individuals collectively hold), beneficially
                    or
                    otherwise, a material voting, proprietary or equity interest.

                  

                  
                    
                       

                    

                    
                      7

                      
                        

                      

                    

                    
                       

                    

                  

                  1.2.35. "Representatives"
                    shall
                    mean officers, directors, employees, agents, attorneys, accountants
                    and advisors
                    of Lapis.

                  

                  1.2.36. "SEC"
                    shall
                    mean the United States Securities and Exchange Commission.

                  

                  1.2.37. "Securities
                    Act"
                    shall
                    mean the Securities Act of 1933, as amended.

                  

                  1.2.38. "Shareholder
                    Indebtedness"
                    shall
                    mean all indebtedness outstanding between any of Lapis and/or
                    Mund and/or Lapis’
Subsidiaries.

                  

                  1.2.39. "Subsidiaries"
                    means
                    Systems, Electronics and Enertec Management Ltd. 

                  

                  1.2.40. "Tax"
                    shall
                    mean any tax (including any income tax, franchise tax, capital
                    gains tax, gross
                    receipts tax, value-added tax, surtax, excise tax, ad valorem
                    tax, transfer tax,
                    stamp tax, sales tax, use tax, property tax, business tax, withholding
                    tax or
                    payroll tax), levy, assessment, tariff, duty (including any customs
                    duty) and
                    any related charge or amount (including any fine, penalty or
                    interest), in each
                    case imposed, assessed or collected by or under the legal authority
                    of any
                    Governmental Body entitled by applicable law to levy Tax.

                  

                  1.2.41. "Tax
                    Returns"
                    shall
                    mean returns, reports and information statements with respect
                    to Tax required to
                    be filed by or on behalf of Lapis with the US Internal Revenue
                    Authority and any
                    other taxing authority domestic or foreign.

                  

                  1.2.42. "Third
                    Party Assurances"
                    means
                    all guarantees, indemnities, counter-indemnities and letters
                    of comfort of any
                    nature whatsoever given to a third party by Mund and/or Zvi Avni
                    and/or
                    Electronics in respect of any obligation or liability of Lapis
                    and/or its
                    Subsidiaries other than Electronics, for the avoidance of doubt,
                    the above shall
                    include all guarantees, obligations and/or liabilities of any
                    nature whatsoever
                    either Mund and/or Mr. Zvi Avni and/or Electronics may have towards
                    any bank
                    associated with the business and/or activities of Systems and/or
                    Lapis.

                  

                  1.2.43. "Trading
                    Day" shall
                    mean a day on which the OTC Bulletin Board is open for trading
                    or, if Lapis is
                    subsequently listed for trading on a stock exchange, any day
                    on which such
                    exchange is open for trading.

                  

                  
                    
                       

                    

                    
                      8

                      
                        

                      

                    

                    
                       

                    

                  

                  1.2.44. "Transaction
                    Documents"
                    shall
                    mean this Agreement, the Systems SPA (as defined below), the
                    Electronics SPA (as
                    defined below), the Escrow
                    Agreement (as defined below), the Due Diligence Information,
                    the Disclosure
                    Letter and any other Agreed Form Documents. 

                  

                  1.1.3. "Value"
                    shall
                    mean the value of the Option Shares as calculated in accordance
                    with clause
15.2
                    of this
                    Agreement.

                  

                  
                    	2.	
                            ISSUANCE
                              AND PURCHASE OF THE ISSUED
                              SHARES

                          

                  

                  

                  2.1. Subject
                    to and in accordance with the terms of this Agreement, on the
                    Closing Date,
                    Lapis shall issue and allot to the Investor and the Investor
                    shall subscribe to
                    the Issued Shares, which shall be 75,129,500 Common Shares. The
                    Issued Shares
                    shall constitute immediately following the Closing, 92% of the
                    issued and
                    outstanding share capital of Lapis on a Fully Diluted Basis.
                    The Investor shall
                    subscribe to and purchase the Issued Shares, subject to the terms
                    and conditions
                    of this Agreement, in exchange, inter alia, for the transfer
                    to Lapis of the
                    Investor's SN Shares and the grant of the Mund Option, both in
                    accordance with
                    the provisions below. 

                  

                  1.2. The
                    Parties acknowledge that the issue of the Issued Shares shall
                    be completed on
                    the basis of the share issue and other arrangements set out or
                    referred to in
                    the document attached hereto as Schedule
                    1.2.
                    

                  

                  1.3. Upon
                    the
                    issuance of the Issued Shares to the Investor, the ownership
                    of the issued share
                    capital of Lapis on a Fully Diluted Basis shall be as detailed,
                    in the
                    capitalization table attached hereto as Schedule
                    2.2.

                  

                  
                    	3.	
                            TRANSFER
                              OF THE INVESTOR’S SN
                              SHARES

                          

                  

                  

                  3.1.  In
                    consideration for the Issued Shares and simultaneously with the
                    issue of the
                    Issued Shares, the Investor shall unconditionally transfer to
                    Lapis the
                    Investor’s SN Shares, including any rights accrued thereon per the date
                    of such
                    transfer.

                  

                  1.4. The
                    Parties acknowledge that the transfer of the Investor’s SN Shares shall be
                    completed on the basis of the share transfer and other arrangements
                    set out or
                    referred to in Schedule
                    1.4.
                    

                  

                  
                    	4.	
                            CLOSING

                          

                  

                   

                  4.1.  The
                    closing of the issue of the Issued Shares to the Investor, the
                    transfer to Lapis
                    of the Investor’s SN Shares and the grant of the Mund Option in accordance with
                    the terms of this Agreement and the consummation of the other
                    transactions
                    contemplated under this Agreement (the "Closing")
                    shall
                    take place at the offices of at 10:00a.m. at the offices of Shnitzer,
                    Gotlieb
& Co., 7 Menachem Begin Rd., Ramat-Gan 52681, or such other place
                    as the
                    Parties may agree, on the Closing Date.

                  

                  
                    
                       

                    

                    
                      9

                      
                        

                      

                    

                    
                       

                    

                  

                  4.2. The
                    Parties shall negotiate in good faith with a view to agreeing
                    before the Closing
                    Date the final form of any Transaction Document, which is not
                    in Agreed Form at
                    the date of this Agreement. 

                  

                  1.5. At
                    Closing each of the Parties shall deliver or perform (or procure
                    that there is
                    delivered or performed) all those documents, items and actions
                    respectively
                    listed in relation to that Party in Schedule
                    4.3. 

                  

                  1.6. If
                    the
                    Parties fail or are unable to perform any of their respective
                    closing
                    obligations as set out in Schedule
                    1.5,
                    which
                    are required to be performed by them on or before Closing, and
                    whichever of the
                    Parties is the defaulting Party, such Party shall be referred
                    to as the
“Defaulting
                    Party”
and
                    the
                    other the “Non-Defaulting
                    Party”,
                    the
                    Non-Defaulting Party shall not be obliged to complete such Party’s obligations
                    under this Agreement and may, in its absolute discretion, by
                    written notice to
                    the Defaulting Party:

                  

                  1.6.1. elect
                    to
                    defer Closing by not more than twenty (20) Business Days after
                    the original date
                    for Closing to such other date as it may specify in such notice
                    (in which event
                    the provisions of this clause 4.2.1
                    shall
                    apply, mutatis mutandis, if any of the Parties fails or is unable
                    to perform any
                    of its closing obligations as set out in Schedule
                    1.5
                    on such
                    other date);
                    or

                  

                  1.6.2. elect
                    to
                    complete Closing and its obligations under this Agreement on
                    that date and: (i)
                    specify a further date on which the Defaulting Party shall be
                    obliged to
                    complete its outstanding obligations;
                    and/or
                    (ii) waive all or some of the obligations contained in Schedule 1.5
                    at its
                    discretion. 

                  

                  
                    	5.	
                            REPRESENTATIONS
                              AND WARRANTIES OF LAPIS AND
                              MUND

                          

                  

                  

                  Each
                    of
                    Lapis and Mund, jointly and severally, hereby represents and
                    warrants to the
                    Investor the below representations and warranties as of the date
                    hereof and
                    acknowledges that the Investor is entering into this Agreement
                    on the basis of
                    and in reliance thereon (the “Mund
                    and Lapis Warranties”).

                  

                  
                    
                       

                    

                    
                      10

                      
                        

                      

                    

                    
                       

                    

                  

                  The
                    below
                    Mund and Lapis Warranties are given subject to and are qualified
                    by:

                   

                  
                    	 	
                            (i)

                          	
                            any
                              matters fairly disclosed by or under this Agreement,
                              any of the
                              Transaction Documents, the Disclosure Letter, any document
                              contained in
                              the Due Diligence Information, any document provided
                              in the course of the
                              financial due diligence carried out in accordance with
                              any of the
                              Transaction Documents or any other information provided
                              in writing to the
                              Investor or his advisers during the course of any investigation
                              by or on
                              behalf of the Investor into the affairs of Systems,
                              Lapis or any of its
                              Subsidiaries; and 

                          

                  

                   

                   

                  
                    	 	
                            (i)

                          	
                            any
                              other limitations and qualifications as set out in
                              this clause
                              5
                              and in Schedule
                              5.30.1.
                              

                          

                  

                   

                  5.1. Due
                    Organization and Standing 

                   

                  Lapis
                    is
                    a corporation duly organized and validly existing under the laws
                    of the State of
                    Delaware, the USA. Lapis has all requisite corporate power to
                    own and operate
                    its assets, and to carry on its business as presently conducted,
                    other than
                    where such would not have a material adverse effect. Lapis has
                    not taken any
                    action or failed to take any action, which action or failure
                    would preclude or
                    prevent Lapis from conducting its Business after the execution
                    of this Agreement
                    in the manner conducted on the date hereof, subject to changes
                    to the Business
                    pursuant to the consummation of the transactions contemplated
                    under the
                    Transaction Documents. Lapis has all permits, licenses and any
                    similar authority
                    necessary for the conduct of its Business, the lack of which
                    could adversely
                    affect the business, properties, prospects or financial condition
                    of Lapis.
                    Lapis is not in default under any of such permits, licenses,
                    or other similar
                    authority, which default would have a material adverse effect
                    on Lapis.

                   

                  5.2. Organizational
                    Documents

                   

                  Lapis’
                    Certificate of Incorporation and Bylaws, as in effect on the
                    date hereof are
                    attached hereto as Schedule
                    5.2.
                    No act
                    has been effected by Lapis to amend any of such documents and,
                    to Lapis’ and
                    Mund's knowledge, to wind up Lapis. 

                   

                  5.3. Capitalization

                   

                  5.3.1. Lapis’
                    authorized capital stock is comprised of 5,000,000 shares of
                    preferred stock,
                    par value $0.001 per share, none of which is outstanding, and
                    100,000,000 Common
                    Shares, of which 6,483,000 Common Shares are issued and outstanding.
                    All of such
                    outstanding Common Shares have been validly issued, are fully
                    paid and
                    nonassessable and were issued in accordance with all applicable
                    laws, rules and
                    regulations. 

                  

                  1.6.3. The
                    issued and outstanding share capital of Lapis, on a Fully Diluted
                    Basis is set
                    forth in Schedule
                    5.3.2
                    hereof.
                    At the Closing Date, save as provided for in accordance with
                    the provisions of
                    this Agreement or the Transaction Documents and the warrants
                    granted to an
                    historic services provider to acquire shares in Lapis as set
                    out in
                    Schedule 1.6.3,
                    there
                    will not be any outstanding or authorized subscriptions, options,
                    warrants,
                    calls, rights, commitments, convertible securities, or any other
                    agreements of
                    any character directly or indirectly obligating Lapis to issue
                    any additional
                    shares of Lapis or any securities convertible into, or exchangeable
                    for, or
                    evidencing the right to subscribe for any shares of Lapis, except
                    as set forth
                    in Schedule
                    1.6.3.
                    There
                    are no agreements or arrangements under which Lapis is obligated
                    to register the
                    sale of any of its securities under the Securities Act. 

                  

                  
                    
                       

                    

                    
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                  5.4. Valid
                    Issuance The
                    Issued Shares to be issued to the Investor in the transaction
                    contemplated by
                    this Agreement will, when issued and paid for in accordance with
                    the provisions
                    of this Agreement, upon Closing, be validly authorized, issued,
                    fully paid and
                    nonassessable and issued in compliance with an exemption from
                    applicable United
                    States federal securities laws. 

                  

                  5.5. SEC
                    Filings; Financial Statements 

                   

                  5.5.1. Lapis
                    has
                    filed all reports required to be filed by Lapis under the Securities
                    Act and the
                    Exchange Act for the two-year period preceding the date hereof
                    (or such shorter
                    period as Lapis was required by applicable law or regulation
                    to file such
                    material) (the “Lapis
                    SEC Documents”),
                    each
                    of which has complied in all material respects with all applicable
                    requirements
                    of the Exchange Act and the rules and regulations promulgated
                    thereunder, each
                    as in effect on the dates such reports were filed and, as of
                    their respective
                    dates of filing with the SEC, none of the Lapis SEC Documents
                    contained any
                    untrue statement of a material fact or omitted to state a material
                    fact required
                    to be stated therein or necessary in order to make the statements
                    therein, in
                    the light of the circumstances under which they were made, not
                    misleading.

                  

                  
                    
                       

                    

                    
                      12

                      
                        

                      

                    

                    
                       

                    

                  

                  5.5.2. A
                    true
                    and complete copy of the audited, consolidated financial statements
                    of Lapis for
                    the year ended December 31, 2007, will be provided to the Investor
                    upon Closing
                    (the “Yearly
                    Financial Statements”);
                    a
                    trial balance sheet for the period ended 2 days prior to the
                    Closing will be
                    provided to the Investor upon Closing (the "Trial
                    Balance").
                    The
                    Yearly Financial Statements will have been prepared in conformity
                    with generally
                    accepted accounting principles in the U.S. (except: (i) as may
                    be otherwise
                    indicated in such financial statements or the notes thereto;
                    or (ii) in the case
                    of unaudited interim statements, to the extent they may not include
                    all required
                    footnotes or may be condensed or summary statements and are subject
                    to routine
                    year-end adjustments). Subject to the matters required to appear
                    in such
                    documents in accordance with the relevant accounting principles,
                    the Yearly
                    Financial Statements and the Trial Balance present fairly in
                    all material
                    respects the financial condition, the results of operations,
                    changes in
                    shareholders' equity and cash flow of Lapis for the periods referred
                    to in such
                    Yearly Financial Statements, subject, in the case of unaudited
                    statements, to
                    normal year-end audit adjustments. As of their respective dates,
                    the financial
                    statements of Lapis included in the Lapis SEC Documents complied
                    as to form in
                    all material respects with applicable accounting requirements
                    and the published
                    rules and regulations of the SEC with respect thereto as in effect
                    at the time
                    of filing. Such financial statements have been prepared in accordance
                    with
                    generally accepted accounting principles, consistently applied,
                    during the
                    periods involved (except: (i) as may be otherwise indicated in
                    such financial
                    statements or the notes thereto; or (ii) in the case of unaudited
                    interim
                    statements, to the extent they may not include all required footnotes
                    or may be
                    condensed or summary statements and are subject to routine year-end
                    adjustments)
                    and fairly present in all material respects the consolidated
                    financial position
                    of Lapis as of the dates thereof and the results of its operations
                    and cash
                    flows for the periods then ended (subject, in the case of unaudited
                    statements,
                    to normal year-end audit adjustments as referred to above). Subject
                    to the
                    provisions and qualifications set out in the Transaction Documents,
no
                    other
                    information provided by or on behalf of Lapis to the Investor
                    which is not
                    included in the Lapis SEC Documents, including, without limitation,
                    information
                    referred to in clause 6.14 of this Agreement, contains any untrue
                    statement of a
                    material fact or deliberately omits to state any material fact
                    necessary in
                    order to make the statements therein, in the light of the circumstance
                    under
                    which they are or were made, not misleading. 

                   

                  5.5.3. Other
                    than as disclosed in the Yearly Financial Statements and in the
                    Trial Balance,
                    Lapis has no financial liabilities, debts or financial obligations,
                    whether
                    accrued, absolute or contingent, which are required to be disclosed
                    in the
                    Yearly Financial Statements in accordance with the accounting
                    principles under
                    which such Yearly Financial Statements were made. 

                  

                  
                    
                       

                    

                    
                      13

                      
                        

                      

                    

                    
                       

                    

                  

                  1.6.4. Except
                    as
                    set forth in Schedule
                    5.5.4
                    and
Schedule
                    1.6.3
                    or as
                    otherwise contemplated in the Transaction Documents, since 1
                    January 2007 and
                    until the date of this Agreement Lapis has not consummated any
                    of the following:
                    (i) a merger with or an acquisition of a company; (ii) a transaction
                    which
                    represents a sale of five percent (5%) of Lapis’ activities during the fourth
                    fiscal quarter of 2007; (iii) created or extended any credit
                    facility, other
                    than in the ordinary course of business; and (iv) a material
                    transaction which
                    is out of the ordinary course of the Business of Lapis. Since
                    1 January 2007,
                    there has not been any event or condition of any character which
                    has materially
                    adversely affected Lapis’ Business. 

                  

                  5.5.4. Lapis’
                    minute books, share record books, and other records of Lapis
                    are correct in all
                    material respects and a true and complete copy of all such minute
                    books and
                    share record books has been provided to the Investor. 

                  

                  5.6. Tax
                    Matters 

                   

                  5.6.1. Lapis
                    has
                    timely filed all Tax Returns required by applicable laws. All
                    Tax Returns of
                    Lapis were true and correct in all material respects when filed,
                    and Lapis has
                    paid all taxes and other assessments due. Lapis made the proper
                    allowance in its
                    financial statements with respect to any taxes that are due but
                    not yet paid by
                    Lapis. 

                  

                  1.6.5. The
                    Lapis’ Yearly Financial Statements make full provisions for all Taxes
                    for which
                    Lapis was then or that thereafter became or, if known at the
                    date hereof, may
                    hereafter become liable or accountable in respect of or by reference
                    to any
                    income, profit, receipt, gain, transaction, agreement, distribution
                    or event
                    which was earned, accrued, received, or realized, entered into
                    except as
                    specifically set forth in Schedule
                    5.6.2
                    and
                    Lapis promptly paid or fully provided in its books of account
                    for all Taxes for
                    which it has or may hereafter become liable or accountable in
                    the period from
                    the date of its incorporation to the Closing Date. 

                  

                  
                    
                       

                    

                    
                      14

                      
                        

                      

                    

                    
                       

                    

                  

                  1.6.6. To
                    Lapis’
knowledge, and except as set forth in Schedule
                    1.6.5
                    or where
                    such would not have a material adverse effect, Lapis has at all
                    times and within
                    the requisite time limits promptly, fully and accurately observed,
                    performed and
                    complied with all material obligations or conditions imposed
                    on it, or to which
                    any claim, deduction, allowance or relief made, claimed by or
                    afforded to it was
                    made subject, under any legislation relating to Taxes. 

                   

                  1.6.7. Except
                    as
                    specifically set forth in Schedule
                    1.6.5,
                    to the
                    knowledge of the Lapis, at the date of this Agreement there are
                    no circumstances
                    which will or may, whether by lapse of time or the issue of any
                    notice of
                    assessment or otherwise, give rise to any dispute with any relevant
                    Government
                    Body in relation to its liability or accountability for Taxes,
                    any claim made by
                    it, any relief, deduction, or allowance afforded to it, or in
                    relation to the
                    status or character of Lapis any of its enterprises under or
                    for the purpose of
                    any provision of any legislation relating to Taxes. 

                  

                  5.7. Legal
                    Proceedings; Orders

                   

                  1.6.8. Except
                    as
                    set forth in Schedule
                    5.7.1
                    there is
                    no pending Legal Proceeding, and, to Lapis' knowledge, no Person
                    has threatened
                    to commence any Legal Proceeding that: (i) involves Lapis or any of the
                    assets owned or used by Lapis or any Person whose liability Lapis
                    assumed,
                    either contractually or by operation of law; or (ii) challenges, or that
                    may have the effect of preventing, delaying, making illegal or
                    otherwise
                    interfering with the consummation of, any of the transactions
                    contemplated by
                    this Agreement. To Lapis’ and Mund's knowledge no material event has occurred,
                    and no material claim, dispute or other condition or circumstance
                    exists, that
                    will, or that could reasonably be expected to, give rise to,
                    or serve as a basis
                    for, the commencement of any such Legal Proceeding that has a
                    potential material
                    adverse effect on Lapis.

                  

                  5.7.1. To
                    Lapis’
and Mund's knowledge, there is no order, writ, injunction, judgment
                    or decree to
                    which Lapis, or any of the assets owned or used by Lapis, are
                    subject. To Lapis’
and Mund's knowledge, no director, officer, consultant or employee
                    of Lapis is
                    subject to any order, writ, injunction, judgment or decree that
                    prohibits such
                    director, officer, consultant or employee from engaging in or
                    continuing any
                    conduct, activity relating to Lapis' Business.

                  

                  
                    
                       

                    

                    
                      15

                      
                        

                      

                    

                    
                       

                    

                  

                  5.8. Authority;
                    Binding Nature of Agreement Subject
                    to the fulfillment of all Conditions and other stipulations and
                    provisions set
                    out in the Transaction Documents: (i) Lapis has the absolute
                    and unrestricted
                    right, power and authority to enter into and perform its obligations
                    under this
                    Agreement and the execution, delivery and performance by Lapis
                    of this Agreement
                    (including the contemplated issuance of the Issued Shares in
                    accordance with
                    this Agreement) will have been duly authorized by all necessary
                    action on the
                    part of Lapis’ board of directors at Closing; and (ii) this Agreement
                    constitutes the legal, valid and binding obligation of Lapis,
                    enforceable
                    against it in accordance with its terms. 

                  

                  5.9. Non-Contravention;
                    Consents

                   

                  5.9.1. Except
                    as
                    set forth in this Agreement and/or as contemplated under any
                    of the Transaction
                    Documents or where such would not have a material adverse effect:
                    (1) the
                    execution, delivery or performance of this Agreement or any of
                    the Transaction
                    Documents; and (2) the consummation of any of the transactions contemplated
                    by this Agreement or any of the Transaction Documents, will not
                    directly or
                    indirectly (with or without notice or lapse of time):

                  

                  5.9.1.1. contravene,
                    conflict with or result in a violation of: (i) any of the provisions of the
                    Certificate of Incorporation or Bylaws; (ii) any resolution adopted by the
                    shareholders of Lapis, the board of directors or any committee
                    of the board of
                    directors of Lapis, and will not trigger any right of first refusal,
                    tag-along
                    right or preemptive right in respect of Lapis’ securities; 

                  

                  5.9.1.2. except
                    where such would not have a material adverse effect on the Business,
                    contravene,
                    conflict with or result in a violation of any applicable law,
                    rule or regulation
                    or give any Governmental Body or other Person the legal right
                    to challenge any
                    of the transactions contemplated by this Agreement or to exercise
                    any remedy or
                    obtain any relief under, any Legal Requirement or any order,
                    writ, injunction,
                    judgment or decree to which Lapis, or any of the assets owned
                    or used by Lapis
                    is subject;

                  

                  
                    
                       

                    

                    
                      16

                      
                        

                      

                    

                    
                       

                    

                  

                  5.9.1.3. except
                    where such would not have a material adverse effect on the Business,
                    contravene,
                    conflict with or result in a violation of any of the terms or
                    requirements of,
                    or give any Governmental Body the right to revoke, withdraw,
                    suspend, cancel,
                    terminate or modify, any Governmental Authorization that is held
                    by Lapis or
                    that otherwise relates to the Business or to any of the assets
                    owned or used by
                    Lapis;

                  

                  5.9.1.4. except
                    where such would not have a material adverse effect on the Business,
                    contravene,
                    conflict with or result in a violation or breach of, or result
                    in a default
                    under, any provision of any agreement to which Lapis is a party
                    (including
                    instruments, leases, licenses, arrangements, or undertakings
                    of any nature,
                    written or oral) that is or would constitute an agreement, or
                    give any Person
                    the right to: (i) declare a default or exercise any remedy under any such
                    agreement, which would have a material adverse effect on the
                    Business;
                    (ii) accelerate the maturity or performance of any such agreement
                    in a
                    manner which would have a material adverse effect on the Business;
                    or
                    (iii) cancel, terminate or modify any such agreement in a manner which
                    would have a material adverse effect on the Business; or

                  

                  5.9.1.5. result
                    in
                    the imposition or creation of any Encumbrance upon or with respect
                    to any asset
                    owned or used by Lapis. 

                  

                  5.10. Other
                    than as set out in the Conditions and/or in any other stipulation
                    or provision
                    of the Transaction Documents and except for filings required
                    under applicable
                    federal and/or state securities laws, Lapis is not required to
                    take any action
                    or obtain any authorization, consent, waiver or order of, give
                    any notice to, or
                    make any filing or registration with, any court or other federal,
                    state, local
                    or other Governmental Body or other Person in
                    connection with its execution, delivery and performance of the
                    transactions contemplated by this Agreement. 

                  

                  
                    
                       

                    

                    
                      17

                      
                        

                      

                    

                    
                       

                    

                  

                  5.11. Subsidiaries
                    At
                    the
                    date of this Agreement, except for Electronics, Enertec Management
                    Ltd.
                    and
Systems,
                    Lapis
                    has no subsidiaries, and does not own, of record or beneficially,
                    directly or
                    indirectly, any interest or share capital or equity interest
                    in any other
                    Entity.

                  

                  1.7. Outstanding
                    Debt
                    Except
                    as set forth in Schedule
                    5.12
                    or as
                    set out under this Agreement or any of the Transaction Documents
                    or in Lapis’
and/or its Subsidiaries’ financial statements, Lapis has no outstanding loans,
                    and is not a guarantor of any debt or monetary obligation. Given
                    the nature of
                    the information set forth in the Schedule
                    1.7,
                    which
                    will be subject to changes in the ordinary course of business
                    from time to time,
Schedule
                    1.7 will
                    be
                    amended and updated immediately prior to Closing to contain information
                    in
                    respect of all outstanding loans and guarantees granted by Lapis
                    for any debt or
                    obligation immediately prior to Closing.

                  

                  1.8. Contracts
                    and Contractual Arrangements Lapis
                    is
                    not in a material default under any indenture, mortgage, lease,
                    contract,
                    purchase order or other instrument, or agreement: (i) to which
                    Lapis is a party
                    and which is material for the Business; or (ii) by which Lapis
                    may be materially
                    adversely affected; or (iii) in respect of which any of its property
                    which is
                    material for the Business of Lapis may be materially adversely
                    affected. To
                    Lapis’ and Mund's knowledge, no third party is in material default under
                    any
                    material contract or other instrument or agreement to which Lapis
                    is a party or
                    by which it or any of its assets are affected. Except as detailed
                    in
Schedule
                    5.12 and
                    other
                    than where such would not have a material adverse effect on the
                    Business, there
                    is no contract, license, commitment or undertaking to which Lapis
                    is a party
                    that will be in effect after Closing: (i) that prohibits or substantially
                    restricts Lapis from freely engaging in any business in any part
                    of the world;
                    or (ii) obligating Lapis to share, license or develop any product
                    or technology.

                  

                  5.12. Indebtedness
                    of or to Major Shareholders; Conflicts of Interest 

                   

                  1.8.1. Except
                    as
                    detailed in Schedule
                    5.12.1
                    or in
                    Lapis’ and/or its Subsidiaries’ financial statements or any of the Transaction
                    Documents and other than in the ordinary course of business,
                    none of Lapis’
holders of ten percent (10%) or more of Lapis’ share capital on a fully diluted
                    basis (a “Major
                    Shareholder”),
                    directors, officers or employees is indebted to Lapis for an
                    amount exceeding
                    NIS 50,000, and Lapis has no debt or obligation to any of them
                    in an amount
                    exceeding NIS 50,000. 

                  

                  
                    
                       

                    

                    
                      18

                      
                        

                      

                    

                    
                       

                    

                  

                  5.12.1. Other
                    than as contemplated under any of the Transaction Documents,
                    none of the
                    Subsidiaries, Major Shareholders, directors, officers or employees:
                    (i) has any
                    interest in the assets, technology or know-how used or owned
                    by Lapis or which
                    is required for Lapis to operate its Business; (ii) is a party
                    to any contract
                    or business arrangement with Lapis affecting the ownership of
                    assets, technology
                    or know-how used or owned by Lapis or which is required for Lapis
                    to operate its
                    Business; or (iii) has any interest in any other transaction
                    related to the
                    assets, technology or know-how used or held by Lapis or which
                    is required for
                    Lapis to operate its Business. Except as set forth in the Lapis
                    SEC Documents or
                    as contemplated under any of the Transaction Documents, none
                    of the officers,
                    directors or employees of Lapis is presently a party to any transaction
                    with
                    Lapis or any of its Subsidiaries (other than for ordinary course
                    services as
                    employees, officers or directors), including any contract, agreement
                    or other
                    arrangement providing for the furnishing of services to or by,
                    providing for
                    rental of real or personal property to or from, or otherwise
                    requiring payments
                    to or from any such officer, director or employee or, to the
                    knowledge of Lapis
                    or Mund, any corporation, partnership, trust or other entity
                    in which any such
                    officer, director, or employee has an interest or is an officer,
                    director,
                    trustee or partner. 

                  

                  5.12.2. All
                    Shareholder Indebtedness shall have been repaid in full immediately
                    prior to
                    Closing. 

                  

                  5.13. Employees;
                    Directors and Major Shareholders 

                   

                  1.8.2. Schedule
                    5.13.1
                    contains
                    a complete and accurate list of all employees of Lapis. 

                  

                  5.13.1. To
                    the
                    knowledge of Lapis and Mund, no key employee, key officer, or
                    director of Lapis
                    (each, a "Representative"
                    and
                    collectively, the "Representatives")
                    is a
                    party to, or otherwise bound by, any agreement or arrangement
                    (including any
                    confidentiality, non-competition, proprietary rights agreement,
                    licenses,
                    covenants or commitments of any nature), between such Representative
                    and any
                    other person, or subject to any order or any other restriction
                    that in any way
                    materially adversely affects the performance of such Representative’s duties as
                    an employee, officer or director of Lapis. Other than as contemplated
                    under any
                    of the Transaction Documents, none of the directors, key officers,
                    or key
                    employees of Lapis has informed Lapis that he or she intends
                    to terminate his
                    employment with it.

                  

                  
                    
                       

                    

                    
                      19

                      
                        

                      

                    

                    
                       

                    

                  

                  5.14. Labor
                    Relations; Compliance

                   

                  5.14.1. Lapis
                    is
                    not bound by or subject to any contracts, commitments or arrangements
                    with any
                    labor union.

                  

                  5.14.2. Lapis
                    has
                    complied in all material respects with all material legal requirements
                    relating
                    to employment, wages, hours, benefits, the payment of social
                    security and
                    similar taxes and occupational safety and health. 

                  

                  5.14.3. Lapis
                    does not have any labor relations problem pending, or to the
                    knowledge of Lapis,
                    threatened and its labor relations, to its knowledge, are
                    satisfactory.

                   

                  1.8.3. All
                    present key employees and directors of Lapis and key employees
                    and directors of
                    Lapis during the 2 years immediately prior to Closing, as listed
                    in Schedule
                    5.14.4,
                    who
                    materially contributed to the development of the business of
                    Lapis, have entered
                    into a written agreement with Lapis, under which all copyrights
                    on any invention
                    or patents invented by one of the above in the framework of his
                    or her service
                    with Lapis and during the term of his or her engagement with
                    Lapis, belong
                    solely to Lapis. 

                  

                  5.15. Stock
                    Option Plan Lapis’
                    2002 Stock Option Plan (the “Plan”)
                    has
                    been duly authorized and adopted by the board of directors and
                    the shareholders
                    of Lapis. Lapis has no other equity or phantom equity plans in
                    existence. Lapis
                    has no options outstanding under the Plan and has never issued
                    any options under
                    the Plan.

                  

                  5.16. Intellectual
                    Property Rights 

                   

                  1.8.4. So
                    far as
                    Lapis and Mund are aware, Lapis has good title to and/or ownership
                    of, and/or
                    valid and enforceable licenses to use all of its Intellectual
                    Property that can
                    be registered for ownership or requires licensing and which is
                    used in the
                    conduct of Lapis’ Business, save where such would not have a material adverse
                    effect on the Business. A list of all such licenses, other than
                    licenses for
                    off-the-shelf products, and registered ownership of Intellectual
                    Property is
                    attached hereto as Schedule
                    5.16.1.

                  

                  
                    
                       

                    

                    
                      20

                      
                        

                      

                    

                    
                       

                    

                  

                  5.16.1. Lapis
                    has
                    taken reasonable security measures, including measures against
                    unauthorized
                    disclosure, to protect the secrecy, confidentiality and value
                    of its trade
                    secrets and other confidential technical information, save where
                    such would not
                    have a material adverse effect on the Business.

                  

                  5.16.2. To
                    Lapis’
and Mund’s knowledge, the use of the Intellectual Property of Lapis in
                    the
                    Business does not constitute an infringement, misappropriation
                    or misuse of any
                    intellectual property rights of any third party, save where such
                    would not have
                    a material adverse effect on the Business. There are no claims
                    pending and, to
                    Lapis’ and Mund's knowledge, no claims threatened against Lapis or its
                    directors
                    regarding the use of, or challenging or questioning the right
                    or title of Lapis
                    in the Intellectual Property of Lapis or the use of it.

                  

                  1.8.5. Except
                    as
                    set forth in Schedule
                    5.16.3,
                    Lapis’
has no registered patents, trademarks and registered copyrights, pending
                    applications for registration of patents, trademarks and copyrights. 

                  

                  1.8.6. Lapis’
                    Intellectual Property rights as set forth in Schedules
                    1.8.4 and 1.8.5
                    is, in
                    combination with certain off-the-shelf products to which it has
                    a license, the
                    required Intellectual Property to enable Lapis to carry on its
                    Business.

                  

                  1.9. Related
                    Party Transactions
                    Except
                    for the transactions contemplated by or disclosed in the Transaction
                    Documents,
                    in Lapis’ and/or any of the Subsidiaries’ financial statements, and as disclosed
                    in Schedule
                    5.17:
                    (i) no Related Party has any direct or indirect interest (other than
                    through the holding of securities in Lapis or any of its Subsidiaries)
                    in any
                    material asset used in the Business of Lapis; (ii) no Related Party is
                    indebted to Lapis, other than under inter-company agreements
                    or pursuant to
                    loans and guarantees provided by Mund to Lapis and/or the Subsidiaries;
                    (iii) no Related Party has any direct or indirect financial interest
                    in,
                    any material agreement, material transaction or material business
                    dealing
                    involving Lapis, other than any interest due to such Related
                    Party being a
                    shareholder, employee or director of Lapis or its Subsidiaries;
                    (iv) no
                    Related Party is competing directly or indirectly, with Lapis
                    (for the avoidance
                    of doubt, the business conducted by Electronics, is deemed to
                    be an activity
                    that does not compete with Lapis or its Subsidiaries); and (v) no Related
                    Party has any claim against Lapis other than in respect of Inter-Entity
                    Indebtedness (as such term is defined in the Systems SPA).

                  

                  
                    
                       

                    

                    
                      21

                      
                        

                      

                    

                    
                       

                    

                  

                  1.10. Title
                    to Property and Assets  Except
                    as
                    set forth in Schedule
                    5.17,
                    Lapis
                    owns its assets which are material to the Business of Lapis free
                    and clear of
                    all Encumbrances. With respect to the property and assets which
                    are material to
                    the Business and which are leased or licensed, Lapis is in compliance
                    with all
                    applicable material terms of the lease or license agreements.
Schedule
                    5.20 contains
                    a correct and complete list of all leases under which Lapis leases
                    real estate
                    property or assets.

                  

                  1.11. Insurance
                    Schedule 5.17
                    hereto
                    lists all policies of insurance to which Lapis is a party. Such
                    policies are
                    valid, outstanding, and enforceable, and taken together, they
                    provide adequate
                    insurance coverage against such insured risks including and in
                    such amounts as
                    the management of Lapis believes to be prudent in the businesses
                    in which Lapis
                    is engaged.

                  

                  1.12. Directors,
                    Officers
                    A list
                    of the directors and key officers of Lapis as at the date this
                    Agreement is
                    attached as Schedule
                    5.17
                    hereto.

                  

                  5.17. Brokers
                    No
                    broker, finder or investment banker, for which Lapis and/or Mund
                    may be liable,
                    is entitled to any brokerage, finder's or other fee or commission
                    in connection
                    with the transactions contemplated by this Agreement.

                  

                  5.18. No
                    Undisclosed Events, Liabilities, Developments or Circumstances
                    To
                    Lapis’
knowledge, since January 1, 2006 through February 22, 2008, no
                    event, liability,
                    development or circumstance has occurred or exists, or is contemplated
                    to occur
                    with respect to Lapis or its Business, properties, prospects,
                    operations or
                    financial condition, that would be required to be disclosed by
                    Lapis under
                    applicable securities laws on a Form 8-K (other than the transactions
                    contemplated in this Agreement and/or in the Transaction Documents)
                    relating to
                    an issuance and sale by Lapis of its Common Shares and which
                    has not been
                    publicly announced. 

                  

                  5.19. Foreign
                    Corrupt Practices Neither
                    Lapis nor, or to Lapis’ knowledge, any director, officer, agent, employee or
                    other Person authorized to act on behalf of Lapis has, in the
                    course of its
                    actions for, or on behalf of, Lapis: (i) directly or indirectly
                    used any
                    corporate funds for any unlawful contribution, gift, entertainment
                    or other
                    unlawful expenses relating to political activity; (ii) made any
                    direct or
                    indirect unlawful payment to any foreign or domestic government
                    officials or
                    employee or to any foreign or domestic political parties or campaigns
                    from
                    corporate funds or failed to disclose fully any contribution
                    made by Lapis (or
                    made by any person acting on its behalf of which Lapis is aware)
                    which is 
in violation of applicable law; or (iii) violated or is in violation
                    of any
                    provision of the U.S. Foreign Corrupt Practices Act of 1977,
                    as amended.

                  

                  
                    
                       

                    

                    
                      22

                      
                        

                      

                    

                    
                       

                    

                  

                  5.20. Internal
                    Accounting and Disclosure Controls Lapis
                    maintains a system of internal accounting controls sufficient
                    to provide
                    reasonable assurance that: (i) transactions are executed in accordance
                    with
                    management's general or specific authorizations; (ii) transactions
                    are recorded
                    as necessary to permit preparation of financial statements in
                    conformity with
                    generally accepted accounting principles and to maintain asset
                    accountability;
                    (iii) access to assets is permitted only in accordance with management's
                    general
                    or specific authorization; and (iv) the recorded accountability
                    for assets is
                    compared with the existing assets at reasonable intervals and
                    appropriate action
                    is taken with respect to any material differences. Lapis maintains
                    a standard
                    disclosure controls and procedures (as such term is defined in
                    Rule 13a-14 under
                    the Exchange Act) established and administered in accordance
                    with generally
                    accepted accounting principles in the U.S. and the applicable
                    requirements of
                    the Exchange Act. Lapis’ officers certified Lapis’ internal controls as of the
                    filing of Lapis’ Form 10-QSB for the quarter ended September 30, 2007 and since
                    that date, there have been no significant changes in Lapis’s internal controls
                    (as such term is defined in Section 307(b) of Regulation S-K)
                    or, to Lapis’s
                    knowledge, any other facts that would significantly affect Lapis’s internal
                    controls. 

                   

                  5.21. Off
                    Balance Sheet Arrangements There
                    is
                    no transaction, arrangement, or other relationship between Lapis
                    and an
                    unconsolidated or other off balance sheet entity that is required
                    to be
                    disclosed by Lapis in its Exchange Act filings and is not so
                    disclosed or that
                    otherwise would be reasonably likely to have a material adverse
                    effect, except
                    where such noncompliance would not have, individually or in the
                    aggregate, a
                    material adverse effect on Lapis. 

                  

                  5.22. Independent
                    Auditors Gvilli
                    & Co., which has certified certain financial statements of Lapis,
                    is an
                    independent registered public accounting firm as required by
                    the Securities Act
                    and the rules and regulations thereunder.

                  

                  5.23. Full
                    Disclosure Other
                    than where such would not have a material adverse effect on the
                    Business, this
                    Agreement does not contain any representation, warranty or information
                    that is
                    false or misleading with respect to any statement of a material
                    fact, the
                    omission of which causes the statement from which it was omitted
                    to become
                    materially untrue, materially inaccurate or materially misleading.
                    To Lapis’ and
                    Mund’s knowledge, all documents and information requested by the Investor
                    and/or
                    his advisors within the framework of the due diligence conducted
                    by the Investor
                    in respect of Lapis that are in the possession of Lapis and/or
                    Mund and that
                    could be provided by employing reasonable efforts, have been
                    provided.

                  

                  
                    
                       

                    

                    
                      23

                      
                        

                      

                    

                    
                       

                    

                  

                  5.24. Warranties
                    The
                    Investor acknowledges and agrees that:

                  

                  1.12.1. Any
                    Claims shall be subject to the limitations on liabilities and
                    other provisions
                    set out in Schedule
                    5.24.1.

                  

                  5.24.1. The
                    Mund
                    and Lapis Warranties are the only warranties or representations
                    of any kind
                    given by or on behalf of Mund and/or Lapis on which the Investor
                    may rely in
                    entering into this Agreement.

                  

                  5.24.2. At
                    the
                    time of entering into this Agreement, the Investor is not aware
                    of any facts or
                    circumstances which are likely to result in a Claim being made
                    against Mund
                    and/or Lapis or any misrepresentation by or on behalf of Mund
                    and/or Lapis in
                    connection with any of the Transaction Documents.

                  

                  5.24.3. Each
                    of
                    the Mund and Lapis Warranties shall be separate and independent
                    and, save as
                    expressly provided to the contrary in this Agreement, shall not
                    be limited by
                    reference to or inference from any other representation of warranty
                    in this
                    Agreement

                  

                  
                    	6.	
                            REPRESENTATIONS
                              AND WARRANTIES OF THE INVESTOR 

                          

                  

                  

                  The
                    Investor makes the following representations and warranties to
                    Lapis and
                    Mund:

                  6.1. This
                    Agreement and the Transaction Documents, which are to be entered
                    into by the
                    Investor will, when executed, constitute valid and binding obligations
                    of the
                    Investor enforceable in accordance with their respective terms.

                  

                  6.2. Subject
                    to fulfillment of the Conditions neither entry into this Agreement
                    nor entry
                    into, and implementation of, any of the Transaction Documents
                    will:

                  

                  6.2.1. result
                    in
                    violation or breach of any applicable laws or regulations in
                    any relevant
                    jurisdiction; 

                  

                  6.2.2. amount
                    to
                    a violation or default with respect to any statute, regulation,
                    order, decree or
                    judgment of any court or any governmental or regulatory authority
                    in any
                    jurisdiction; or

                  

                  
                    
                       

                    

                    
                      24

                      
                        

                      

                    

                    
                       

                    

                  

                  6.2.3. result
                    in
                    a breach of, or give rise to a default under, any contract or
                    other
                    instrument,

                  

                  by
                    the
                    Investor, which, in each case, would affect its ability to enter
                    into or perform
                    its obligations under this Agreement and/or any Transaction Document
                    to which it
                    is a party.

                  

                  6.3. No
                    order
                    has been made or petition filed to request the bankruptcy or
                    insolvency of the
                    Investor. No order has been made, petition presented or meeting
                    convened for the
                    winding up of any company in which the Investor holds securities
                    and there are
                    no cases or proceedings under any applicable insolvency, reorganisation
                    or
                    similar laws in any relevant jurisdiction, and no events have
                    occurred which,
                    under applicable laws, would justify any such cases or proceedings
                    against the
                    Investor or any company in which the Investor holds securities.

                  

                  6.4. Organization
                    SN
                    is a
                    company duly organized and validly existing under the laws of
                    the State of
                    Israel. SN has all requisite corporate power to own and operate
                    its properties
                    and assets, and to carry on its business as presently conducted.
                    SN is in good
                    standing in each jurisdiction in which the nature of its business
                    and its
                    ownership or leasing of property requires that SN becomes so
                    qualified, except
                    to the extent that the failure to be so qualified or be in good
                    standing would
                    not have an adverse effect on SN and its subsidiaries, properties
                    and assets. SN
                    has not taken any action or failed to take any action, which
                    action or failure
                    would preclude or prevent SN from conducting its business after
                    the execution of
                    this Agreement in the manner conducted on the date hereof. SN
                    has all permits,
                    licenses and any similar authorizations and Consents necessary
                    for the conduct
                    of its business as now being conducted by it, the lack of which
                    could adversely
                    affect the business, properties, prospects or financial condition
                    of SN. SN is
                    not in default under any of such permits, licenses, or other
                    similar authority,
                    which default would have an adverse effect on SN. 

                  

                  6.5. Organization
                    and Organizational Documents

                   

                  6.5.1. To
                    the
                    Investor’s and SN's knowledge: (i) no order has been made, petition presented
                    or
                    meeting convened for the winding up of SN or for any of its direct
                    or indirect
                    holding companies or subsidiaries, or for the appointment of
                    any provisional
                    liquidator in respect of them or any of their respective assets
                    and properties;
                    (ii) there are no cases or proceedings under applicable insolvency,
                    reorganization or similar laws, and no events have occurred which,
                    under
                    applicable laws, would justify any such cases or proceedings;
                    or (iii) no action
                    has been taken or prepared to have SN struck out from the Israeli
                    Registrar or
                    have SN’s shares delisted from trading on the Tel Aviv Stock Exchange.
                    

                  

                  
                    
                       

                    

                    
                      25

                      
                        

                      

                    

                    
                       

                    

                  

                  6.5.2. SN’s
                    Memorandum and Articles of association, as in effect on the date
                    hereof, are
                    attached hereto as Schedule
                    6.5.2.
                    No act
                    has been effected by SN and/or its shareholders to amend any
                    of such documents
                    in a manner, which would alter the form of the documents attached
                    hereto as
Schedule
                    6.5.2.
                    

                  

                  6.6. Authorization;
                    Binding Authority; Enforceability The
                    Investor has obtained all authorizations from SN and all applicable
                    governmental, statutory, regulatory or other consents, licences,
                    authorizations,
                    waivers or exemptions required to empower him to enter into and
                    to perform his
                    obligations hereunder, to consummate the transactions contemplated
                    by this
                    Agreement and by any other Transaction Document to which he is
                    (or is proposed
                    to be) a party, and to purchase the Issued Shares from Lapis
                    pursuant and
                    subject to the provisions of this Agreement. 

                  

                  6.7. Ownership
                    and Title The
                    Investor represents and warrants that: (i) he has full title
                    and ownership of
                    the Investor's SN Shares; (ii) the Investor's SN Shares are fully
                    paid up and
                    non-assessable and at Closing, the Investor shall deliver to
                    Lapis good title
                    to, and all rights to vote, all of the Investor's SN Shares to
                    be sold and
                    transferred to Lapis hereunder, free and clear of any Encumbrance;
                    (iii) the
                    Investor did not enter into any agreement or arrangement pursuant
                    to which any
                    Person has the right (exercisable now or in the future and whether
                    contingent or
                    not) to any of the Investor's SN Shares; (iv) the Investor is
                    entitled to
                    transfer or procure the transfer of the Investor's SN Shares
                    on the terms set
                    out in this Agreement; and (v) the Investor's SN Shares constitute
                    the
                    Investor’s entire personal holdings in SN. 

                  

                  1.13. No
                    Violations Subject
                    to the fulfillment of the Conditions set out in clause 10,
                    neither
                    the entry into nor the execution, delivery and performance of
                    this Agreement and
                    the Transaction Documents and the consummation by the Investor
                    of the
                    transactions contemplated thereunder will: (i) conflict with,
                    or constitute a
                    default (or an event which with notice or lapse of time or both
                    would become a
                    default) under, or give to others any rights of termination,
                    amendment,
                    acceleration or cancellation of, any material agreement, indenture
                    or instrument
                    to which SN is a party; (ii) result in any relevant jurisdiction
                    in a violation
                    of any law, rule, regulation, order, judgment or decree applicable
                    to the
                    Investor or SN, which, in each case, would adversely affect the
                    Investor’s
                    ability to enter into or perform his obligations under this Agreement
                    and/or any
                    Transaction Document to which he is a party; and (iii) neither
                    entry into this
                    Agreement nor entry into the Transactions Documents and the transactions
                    contemplated therein, will result in, now or in the future, a
                    requirement for
                    the Investor to obtain any consent or approval, or give any notice
                    to or make
                    any registration with, any governmental regulatory or other authority
                    which has
                    not been obtained or made as at the date of this Agreement and
                    could affect the
                    implementation or consummation of the transactions contemplated
                    under the
                    Transaction Documents. 

                  

                  
                    
                       

                    

                    
                      26

                      
                        

                      

                    

                    
                       

                    

                  

                  6.8. No
                    Investigations So
                    far as
                    the Investor is aware, neither the Investor nor SN are subject
                    to any order,
                    judgment, direction, investigation or other proceedings by any
                    Governmental Body
                    or regulatory authority, which will, or are reasonably likely
                    to, prevent or
                    delay the fulfillment of any of the Conditions to this Agreement
                    or the
                    Transaction Documents.

                  

                  6.9. Consideration
                    The
                    Investor has available cash or loan facilities, which will, at
                    the time set out
                    therefore under this Agreement, provide in immediately available
                    funds the
                    necessary cash resources to meet its obligations in respect of
                    the Mund Option,
                    including, but not limited to the payment of the Minimum Value,
                    or any guarantee
                    granted to Mund and, in the case of loan facilities, they involve
                    no material
                    pre-conditions and the Investor will be able to satisfy all conditions
                    of
                    drawdown to such loan facilities at or prior to the time the
                    obligations in
                    respect of the Mund Option will materialize and meet the Investor’s other
                    obligations under this Agreement and the Transaction Documents. 

                  

                  6.10. No
                    Public Sale or Distribution
                    The
                    Investor is acquiring the Issued Shares for its own account and
                    not with a view
                    towards, or for resale in connection with, the public sale or
                    distribution
                    thereof, except pursuant to sales registered or exempted under
                    the 1933 Act;
provided,
                    however,
                    that by
                    making the representations herein, the Investor does not agree
                    to hold any of
                    the Issued Shares for any minimum or other specific term and
                    reserves the right
                    to dispose of the Issued Shares at any time in accordance with
                    or pursuant to an
                    effective registration statement or an exemption under the Securities
                    Act.

                  

                  6.11. Accredited
                    Investor Status
                    At the
                    time the Investor was offered the Issued Shares and as the date
                    hereof and will
                    be at the Closing Date, either; (i) an “accredited investor” as that term is
                    defined under Regulation D; or (ii) not a “U.S. “Person” as that term is defined
                    in Rule 902(b) of Regulation S and the sale of the Issued Shares
                    constituted an
“offshore transaction” as that term is defined in Rule 902(i) of Regulation S.

                  

                  6.12. Restricted
                    Securities
                    The
                    Investor understands that the Issued Shares are being offered
                    and sold to him in
                    reliance on specific exemptions from the registration requirements
                    of the
                    Securities Act which depends upon, among other things, the bona
                    fide nature of
                    the investment intent and the truth and accuracy of the Investor’s
                    representations, warranties, agreements, acknowledgments and
                    understandings
                    expressed herein and the Investor’s compliance therewith. The Investor
                    understands that the Issued Shares are “restricted securities” under applicable
                    U.S. federal and state securities laws and that, pursuant to
                    these laws, the
                    Issuer must hold the Issued Shares indefinitely unless they are
                    registered with
                    the SEC and qualified by state authorities, or an exemption from
                    such
                    registration and qualification requirements is available. The
                    Investor
                    acknowledges that Lapis has no obligation to register or qualify
                    the Issued
                    Shares for resale. 

                  

                  
                    
                       

                    

                    
                      27

                      
                        

                      

                    

                    
                       

                    

                  

                  6.13. Information
                    The
                    Investor acknowledges that, prior to entering into this Agreement
                    and the
                    Transaction Documents to which the Investor is a party, the Investor
                    and its
                    advisors have been furnished with all materials relating to the
                    business,
                    finances and operations of Lapis and materials relating to the
                    offer and sale of
                    the Issued Shares which have been requested by or on behalf of
                    the Investor in
                    order to evaluate the investment and verify the accuracy of all
                    information
                    furnished to it regarding Lapis, and access to all of the Lapis
                    SEC Documents.
                    The Investor and its advisors, if any, have been afforded the
                    opportunity to ask
                    questions to and receive answers from Lapis concerning the terms
                    and conditions
                    of the offering of the Issued Shares. The Investor understands
                    that its
                    investment in the Issued Shares involves a high degree of risk
                    and is able to
                    afford a complete loss of such investment. The Investor has sought
                    such
                    accounting, legal and tax advice as he has considered necessary
                    to make an
                    informed investment decision with respect to his acquisition
                    of the Issued
                    Shares.

                  

                  6.14. No
                    Governmental Review
                    The
                    Investor understands that no United States Governmental Body
                    has passed on or
                    made any recommendation or endorsement of the Issued Shares or
                    the fairness or
                    suitability of the investment in the Issued Shares nor have such
                    authorities
                    passed upon or endorsed the merits of the offering of the Issued
                    Shares.

                  

                  6.15. General
                    Solicitation The
                    Investor is not purchasing the Issued Shares as a result of any
                    advertisement,
                    article, notice or other communication regarding the Issued Shares
                    published in
                    any newspaper, magazine or similar media or broadcast over television
                    or radio
                    or presented
                    at any seminar or any other general solicitation or general
                    advertisement.
                    

                  

                  6.16. Legends
                    The
                    Investor understands that the certificates representing the Issued
                    Shares until
                    such time as the resale of the Issued Shares have been registered
                    under the 1933
                    Act, except as set forth below, shall bear a restrictive legend
                    in substantially
                    the following form (and a stop-transfer order may be placed against
                    transfer of
                    such stock certificates):

                   

                  
                    
                       

                    

                    
                      28

                      
                        

                      

                    

                    
                       

                    

                  

                  NEITHER
                    THE ISSUANCE AND SALE OF THE COMMON SHARES REPRESENTED BY THIS
                    CERTIFICATE HAVE
                    BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
                    OR APPLICABLE
                    STATE SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE,
                    SOLD, TRANSFERRED
                    OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
                    STATEMENT FOR
                    THE SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B)
                    AN OPINION OF
                    COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO LAPIS, THAT REGISTRATION
                    IS NOT
                    REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE
                    144 UNDER SAID ACT.
                    NOTWITHSTANDING THE FOREGOING, THE SHARES MAY BE PLEDGED IN CONNECTION
                    WITH A
                    BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
                    SECURED BY THE
                    SHARES. 

                  

                  
                    
                      	7.	
                              COVENANTS
                                OF LAPIS AND MUND

                            

                    

                  

                  

                  Lapis
                    and
                    Mund hereby covenant: 

                   

                  1.14. Access
                    and Investigation
                    During
                    the period from the date of this Agreement through the Closing
                    Date, or the
                    earlier termination hereof in accordance with clause 13
                    (the
                    "Pre-Closing
                    Period"),
                    Lapis
                    and Mund shall, and shall cause their Representatives to: (a) provide the
                    Investor and the Investor's representatives with reasonable access
                    at reasonable
                    times upon reasonable prior notice, to Lapis’ representatives, personnel and
                    assets and to all existing books, records, Tax Returns, work
                    papers and other
                    documents and information relating to Lapis, which is held, controlled
                    or can be
                    reasonably obtained by Lapis; and (b) provide the Investor and Investor's
                    representatives with copies of such existing books, records,
                    Tax
                    Returns, work
                    papers and other documents and information relating to Lapis,
                    which is held,
                    controlled or can be reasonably obtained by Lapis, and with such
                    additional
                    financial, operating and other data and information regarding
                    Lapis, as the
                    Investor may reasonably request, and which is held, controlled
                    or can be
                    reasonably obtained by Lapis.

                  

                  7.1. Operation
                    of Lapis’ Business
                    Other
                    than as contemplated or disclosed under any of the Transaction
                    Documents, or as
                    required in order to facilitate the transactions contemplated
                    under any of the
                    Transaction Documents, during the Pre-Closing Period:

                  

                  7.1.1. Lapis
                    shall conduct its business and operations in the ordinary course
                    and in
                    substantially the same manner as such business and operations
                    have been
                    conducted prior to the date of this Agreement;

                  

                  1.14.1. Lapis
                    shall keep, to the extent required, in full force all insurance
                    policies
                    referred to in Schedule
                    1.11;

                  

                  
                    
                       

                    

                    
                      29

                      
                        

                      

                    

                    
                       

                    

                  

                  7.1.2. unless
                    the Consent of the Investor is obtained and save as contemplated
                    in this
                    Agreement or under the Transaction Documents or as required in
                    order to
                    facilitate and effect the transactions contemplated under this
                    Agreement or
                    under the Transaction Documents, Lapis shall not declare, accrue,
                    set aside or
                    pay any dividend or make any other distribution in respect of
                    any shares of
                    capital stock of Lapis, and shall not repurchase, redeem or otherwise
                    reacquire
                    any shares of capital stock or other securities of Lapis;

                  

                  7.1.3. unless
                    the Consent of the Investor is obtained and save as contemplated
                    or disclosed in
                    this Agreement or under the Transaction Documents or as required
                    in order to
                    facilitate and effect the transactions contemplated under this
                    Agreement or
                    under the Transaction Documents, Lapis shall not sell, issue
                    or authorize the
                    issuance of: (i) any capital stock or other security; (ii) any option
                    or right to acquire any capital stock or other security; or (iii) any
                    instrument convertible into or exchangeable for any capital stock
                    or other
                    security;

                  

                  7.1.4. unless
                    the Consent of the Investor is obtained and save as contemplated
                    or disclosed in
                    this Agreement or under the Transaction Documents or as required
                    in order to
                    facilitate and effect the transactions contemplated under this
                    Agreement or
                    under the Transaction Documents, Lapis, shall not amend or permit
                    the adoption
                    of any amendment to the Certificate of Incorporation or Bylaws
                    or effect or
                    permit Lapis to become a party to any of the following transactions
                    in Lapis’
securities: acquisition, recapitalization, reclassification of
                    securities, stock
                    split, reverse stock split or similar transaction;

                  

                  7.1.5. unless
                    the Consent of the Investor is obtained and save as contemplated
                    in this
                    Agreement or under the Transaction Documents or as required in
                    order to
                    facilitate and effect the transactions contemplated under this
                    Agreement or
                    under the Transaction Documents, Lapis, shall not form any subsidiary
                    or acquire
                    any equity interest or other interest in any other Entity;

                  

                  7.1.6. unless
                    the Consent of the Investor is obtained and other than in the
                    ordinary course of
                    business, or in respect of obligations or liabilities under Lapis’ financial
                    statements or as contemplated or disclosed under the Transaction
                    Documents,
                    Lapis shall not make any capital expenditure;

                  

                  
                    
                       

                    

                    
                      30

                      
                        

                      

                    

                    
                       

                    

                  

                  7.1.7. unless
                    the Consent of the Investor is obtained and other than in the
                    ordinary course of
                    business or as contemplated or disclosed under the Transaction
                    Documents, Lapis
                    shall not: (i) enter into, or permit any of the assets owned or used by it
                    to become bound by, any contract that is or would constitute
                    a Material
                    Agreement; or (ii) amend or prematurely terminate, or waive any right or
                    remedy under, any such Material Agreement;

                  

                  7.1.8. unless
                    the Consent of the Investor is obtained and save as contemplated
                    in this
                    Agreement or under the Transaction Documents or as required in
                    order to
                    facilitate and effect the transactions contemplated under this
                    Agreement or
                    under the Transaction Documents, Lapis shall not, other than
                    in the ordinary
                    course of business: (i) acquire, lease or license any right or other asset
                    from any other Person, the value of which exceeds an amount that
                    is equal to or
                    greater than five percent (5%) of the aggregate of Lapis’ and its Subsidiaries’
revenue over the year 2007; (ii) sell or otherwise dispose of, or lease or
                    license, any right or other asset to any other Person, the value
                    of which
                    exceeds an amount that is equal to or greater than five percent
                    (5%) of the
                    aggregate of Lapis’ and its Subsidiaries’ revenue over the year 2007; or
                    (iii) waive or relinquish any right that would have a material adverse
                    effect on the Business;

                  

                  7.1.9. 
                    unless
                    the Consent of the Investor is obtained and save as contemplated
                    in this
                    Agreement or under the Transaction Documents or as required in
                    order to
                    facilitate and effect the transactions contemplated under this
                    Agreement or
                    under the Transaction Documents, Lapis shall not: (i) establish, adopt or
                    amend any employee benefit plan; (ii) other than in accordance with past
                    practices or as previously agreed by Lapis or disclosed to the
                    Investor, pay any
                    bonus or make any profit-sharing payment, cash incentive payment
                    or similar
                    payment to, or increase the amount of the wages, salary, commissions,
                    fringe
                    benefits or other compensation or remuneration payable to, any
                    of its directors,
                    officers, consultants or employees; or (iii) other than in accordance with
                    past practices hire any new employee; 

                  

                  
                    
                       

                    

                    
                      31

                      
                        

                      

                    

                    
                       

                    

                  

                  7.1.10. Lapis
                    shall not change any of its methods of accounting or accounting
                    practices;

                  

                  7.1.11. Lapis
                    shall not make any Tax election; and 

                  

                  7.1.12. Lapis
                    shall not commence or settle any material Legal Proceeding.

                  

                  7.2. Notification;
                    Updates to Disclosure Schedule

                   

                  7.2.1. During
                    the Pre-Closing Period, Lapis and Mund shall promptly notify
                    the Investor in
                    writing of:

                   

                  7.2.1.1. the
                    discovery by Lapis of any event, condition, fact or circumstance
                    that occurred
                    or existed on or prior to the date of this Agreement and that
                    caused or
                    constitutes a material inaccuracy in or breach of any representation
                    or warranty
                    made by Lapis in this Agreement;

                  

                  7.2.1.2. any
                    event, condition, fact or circumstance that occurs, arises or
                    exists prior to
                    Closing and that causes or constitutes a material inaccuracy
                    in or breach of any
                    representation or warranty made by Lapis in this Agreement if:
                    (A) such
                    representation or warranty had been made as of the time of the
                    occurrence,
                    existence or discovery of such event, condition, fact or circumstance;
                    or
                    (B) such event, condition, fact or circumstance had occurred, arisen
                    or
                    existed on or prior to the date of this Agreement;

                  

                  7.2.1.3. any
                    material breach of any representation, warranty, covenant or
                    obligation of
                    Lapis; and

                  

                  1.14.1.1. any
                    event, condition, fact or circumstance that would make the timely
                    satisfaction
                    of any of the Conditions set forth in clause 10
                    or
                    clause 11
                    impossible or unlikely;

                  

                  
                    
                       

                    

                    
                      32

                      
                        

                      

                    

                    
                       

                    

                  

                  7.2.1.4. other
                    than in the ordinary course of business and save as disclosed
                    or required in
                    order to facilitate the transactions contemplated in the Transaction
                    Documents,
                    any engagement of Lapis, oral or written, resulting in an exposure
                    to Lapis of a
                    sum equal to or exceeding fifty thousand Dollars ($50,000).

                  

                  1.14.2. If
                    any
                    event, condition, fact or circumstance that is required to be
                    disclosed pursuant
                    to clause 7.2.1
                    requires
                    any change in Lapis’ Disclosure Letter, or if any such event, condition, fact or
                    circumstance would require such a change assuming Lapis’ Disclosure Letter were
                    dated as of the date of the occurrence, existence or discovery
                    of such event,
                    condition, fact or circumstance, then Lapis shall promptly deliver
                    to the
                    Investor an update of Lapis’ Disclosure Letter specifying such change.

                  

                  7.3. No
                    Negotiation
                    Except
                    as disclosed or required in order to facilitate the transactions
                    contemplated
                    under the Transaction Documents, during the Pre-Closing Period,
                    Lapis and Mund
                    shall not directly or indirectly:

                   

                  7.3.1. solicit
                    or encourage the initiation of any inquiry, proposal or offer
                    from any Person
                    (other than the parties to the Transaction Documents) relating
                    to a possible
                    Acquisition Transaction;

                  

                  7.3.2. participate
                    in any discussions or negotiations or enter into any agreement
                    with, or provide
                    any non-public information to, any Person (other than the parties
                    to the
                    Transaction Documents) relating to or in connection with a possible
                    Acquisition
                    Transaction; or

                  

                  7.3.3. consider,
                    entertain or accept any proposal or offer from any Person (other
                    than the
                    parties to the Transaction Documents) relating to a possible
                    Acquisition
                    Transaction.

                  

                  7.4. Lapis
                    Shareholder Consent
                    Lapis
                    will take, in accordance with applicable law and its Certificate
                    of
                    Incorporation, the actions necessary to seek written consent
                    of holders of a
                    majority of the Common Shares (the “Lapis
                    Shareholder Consent”)
                    to
                    consider and vote for the approval of this Agreement, the Transaction
                    Documents
                    and the transactions contemplated thereby, to the extent such
                    approval is
                    required under applicable laws, including without limitation,
                    filing with the
                    SEC and mailing to Lapis’ shareholders an information statement under the
                    Exchange Act. Lapis’s board of directors shall recommend such approval and Lapis
                    shall take reasonable action to solicit such approval. 

                  

                  
                    
                       

                    

                    
                      33

                      
                        

                      

                    

                    
                       

                    

                  

                  7.5. Inter-Entity
                    Indebtedness
                    All
                    Inter-Entity Indebtedness (as such term is defined in the Systems
                    SPA) shall
                    have been repaid, or waived, by and to Mund, Lapis and its Subsidiaries
                    in full
                    immediately prior to Closing. 

                  

                  7.6. Lapis
                    and
                    Mund shall promptly notify the Investor in writing of any inquiry,
                    proposal or
                    offer, which they have knowledge of, relating to a possible Acquisition
                    Transaction that is received by Lapis or any of its Representatives
                    during the
                    Pre-Closing Period.

                  

                  
                    	8.	
                            COVENANTS
                              AND UNDERTAKINGS OF THE INVESTOR 

                          

                  

                  

                  The
                    Investor hereby covenants:

                  

                  8.1. Release
                    of Guarantees
                    To
                    procure the release of Mund and Zvi Avni and
                    Electronics
                    not
                    later than the Closing Date from all Third
                    Party Assurances. Notwithstanding
                    any other provision of this Agreement or any of the Transaction
                    Documents, the
                    Investor hereby covenants that if the Condition set out in clause
                    11.4
“Guarantees and other Third Party Assurances Closing” will have been waived, and
                    Closing will have become effective, the Investor shall comply
                    with its
                    obligations under the above clause notwithstanding such waiver
                    and upon the
                    waiver of such Condition, the provisions thereof shall become
                    a post Closing
                    covenant as set out in clause 14.1.

                  

                  8.2. Filings
                    and Consents The
                    Investor will take all action reasonably requested by Lapis and
                    Mund (but
                    without the obligation to incur any costs or expenses in connection
                    therewith)
                    to assist Lapis and Mund to obtain any Consents to be obtained
                    by them, if any,
                    under the Transaction Documents.

                  

                  8.3. Investor’s
                    Undertaking The
                    Investor procures and undertakes that the obligations of the
                    Investor under this
                    Agreement and the Transaction Documents shall be binding upon
                    his successor and
                    assignees.

                  

                  
                    	9.	
                            ADDITIONAL
                              COVENANTS OF THE PARTIES 

                          

                  

                  

                  9.1. Filings
                    and Consents
                    As
                    promptly as practicable after the execution of this Agreement,
                    each Party:
                    (a) shall make all filings (if any) and give all notices (if any)
                    required
                    to be made and given by such Party in connection with the transactions
                    contemplated under the Transaction Documents; and (b) shall use all
                    commercially reasonable efforts to obtain all Consents (if any)
                    required to be
                    obtained (pursuant to any applicable Legal Requirement or contract,
                    or
                    otherwise) by such Party in connection with or for the purpose
                    of effecting the
                    transactions contemplated under the Transaction Documents. Each
                    party to the
                    Transaction Documents shall (upon request) promptly deliver to
                    the other parties
                    of the Transaction Documents a copy of each such filing made,
                    each such notice
                    given and each such Consent obtained by such party to the Transaction
                    Documents
                    during the Pre-Closing Period or thereafter. 

                  

                  
                    
                       

                    

                    
                      34

                      
                        

                      

                    

                    
                       

                    

                  

                  9.2. Public
                    Announcements
                    During
                    the Pre-Closing Period, the Parties shall not issue any press
                    release or make
                    any public statement or disclosure regarding the Transaction
                    Documents, or
                    regarding any of the transactions contemplated under the Transaction
                    Documents,
                    without the other Parties’ prior written consent. Notwithstanding the provisions
                    of the preceding sentence, each Party shall be permitted to issue
                    any press
                    release or make any public statement or disclosure as such Party
                    is advised by
                    counsel is legally required to be issued or made under any applicable
                    laws,
                    stock exchange regulation or other supervisory body or Governmental
                    Body to
                    whose rules the press release, public statement or disclosure
                    is subject;
                    provided, however, that in such event the Party issuing such
                    press release or
                    making such public statement or disclosure, such Party will provide
                    the other
                    Parties with prompt written notice of such requirement and a
                    copy of the press
                    release to be issued or public statement to be made, and the
                    Parties shall
                    consult each other and use reasonable efforts to agree on the
                    content of such
                    press release or public statement.

                  

                  9.3. Additional
                    Purchase of Company's Shares In
                    the
                    event any of Lapis’ shareholders shall, pursuant to the transactions
                    contemplated under the Transaction Documents, offer or request
                    to sell any of
                    their Common Shares holdings in Lapis to the Investor on the
                    same, or similar,
                    terms that Mund is entitled to sell his Common Shares to the
                    Investor pursuant
                    to the Mund Option or the Transaction Documents, the Investor
                    shall purchase
                    such shares from such shareholders of Lapis and Mund will participate
                    with the
                    Investor -in financing the purchase of shares offered by members
                    of the public
                    on a pro rata basis. Notwithstanding the above: (A) Mund shall
                    not participate
                    in financing the sale of shares held by Zvi Avni; and (B) Mund’s participation
                    in the financing set out in this sub clause 9.3: (i) will be
                    limited to an
                    amount of two hundred thousand Dollars ($200,000); and (ii) will
                    be financed by
                    reducing the consideration to be paid by the Investor for the
                    Mund Option.

                  

                  9.4. Documents
                    in Agreed Form The
                    following documents in Agreed Forms shall be provided to the
                    Parties and/or
                    finalized prior to Closing:

                  

                  
                    
                       

                    

                    
                      35

                      
                        

                      

                    

                    
                       

                    

                  

                  1.14.3. A
                    legal
                    opinion from Lapis’ US legal counsel, in the form to be attached hereto as
Schedule
                    9.4.1,
                    and
                    addressed to the Investor and dated as of the Closing Date. 

                  

                  1.14.4. A
                    legal
                    opinion of legal counsel to SN, in the form to be attached hereto
                    as
Schedule
                    9.4.1,
                    addressed to Lapis and dated as of the Closing Date.

                  

                  1.14.5. A
                    fairness
                    opinion from Tesuot/Mr. Jacob Eshed, in
                    the
                    form to be attached hereto as Schedule
                    9.4.1,
                    in
                    respect of all the transactions contemplated by this Agreement
                    and the
                    Transaction Documents.

                  

                  9.4.1. A
                    letter
                    by Bank Leumi LeIsrael B.M. and a letter by Bank Hapoalim B.M.
                    (each a
“Bank”
and
                    collectively the “Banks”),
                    to be
                    attached hereto prior to Closing as
                    Schedules 9.4.4.1 and
                    9.4.4.2
                    in which
                    the Banks provide their consent to: (i) the Closing and consummation
                    of the
                    transactions contemplated in the Transaction Documents; and (ii)
                    release Mund
                    and Mr. Zvi Avni and Electronics form all Third Party Assurances
                    per the
                    Closing. 

                  

                  9.4.2. An
                    employment agreement in respect of Mr. Zvi Avni’s employment as CEO of Systems
                    attached hereto as Schedule
                    9.4.5 shall
                    have been entered into prior to Closing.

                  

                  
                    	10.	
                            CONDITIONS
                              PRECEDENT TO THE OBLIGATIONS OF THE
                              INVESTOR

                          

                  

                  

                  Closing
                    shall be conditional on fulfillment at or before the Date of
                    Closing of the
                    following Conditions. The conditions set out in this clause 10
                    may be
                    only waived by written notice from the Investor.

                   

                  10.1. Consents
                    and other documents
                    The
                    following Consents and other documents shall have been obtained
                    by Lapis and
                    Mund and delivered to the Investor without conditions and shall
                    be in full force
                    and effect:

                   

                  1.14.6. a
                    true
                    and correct copy of the resolution or written consent of the
                    majority Lapis’
shareholders approving this Agreement and the consummation of
                    the transactions
                    contemplated herein, substantially in the form to be attached
                    prior to Closing
                    as Schedule
                    10.1.1 or
                    as
                    otherwise reasonably agreed between the Investor and Mund; 

                   

                  10.1.1. an
                    information statement under the Exchange Act shall have been
                    filed with the SEC
                    and mailed to Lapis’ shareholders and a period of 20 days following the mailing
                    of the information statement to Lapis’ shareholders shall have lapsed;

                   

                  
                    
                       

                    

                    
                      36

                      
                        

                      

                    

                    
                       

                    

                  

                  10.1.2. a
                    Closing
                    Balance which shall be either balanced (Zero) or positive. For
                    the purpose of
                    this clause 10.1.3; 

                  

                  10.1.2.1. the
                    “Closing Balance” shall mean: the audited financial statements of Systems and
                    Lapis (excluding Lapis’ Subsidiaries), audited by Systems' and Lapis’ external
                    accountants prepared in accordance with generally accepted accounting
                    principles, for the year ended December 31, 2007; 

                  

                  10.1.2.2. “either
                    balanced (Zero) or positive” shall mean in respect of Systems that: the
                    aggregate of the balance sheet items featured under assets on
                    the Closing
                    Balance, minus the aggregate of the balance sheet items featured
                    under
                    liabilities on the Closing Balance, results in an amount that
                    is zero or larger
                    than zero; and

                  

                  10.1.2.3. “either
                    balanced (Zero) or positive” shall mean in respect of Lapis that: the aggregate
                    of the balance sheet items featured under assets on the Closing
                    Balance, minus
                    the balance sheet items featured under liabilities, results in
                    an amount that is
                    zero or larger than zero. For the above calculation: (i) the
                    financial assets,
                    liabilities and financial contribution and/or provisions of any
                    Subsidiaries of
                    Lapis shall not be taken into account; and (ii) the financial
                    effect and
                    cash-flow on Lapis’ Closing Balance of the transactions contemplated under the
                    Electronics SPA shall be taken into account as if Closing of
                    the Electronics SPA
                    was effected on the date of the Closing Balance.

                  

                  10.2. No
                    Restraints
                    No
                    temporary restraining order, preliminary or permanent injunction
                    or other order
                    preventing the consummation of the transactions contemplated
                    by this Agreement
                    shall have been issued by any court of competent jurisdiction
                    and remain in
                    effect, unless such will not have a material adverse effect,
                    and there shall not
                    be any Legal Requirement enacted or applicable to the transactions
                    contemplated
                    under the Transaction Documents that makes consummation of the
                    transactions
                    contemplated under the Transaction Documents illegal, which Legal
                    Requirement
                    shall not have been removed within thirty (30) days of enactment.

                   

                  
                    
                       

                    

                    
                      37

                      
                        

                      

                    

                    
                       

                    

                  

                   

                  10.3. No
                    Legal Proceedings
                    No
                    Person shall have commenced or taken steps challenging or seeking
                    the recovery
                    of a material amount of damages from Lapis, due to Lapis being
                    a Party to this
                    Agreement, or seeking to prohibit or limit the exercise by Lapis
                    of any material
                    right pertaining to the issue of the Issued Shares.

                  

                  
                    	11.	
                            CONDITIONS
                              PRECEDENT TO OBLIGATIONS OF LAPIS 

                          

                  

                  

                  The
                    obligations of Lapis and Mund to consummate the transactions
                    contemplated by
                    this Agreement and/or other Transaction Documents to which they
                    are a party, are
                    subject to the satisfaction or waiver at or prior to the Closing,
                    of the
                    following conditions. The conditions set out in this clause 11
                    may be
                    only waived by written notice by Mund.

                   

                  11.1. Securities
                    Law Requirements
                    Lapis,
                    the Investor and, where necessary or required, SN have obtained
                    all applicable
                    governmental, statutory, regulatory, permits, licenses, or other
                    consents and
                    approvals and/or waivers or exemptions, necessary under any laws
                    relating to the
                    consummation of the transactions contemplated under this Agreement,
                    and an
                    information statement under the Exchange Act shall have been
                    filed with the SEC
                    and mailed to the Lapis’ shareholders and the a period of 20 days following the
                    mailing of the information statement to Lapis’ shareholders shall have lapsed,
                    and no such applicable governmental, statutory, regulatory, permit,
                    license, or
                    other consent or approval and/or waiver or exemption shall have
                    been revoked,
                    cancelled, terminated, suspended or made the subject of any stop
                    order or
                    proceeding thereof. 

                  

                  11.2. No
                    Restraints
                    No
                    temporary restraining order, preliminary or permanent injunction
                    or other order
                    preventing the consummation of the transactions contemplated
                    under the
                    Transaction Documents shall have been issued by any court of
                    competent
                    jurisdiction and remain in effect, and there shall not be any
                    Legal Requirement
                    enacted or applicable to the transactions contemplated under
                    the Transaction
                    Documents that makes consummation of the transactions contemplated
                    by this
                    Agreement illegal, which Legal Requirement shall not have been
                    removed within
                    thirty (30) days of enactment.

                  

                  
                    
                       

                    

                    
                      38

                      
                        

                      

                    

                    
                       

                    

                  

                  11.3. No
                    Legal Proceedings
                    No
                    Person shall have commenced any Legal Proceeding challenging
                    or seeking the
                    recovery of a material amount of damages from the Investor in
                    connection with
                    the transactions contemplated by the transaction Documents. 

                  

                  11.4. Guarantees
                    and other Third Party Assurances 

                   

                  11.4.1. Mund,
                    Zvi
                    Avni and Electronics are released in full from all Third Party
                    Assurances. Such
                    Third Party Assurances shall include but shall not limited to
                    all outstanding
                    personal guarantees and liabilities provided by Mund and/or Zvi
                    Avni and/or
                    Electronics for the benefit of any bank or third party, to secure
                    Lapis’ (and/or
                    its Subsidiaries’ other than Electronics) credit lines, liabilities,
                    undertakings and debts and all of Mund's and/or Zvi Avni’s and/or Electronics’
assets encumbered in favor of any bank or third party including,
                    but not limited
                    to the Third Party Assurances listed in Schedule
                    11.4.1.
                    Given
                    the nature of the Business, the Third Party Assurances set forth
                    in the
Schedule 11.4.1
                    are,
                    from time to time, subject to changes in the ordinary course
                    of business and,
                    therefore, Schedule 11.4.1
                    will be
                    amended and updated immediately prior to Closing.

                   

                  1.14.7. Without
                    prejudice to clause 11.4.1
                    above:

                   

                   

                  
                    	 	
                            11.4.1.1.

                          	
                            the
                              Investor shall use its reasonable endeavours to procure
                              that, as soon as
                              reasonably practicable after becoming aware of any
                              Third Party Assurance
                              not released on Closing, Mund, Electronics and/or Zvi
                              Avni shall be
                              released in full from such Third Party Assurance;
                              and

                          

                  

                   

                  
                    	 	
                            11.4.1.2.

                          	
                            pending
                              release of any Third Party Assurance, the Investor
                              undertakes to indemnify
                              Mund, Electronics and/or Zvi Avni against any and all
                              Costs arising under
                              or by reason of that Third Party
                              Assurance.

                          

                  

                  

                  11.5. Escrow
                    Agreement and Security
                    The
                    signing and closing of the Escrow Agreement and the grant by
                    the Investor of an
                    irrevocable security over sufficient assets, which would ensure
                    the payment of
                    the Minimum Value and the discharge of the Investor’s obligations under the Mund
                    Option in a form acceptable to Mund. 

                  

                  
                    	12.	
                            CONDITIONS
                              PRECEDENT TO CLOSING

                          

                  

                  

                  12.1. Consummation
                    of Additional Transactions Under Documents in Agreed Form The
                    obligations of the Parties to consummate the transactions contemplated
                    by this
                    Agreement and/or other Transaction Documents to which they are
                    a party, are
                    subject to the consummation of the following transactions under
                    documents in
                    Agreed Form: 

                   

                  
                    
                       

                    

                    
                      39

                      
                        

                      

                    

                    
                       

                    

                  

                  12.1.1. A
                    transaction between Enertec Management Ltd. and Mund as sellers
                    and SDS as
                    purchaser for the purchase and sale of the entire outstanding
                    share capital of
                    Systems (the "Systems
                    SPA"),
                    shall
                    have been entered into and all conditions precedent therein shall
                    have been
                    fulfilled or waived.

                  

                  12.1.2. A
                    transaction between Mund or a company wholly owned by Mund and
                    Lapis, dated the
                    date of this Agreement, in which Mund or a company wholly owned
                    by Mund shall
                    acquire the entire outstanding share capital of Electronics (the
                    "Electronics
                    SPA"),
                    shall
                    have been entered into and all conditions precedent therein shall
                    have been
                    fulfilled or waived.

                  

                  12.2. Waiver
                    Provided,
                    however, that the Conditions set out in this clause 12 shall
                    automatically be
                    waived if: (i) all conditions in the Systems SPA shall have been
                    fulfilled or
                    waived, save for the conditions in clause 7.2 of that agreement
                    in respect of
                    the closing of the Electronics SPA and the closing of this Agreement;
                    and (ii)
                    all conditions in the Electronics SPA shall have been fulfilled
                    or waived, save
                    for the conditions in clauses 6.1.1 and 6.1.6 of that agreement
                    in respect of
                    the closing of the Systems SPA and the closing this Agreement

                  

                  
                    	13.	
                            TERMINATION

                          

                  

                  

                  13.1. Termination
                    Events
                    This
                    Agreement may be immediately terminated prior to the Closing
                    upon the provision
                    of written notice as provided for below:

                  

                  13.1.1. by
                    either
                    Mund or the Investor if a court of competent jurisdiction or
                    Governmental Body
                    shall have issued an order, decree (which order, decree or ruling
                    the Parties
                    shall use their best efforts to remedy or release) and such was
                    not at the
                    request of a Party or a Party’s Related Person, in each case permanently
                    restraining or otherwise prohibiting the Closing of this Agreement
                    or any other
                    material transaction under the Transaction Documents, and such
                    order, decree,
                    ruling or other action shall have become final and non-appealable;

                  

                  
                    
                       

                    

                    
                      40

                      
                        

                      

                    

                    
                       

                    

                  

                  13.1.2. by
                    Lapis
                    and Mund acting together, if the Closing has not taken place
                    on or before 30
                    April, 2008 (other than as a result of any failure on the part
                    of Lapis to
                    comply with or perform any covenant or obligation of Lapis and/or
                    Mund set forth
                    in this Agreement);

                  

                  13.1.3. by
                    the
                    Investor, if the Closing has not taken place on or before 30
                    April, 2008 (other
                    than as a result of the failure on the part of the Investor to
                    comply with or
                    perform any covenant or obligation set forth in this Agreement);
                    and/or

                  

                  13.1.4. by
                    the
                    mutual consent of Lapis, Mund and the Investor.

                  

                  1.15. Termination
                    Procedures
                    If a
                    Party wishes to terminate this Agreement pursuant to clause 13.1,
                    such
                    Party shall deliver to the other Parties the basis for terminating
                    this
                    Agreement. If
                    this
                    Agreement is terminated pursuant to this clause 13
                    prior to
                    the Closing, then all rights and obligations of the Parties hereunder
                    shall
                    terminate without any liability of any Party to any other Party;
provided,
                    however, that
                    notwithstanding termination of this Agreement, clauses 16, 17.1,
                    17.2, 17.4 and
                    17.14 hall remain in full force and effect.

                  

                  
                    	14.	
                            POST
                              CLOSING COVENANTS AND INDEMNIFICATION 

                          

                  

                  

                  14.1. Release
                    of Guarantees and other Third Party Assurances
                    In the
                    event that, notwithstanding
                    that the Condition set out in clause 11.4 will have been waived
                    and Closing will
                    have become effective, Mund
                    and/or Electronics and/or Zvi Avni shall not have been released from
                    any
                    and all Third Party
                    Assurances per the Closing, then the Investor will take promptly
                    all action
                    required and/or necessary to fulfill the Conditions set out in clause
                    11.4 to release Mund, Electronics and Zvi Avni from any and all
                    Third Party
                    Assurances from which they were not released per the date of
                    Closing.

                  

                  14.2. Indemnification
                    

                   

                  1.15.1. From
                    and
                    after the Closing Date, the Investor may seek, subject to the
                    terms of this
                    Agreement and Schedule
                    5.30.1,
                    indemnification from Lapis and/or Mund (the "Indemnitors" and
                    each
                    an "Indemnitor")
                    for
                    any proven Costs that are wholly and directly suffered or incurred
                    by the
                    Investor and which arise from or as a result of:
                    (i) any
                    inaccuracy in or breach of any of the Mund and Lapis Warranties
                    set forth in
                    clause 5;
                    or
(ii)
                    any
                    breach of any covenant or obligation of Lapis and Mund under
                    this Agreement;
                    provided, however, that the amount of indemnification sought
                    by the Investor
                    shall not exceed the portion of the Minimum Value, as adjusted
                    hereunder,
                    actually and wholly received by Mund minus the sum the is equal
                    to the Purchase
                    Price as such term is defined in the Systems SPA.

                  

                  
                    
                       

                    

                    
                      41

                      
                        

                      

                    

                    
                       

                    

                  

                  14.2.1. 
                    If the
                    Investor becomes aware of any claim or potential claim by a third
                    party
                    (“a
                    third party claim”)
                    which
                    might result in a Claim being made, the Investor shall:

                  

                  14.2.1.1. promptly
                    (and in any event within 30 days of it becoming aware of it)
                    give notice of such
                    third party claim to the Mund and procure that the Mund is given
                    all reasonable
                    facilities to investigate it;

                  

                  14.2.1.2. not
                    make
                    any admission of liability, agreement or compromise with any
                    person, body or
                    authority in relation to that third party claim without prior
                    written approval
                    of Mund;

                  

                  14.2.1.3. subject
                    to the Investor being indemnified by Mund against all reasonable
                    out of pocket
                    costs and expenses incurred in respect of that third party claim;

                  

                  14.2.1.4. take
                    such
                    action as Mund may reasonably request to avoid, resist, dispute,
                    appeal,
                    compromise or defend such third party claim;

                  

                  14.2.1.5. allow
                    Mund to take over the conduct of all proceedings and/or negotiations
                    of
                    whatsoever nature arising in connection with the third party
                    claim in question;
                    and

                  

                  14.2.1.6. provide
                    such information and assistance as Mund may reasonably require
                    in connection
                    with the preparation for and conduct of any proceedings and/or
                    negotiations
                    relating to that third party claim.

                  

                  
                    
                       

                    

                    
                      42

                      
                        

                      

                    

                    
                       

                    

                  

                  14.2.2. If
                    the
                    Investor makes a Claim against Lapis and/or Mund or notifies
                    Lapis and/or Mund
                    of any third party claim which might lead to such a Claim being
                    made, the
                    Investor shall
                    make
                    available to accountants and other representatives appointed
                    by Mund such access
                    to the personnel, records and information of Lapis as Mund reasonably
                    request in
                    connection with such Claim or third party claim.

                  

                  14.2.3. After
                    Closing, the sole remedy of a Party for any breach of any of
                    the representations
                    and warranties by another Party or any other breach of this Agreement
                    or any
                    Transaction Document by such other Party, shall be an action
                    for indemnification
                    under this clause 14. 

                  

                  
                    	15.	
                            THE
                              MUND OPTION  

                          

                  

                  

                                 
                    Subject to the terms and conditions hereof and in reliance upon
                    the
                    representations, warranties and agreements contained herein and
                    subject to Mund
                    exercising the Mund Option (as such term is defined below), the
                    Investor shall acquire the Option Shares (as
                    such
                    term is defined below) in accordance with the terms set out below.
                    For
                    the
                    purpose of this Agreement the term “Mund Option” shall mean a non assignable
                    (other than to a Permitted Transferee, to whom the Mund Option
                    can be assigned
                    requiring no other action than a notification in writing to the
                    Investor) put
                    option, exercisable by Mund, at his sole discretion, under the
                    terms set forth
                    herein, to sell to the Investor and oblige the Investor to purchase
                    4,750,000 of
                    Common Shares, par value $0.001 per share of Lapis (the “Option
                    Shares”)
                    owned
                    by Mund, for a price per Common Share equal to $0.6038 (the "Basic
                    Option Share Price")
                    for a
                    total consideration in the amount of the Minimum Value, as defined
                    hereunder.
                    The Basic Option Share Price is subject to all the adjustments
                    provided for
                    herein.

                  

                  15.1. Right
                    to Exercise and Exercise Price 

                   

                  1.15.2. Mund,
                    at
                    his sole discretion, shall be entitled to exercise the Mund Option
                    and sell to
                    the Investor the Option Shares if and only if the Value of the
                    Option Shares,
                    calculated in accordance with clause 15.2
                    below
                    was not higher for a period of 65 consecutive calendar days during
                    a period of
                    up to 24 months following the Closing Date (the "Strike
                    Period"),
                    than
                    two million and eight hundred and sixty eight thousand Dollars
                    ($2,868,000) (the
“Minimum
                    Value”),
                    subject to the adjustments provided for herein to the Minimum
                    Value in clause
15.4.3.

                   

                  
                    
                       

                    

                    
                      43

                      
                        

                      

                    

                    
                       

                    

                  

                  1.15.3. If
                    the
                    Value of the Option Shares, calculated in accordance with clause
15.2
                    below,
                    during the Strike Period is equal to, or exceeds, the Minimum
                    Value, for a
                    period of 65 consecutive calendar days commencing 120 days after
                    the Closing
                    Date (so long as Mund may sell his Common Shares pursuant to
                    Rule 144 under the
                    Securities Act after such 120-day period), then the Mund Option
                    will become null
                    and void and shall have no force and effect. Notwithstanding
                    the above, in the
                    event Mund shall give an order or attempt to sell the Option
                    Shares during such
                    period of 65 consecutive calendar days and Mund does not succeed
                    in selling the
                    all of Option Shares or a portion thereof during such period
                    of 65 consecutive
                    calendar days for a price per Option Share reflecting at least
                    the Minimum
                    Value, then the Mund Option shall not become void and null and
                    shall be extended
                    in respect of the Option Shares or the unsold portion thereof
                    for a period
                    ending the earlier of: (i) the last day of the period of 24 months
                    following the
                    Closing Date; or (ii) the date on which all Option Shares will
                    have been sold
                    for a price per Option Share equal to or exceeding the Basic
                    Option Share Price,
                    during which period Mund can exercise the Mund Option in accordance
                    with this
                    clause 15. 

                   

                  15.1.1. A
                    third
                    party purchaser of the Option Shares or any part thereof shall
                    not be entitled
                    to the Mund Option unless written consent of the Investor is
                    obtained prior to
                    such sale of Option Shares.

                   

                  15.2. Value
                    of Option Shares The
                    Value
                    of the Option Shares will be calculated according to the average
                    value of the
                    Common Shares as determined by the closing sales price of Lapis’ Common Shares
                    as reported by either the NASDAQ Small Cap Market or the Over
                    the Counter
                    Bulletin Board (www.otcbb.com)
                    upon
                    which Lapis’ securities are listed and traded as of such date during a period
                    of
                    60 consecutive Trading Days, within a period of 24 months from
                    the Closing date.

                  

                  In
                    the
                    event that for whatever reason the Value of the Option Shares
                    cannot be
                    determined in the manner set forth above or if the Parties do
                    not agree on the
                    Value as determined above, the Value shall be determined by Tamir
                    Fishman or
                    Poalim Capital Markets, or such other party as determined and
                    agreed upon
                    between by the Parties. 

                  

                  1.16. Exercise
                    Period and
                    Sum of Option Shares Exercised 

                  

                                 Subject
                    to Mund’s right to exercise as per clause 15.1
                    above,
                    the Mund Option may be exercised and the Option Shares sold by
                    Mund to the
                    Investor during a period of 90 calendar days immediately following
                    the dates set
                    below and in respect to such number of the Option Shares as set
                    out below (the
“Option
                    Exercise Period”):

                   

                  
                    
                       

                    

                    
                      44

                      
                        

                      

                    

                    
                       

                    

                  

                  1.16.1. after
                    the
                    first anniversary of the Closing Date - a sum of Option Shares
                    equal to up to
                    fifty percent (50%) of the total number of Option Shares, for
                    a consideration
                    per one Common Share equal to the Basic Option Share Price, subject
                    to the
                    adjustments determined in accordance with clause 15.3.1
                    below
                    and for a total consideration determined in accordance with clause
15.3.1;
                    and

                   

                  1.16.2. after
                    the
                    second anniversary of the Closing Date - a sum of Option Shares
                    equal to all or
                    part of the Option Shares, for a consideration per one Common
                    Share equal to the
                    Basic Option Share Price, subject to the adjustments determined
                    in accordance
                    with clause 15.3.2
                    below
                    and for a total consideration determined in accordance with clause
15.3.2. 

                   

                  15.3. Exercise
                    Price 

                   

                  The
                    Basic
                    Option Share Price shall be subject to the adjustments set forth
                    below (the
                    Basic Option Share Price, as adjusted, shall be referred to as
                    the “Exercise
                    Price”):

                   

                  1.16.3. In
                    the
                    event the Mund Option is exercised in accordance with clause
1.16.1
                    above,
                    the Exercise Price shall be equal to $0.5434 per Option Share,
                    subject to all
                    adjustments set forth in clauses 15.3.3
                    and15.3.4
                    below
                    and reflecting a consideration (the “First
                    Anniversary Consideration”)
                    to be
                    paid by the Investor to Mund for the Option Shares sold on that
                    date of one
                    million, two hundred and ninety thousand and five hundred seventy
                    five US
                    Dollars ($1,290,575). 

                   

                  1.16.4. In
                    the
                    event the Mund Option is exercised in accordance with clause
1.16.2
                    above,
                    the Exercise Price shall be equal to $0.6038 per Option Share,
                    subject to all
                    adjustments set forth in clauses 15.3.2
                    and15.3.3
                    below
                    and reflecting a consideration (the “Second
                    Anniversary Consideration”)
                    to be
                    paid by the Investor to Mund of two million and eight hundred
                    and sixty eight
                    thousand Dollars ($2,868,000).

                   

                  15.3.1. In
                    the
                    event Mund sells any of the Option Shares to a third party who
                    is not a
                    Permitted Transferee within the 24 months period following the
                    Date of the
                    Closing, the Minimum Value shall be adjusted pro rata to reflect
                    such number of
                    the Option Shares actually sold by reducing the Minimum Value
                    by the sum that is
                    equal to the number of Option Shares sold by Mund multiplied
                    by the Exercise
                    Price per Option Share.

                   

                  
                    
                       

                    

                    
                      45

                      
                        

                      

                    

                    
                       

                    

                  

                  15.3.2. In
                    the
                    event Lapis shall subdivide or consolidate its Common Shares
                    and/or otherwise
                    alter its share capital, then the Basic Option Share Price shall
                    be adjusted in
                    order to ensure that the economic value attributed to the Mund
                    Option is not
                    altered pursuant to changes to the share capital of the Company.
                    Notwithstanding the above, the adjustment to the Basic Option
                    Share Price shall
                    be effected provided that Mund shall be entitled to the sum that
                    is equal to the
                    Minimum Value upon the exercise of the Mund Option.

                   

                  15.3.3. In
                    the
                    event that at any time prior to the exercise of the Mund Option
                    in full, Lapis
                    shall distribute a cash or stock dividend, the Basic Option Share
                    Price shall be
                    adjusted from and after the date of such distribution is made,
                    by reducing the
                    Basic Option Share Price with an amount equal to the Dollar equivalent
                    of the
                    net per-share distribution after taxes and other compulsory payments,
                    received
                    by Mund for an Option Share. Notwithstanding the above, the adjustment
                    to the
                    Basic Option Share Price shall be effected provided that Mund
                    shall be entitled
                    to the sum that is equal to the Minimum Value upon the exercise
                    of the Mund
                    Option minus any sum actually received by him pursuant to the
                    distribution of
                    the cash dividend contemplated under this sub-clause.

                   

                  1.16.5. 
                    Notwithstanding the stipulations of the above sub-clauses 15.3,
                    in the
                    event the adjustment set out in the above sub-clauses 15.3
                    shall
                    result in Mund receiving upon exercise of the Mund Option a total
                    consideration
                    for the Option Shares below the First Anniversary Consideration
                    set out in
                    clause 1.16.3
                    (if
                    exercised in accordance with clause 1.16.1)
                    or
the
                    Second Anniversary Consideration
                    set out
                    in clause 1.16.4
                    (if the
                    Mund Option will be exercised in accordance with clause 1.16.2),
                    then
                    the Investor shall pay Mund the difference between the consideration
                    received
                    after such adjustment set out in the above sub-clauses 15.3
                    and the
                    consideration that should have been paid according to the First
                    Anniversary
                    Consideration as set out in clause 1.16.3
                    or the
                    Second Anniversary Consideration as set out in clause 1.16.4.
                    

                   

                  
                    
                       

                    

                    
                      46

                      
                        

                      

                    

                    
                       

                    

                  

                  15.4. Exercise
                    of the Option 

                   

                  1.16.6. The
                    Mund
                    Option or any portion thereof is exercisable by delivery of a
                    written notice of
                    exercise to the Investor in a form similar to the form attached
                    hereto in
Schedule
                    15.4.1
                    (the
“Notice
                    of Exercise”)
                    duly
                    completed and executed. In the Notice of Exercise, Mund shall
                    indicate the
                    portion of Option Shares under the Mund Option to be exercised
                    on the Exercise
                    Date (as defined below).

                   

                  15.4.1. The
                    payment of the consideration for the portion of the Option Shares
                    under the Mund
                    Option covered by a Notice of Exercise shall take place within
                    ten (10) business
                    days following the delivery of the Notice of Exercise to the
                    Investor (the
“Exercise
                    Date”).
                    On
                    each Exercise Date, the following transactions shall occur, which
                    transactions
                    shall be deemed to take place simultaneously and no transaction
                    shall be deemed
                    to have been completed or any document delivered until all such
                    transactions
                    have been completed and all required documents delivered: 

                   

                  
                    	 	
                            15.4.1.1.

                          	
                            Mund
                              shall deliver to the Investor share transfer deeds
                              executed by Mund or
                              such other document evidencing the transfer of such
                              Option Shares from
                              Mund to the Investor; and

                          

                  

                   

                  
                    	 	
                            15.4.1.2.

                          	
                            the
                              Investor shall deliver to Mund the sum equal to the
                              First Anniversary
                              Consideration or the Second Anniversary Consideration,
                              as applicable, for
                              the Option Shares purchased under a specific Notice
                              of Exercise, by wire
                              transfer of immediately available funds to the bank
                              account designated by
                              Mund in writing.

                          

                  

                   

                  15.5. Guarantee
                    and Escrow

                   

                  15.5.1. The
                    Investor will provide an irrevocable security over assets in
                    an amount equal to
                    the Minimum Value, as set out in Schedule
                    15.6.1
                    attached
                    hereto, under the documents to be executed at Closing and to
                    be attached hereto
                    in Schedule
                    15.6.1.
                    

                   

                  
                    
                       

                    

                    
                      47

                      
                        

                      

                    

                    
                       

                    

                  

                  1.16.7. Mund,
                    the
                    Investor and a third party escrow agent will enter into an escrow
                    agreement (the
“Escrow
                    Agreement”)
                    to be
                    executed the date hereof and to take effect on Closing, in the
                    form attached
                    hereto in Schedule
                    15.5.2,
                    under
                    which the Investor shall deposit two personal cheques with the
                    escrow agent to
                    facilitate the payment to Mund by the Investor of the consideration
                    under the
                    Mund Option. 

                  

                  
                    	16.	
                            Confidentiality

                          

                  

                  

                  1.17. Each
                    Party undertakes that it shall (and shall procure that each of
                    its
                    Representatives shall) maintain all information received from
                    another Party or a
                    Subsidiary that is marked or deemed confidential (“Confidential
                    Information”)
                    in
                    confidence and not disclose that Confidential Information to
                    any person except
                    as permitted by this clause 16
                    or with
                    the prior written approval of the other Parties.

                  

                  16.1. No
                    Party
                    shall, without the prior written consent of the other Parties,
                    disclose any
                    information to any person about the contents of this Agreement
                    or any of the
                    transactions contemplated under the Transaction Documents, unless
                    it is
                    compelled to do so by any rule of law or by any applicable stock
                    exchange
                    regulation. If a Party is compelled to disclose the aforesaid
                    information to any
                    person on the basis of any rule of law or any stock exchange
                    regulation, it
                    shall consult with the other Parties as to the contents and the
                    form of the
                    disclosure to be made.

                  

                  1.18. The
                    provisions of this clause 16
                    shall
                    survive termination and/or Closing of this agreement.

                  

                  
                    	17.	
                            MISCELLANEOUS
                              

                          

                  

                  

                  17.1. Tax
                    Liability Each
                    Party shall be responsible for all its respective tax obligations
                    deriving from
                    the transactions contemplated in this Agreement. 

                   

                  17.2. Fees
                    & Expenses
                    Each
                    Party shall bear its own legal fees and all related expenses
                    incurred in
                    connection with the negotiation, preparation, entering into and
                    completion of
                    the transactions contemplated under the Transaction Documents.
                    The fees and
                    expenses incurred by Lapis in respect of advise by US advisors
                    on matters of US
                    law and regulations, including, inter alia, dealing with shareholders’ meetings
                    and resolutions, board resolutions, regulatory advice and amendments
                    to the
                    by-laws of Lapis, will shall be borne by Lapis, after Closing.

                  

                  1.19. Survival
                    Subject
                    to any time limitations specifically set forth in this Agreement
                    and the other
                    provisions of this Agreement, all representations and warranties
                    set forth in
                    clauses 5
                    and
6
                    above
                    shall survive the Closing. 

                  

                  
                    
                       

                    

                    
                      48

                      
                        

                      

                    

                    
                       

                    

                  

                  17.3. Notices
                    All
                    notices, consents, approvals, waivers and other communications
                    in relation to or
                    hereunder shall be in writing sent
                    by
                    e-mail, by
                    personal delivery or registered mail with confirmation of receipt
                    and shall be
                    deemed to have been duly given when delivered in person (against
                    confirmation of
                    receipt), or when confirmation of transmission is received when
                    sent by
                    telecopy, or seven (7) business days after delivery (prepaid)
                    to any commercial
                    overnight courier, or within 12 hours after the e-mail was sent,
provided,
                    however, that
                    in
                    each case where delivery by hand or by telecopy occurs after
                    18:00p.m. on a
                    business day or at any time on a day which is not a business
                    day, service shall
                    be deemed to occur at 09:00a.m. on the next following business
                    day.

                  

                  All
                    notices and other communications shall be addressed as follows:

                  

                  
                    	
                            If
                              to the Lapis and Mund:

                          	
                            Lapis
                              Technologies, Inc.

                          
	 	
                            19
                              West 34th Street, Suite 1008

                          
	 	
                            New
                              York, New York 10001, the USA

                          
	 	
                            enertec@netvision.net.il

                          
	 	 
	 	
                            Harry
                              Mund

                          
	 	
                            73
                              Ben-Gurion Street

                          
	 	
                            Kiriat
                              Motzkin, Israel

                          
	 	
                            Tel:
                              04-8404177

                          
	 	
                            Fax:
                              04-8732324

                          
	 	
                            enertec@netvision.net.il

                          

                  

                  

                  
                    	
                            With
                              a copy to:

                          	
                            Tomer
                              Maharshak

                          
	 	
                            Balter,
                              Guth, Aloni & Co.

                          
	 	
                            96
                              Yigal Alon, Tel Aviv, 67891, Israel

                          
	 	
                            Tel:
                              03-5111111

                          
	 	
                            Fax:
                              03-5102166

                          
	 	
                            tmaharshak@bgalaw.co.il

                          

                  

                  

                  

                  
                    	
                            If
                              to the Investor:

                          	
                            Mordechai
                              Solomon

                          
	
                             

                          	
                            11
                              Dganya Street

                          
	
                             

                          	
                            Ra’anana,
                              Israel

                          
	
                             

                          	
                            Tel:
                              073-2324501

                          
	
                             

                          	
                            Fax:
                              073-2324509

                          
	
                             

                          	
                            uri.nissani@star-ds.com

                          

                  

                   

                  

                  
                    	
                            With
                              a copy to:

                          	
                            David
                              Gotlieb, Adv.

                          
	 	
                            Shnitzer,
                              Gotlieb & Co.

                          
	 	
                            7
                              Menachem Begin Street, 

                          
	 	
                            Ramat
                              Gan 52521, Israel 

                          
	 	
                            Tel:
                              03-6113000

                          
	 	
                            Fax:
                              03-6113001

                          
	 	
                            david@sglaw.co.il

                          

                  

                  

                  or
                    to
                    such other address as the parties may from time to time designate
                    in
                    writing.

                  

                  
                    
                       

                    

                    
                      49

                      
                        

                      

                    

                    
                       

                    

                  

                  17.4. Waiver
                    Any
                    waiver hereunder must be in writing, duly authorized and signed
                    by the Party to
                    be bound, and shall be effective only in the specific instance
                    and for the
                    purpose for which given. Except as otherwise provided in this
                    agreement, no
                    failure or delay on the part of any Party in exercising any right,
                    power or
                    privilege under the Transaction Documents or remedy under any
                    applicable law
                    shall operate as a waiver thereof or impair or preclude the exercise
                    of such
                    right, power, remedy or privilege at any subsequent time, nor
                    shall any single
                    or partial exercise of any right, power, remedy or privilege
                    hereunder preclude
                    any other or further exercise thereof or the exercise of any
                    other right, power,
                    remedy or privilege.

                  

                  17.5. Entire
                    Agreement
                    This
                    Agreement and the Transaction Documents constitute the entire
                    agreement among
                    the Parties in respect of the transactions contemplated under
                    the Transaction
                    Documents and supersede any other agreement that may have been
                    made or entered
                    into by the Parties solely relating to the transactions contemplated
                    under the
                    Transaction Documents, including the Letter of Intent dated 11
                    October 2007,
                    entered into by the Investor, SDS, Lapis and Mund. 

                  

                  17.6. Amendments
                    This
                    Agreement may be amended or modified in whole or in part only
                    by a duly
                    authorized written instrument that refers to this Agreement and
                    is signed by the
                    Parties.

                   

                  17.7. Headings
                    The
                    headings in this Agreement are inserted for convenience of reference
                    only and
                    shall not be considered a part of or affect the construction
                    or interpretation
                    of any provision of this Agreement.

                   

                  17.8. Counterparts
                    This
                    Agreement may be executed in counterparts and by facsimile signature,
                    each of
                    which shall be deemed an original, but all of which taken together
                    shall
                    constitute one and the same instrument.

                   

                  17.9. Further
                    Assurances
                    The
                    Parties agree that they shall execute and deliver such additional
                    documents and
                    shall take such additional actions (including without limitation
                    procuring such
                    resolutions or regulatory approvals) as may required by or be
                    reasonably
                    necessary or appropriate to effect and implement the provisions
                    and purposes of
                    the Transaction Documents and the consummation of the transactions
                    contemplated
                    thereunder. In the absence of specific stipulations or agreements,
                    each Party
                    shall be responsible for its own costs and expenses incurred
                    in giving effect to
                    the provisions of this clause 17.10.

                   

                  
                    
                       

                    

                    
                      50

                      
                        

                      

                    

                    
                       

                    

                  

                  17.10. Severability
                    If any
                    provision of this Agreement is by way of law or held by a court
                    of competent
                    jurisdiction to be or otherwise be deemed invalid, illegal or
                    unenforceable, the
                    validity, legality and enforceability of the remaining provisions
                    shall not in
                    any way be affected, impaired or invalidated thereby.
                    Notwithstanding the foregoing, the Parties shall thereupon negotiate
                    in good
                    faith in order to agree to the terms of a mutually satisfactory
                    provision,
                    achieving as nearly as possible the same commercial effect, to
                    be substituted
                    for the provisions so found to be invalid,
                    illegal or unenforceable.

                  

                  17.11. Manner
                    of Payment
                    All
                    payments to be made pursuant to this Agreement shall be made
                    in Dollars to each
                    Party’s respective bank accounts, as shall be designated by or on behalf
                    of such
                    Party from time to time in writing or as otherwise agreed between
                    the Parties.
                    All payments shall be made by initiating such payments on a day
                    the banks are
                    open for business in Israel or the United States, before 11.00
                    a.m., Israel
                    time, by bank wire transfer in immediately available funds, marked
                    for attention
                    as indicated, or as otherwise agreed between the Parties. 

                  

                  17.12. Conflict
                    with Other Agreements
                    In the
                    event of any conflict between this Agreement and any other Transaction
                    Document,
                    this Agreement shall prevail (as between the Parties to this
                    Agreement)
                    unless:
                    (i) such
                    other Transaction Document expressly states that it (or any part
                    of it)
                    overrides this Agreement; or (ii) the Parties otherwise expressly
                    agree in
                    writing that such other agreement shall override this Agreement.

                   

                  17.13. Governing
                    Law & Jurisdiction
                    This
                    Agreement shall be governed by, and construed and enforced in
                    accordance with,
                    the laws of the State of Israel. Any dispute arising under or
                    with respect to
                    this Agreement shall be resolved exclusively in the competent
                    court in the
                    District of Tel Aviv, Israel.

                   

                  

                   

                  
                    
                       

                    

                    
                      51

                      
                        

                      

                    

                    
                       

                    

                  

                   

                  IN
                    WITNESS WHEREOF, Lapis, Mund and the Investor have each caused
                    this Agreement to
                    be duly executed as of the date first above written.

                   

                   

                  
                    	
                            Lapis
                              and Mund:

                          	
                            The
                              Investor:

                          
	
                             

                             

                            /s/
                              Lapis Technologies, Inc.

                            Lapis
                              Technologies, Inc.

                            By:
                              /s/ Harry Mund 

                            Title:
                              Chief Executive Officer 

                          	 
	
                             

                            /s/
                              Harry Mund

                          	
                             

                             /s/
                              Mordechai Solomon

                             

                          
	
                             

                          	 

                  

                  

                  

                  

                  
                    
                       

                    

                    
                      52

                      
                        

                      

                    

                    
                       

                    

                  

                   

                  List
                    of Schedules 

                  

                  
                    	
                            Schedule
                              1.2.13

                          	
                            Due
                              Diligence Information Index List

                          
	 	 
	
                            Schedule
                              2.3

                          	
                            Capitalization
                              Table after issue of the Issued Shares 

                          
	 	 
	
                            Schedule
                              4.3

                          	
                            Closing
                              Obligations 

                          
	 	 
	
                            Schedule
                              5.2

                          	
                            Organizational
                              Documents Lapis 

                          
	 	 
	
                            Schedule
                              5.3.2

                          	
                            Capitalization
                              Table per the Date of this Agreement

                          
	 	 
	
                            Schedule
                              5.5.4

                          	
                            List
                              of: (i) mergers with or an acquisition of a company;
                              (ii) transactions
                              representing a sale of five percent of Lapis’ activities during Q4 of
                              2007; (iii) created or extended any credit facilities
                              not in the ordinary
                              course of business; and (iv) transactions which are
                              not in the ordinary
                              course of business of Lapis, since 1 January 2007 

                          
	 	 
	
                            Schedule
                              5.6.2

                          	
                            List
                              of Tax provisions 

                          
	 	 
	
                            Schedule
                              5.7.1

                          	
                            Legal
                              Proceedings 

                          
	 	 
	
                            Schedule
                              5.12

                          	
                            Outstanding
                              Loans, Guarantees, Debts and Obligations 

                          
	 	 
	
                            Schedule
                              5.13

                          	
                            Restricting
                              Agreements 

                          
	 	 
	
                            Schedule
                              5.14.1

                          	
                            Indebtedness
                              of or to Major Shareholders 

                          
	 	 
	
                            Schedule
                              5.15.1

                          	
                            List
                              of Employees 

                          
	 	 
	
                            Schedule
                              5.16.4.1

                          	
                            List
                              of Key Employees 

                          
	 	 
	
                            Schedule
                              5.18.1 

                          	
                            List
                              of Licensees for the use of Lapis' Intellectual Property
                              

                          
	 	 
	
                            Schedule
                              5.18.4

                          	
                            List
                              of Registered Patent, Trademarks and Copyrights 

                          
	 	 
	
                            Schedule
                              5.19

                          	
                            List
                              of Related Party Transactions 

                          
	 	 
	
                            Schedule
                              5.20

                          	
                            List
                              of Leases and the Rent Payments of each Lease

                          
	 	 
	
                            Schedule
                              5.21

                          	
                            List
                              of insurance 

                          
	 	 
	
                            Schedule
                              5.22

                          	
                            List
                              of Directors and Key Officers 

                          
	 	 
	
                            Schedule
                              5.30.1

                          	
                            Limitations
                              on Liability 

                          
	 	 
	
                            Schedule
                              6.5.2

                          	
                            Organizational
                              Documents Star Night 

                          
	 	 
	
                            Schedule
                              9.4.1

                          	
                            Form
                              of Legal Opinion US Counsel Lapis 

                          
	 	 

                  

                   

                  
                    
                       

                    

                    
                      53

                      
                        

                      

                    

                    
                       

                    

                  

                   

                  
                    	
                            Schedule
                              9.4.2

                          	
                            Form
                              of Legal Opinion Counsel Star Night 

                          
	 	 
	
                            Schedule
                              9.4.3

                          	
                            Fairness
                              Opinion

                          
	 	 
	
                            Schedule
                              9.4.4.1

                          	
                            Consent
                              Letter Bank Leumi

                          
	 	 
	
                            Schedule
                              9.4.4.2

                          	
                            Consent
                              Letter Bank Hapoalim

                          
	 	 
	
                            Schedule
                              9.4.5

                          	
                            Employment
                              agreement of Mr. Zvi Avni 

                          
	 	 
	
                            Schedule
                              10.1.1

                          	
                            Copy
                              of from of Consent of Shareholders Lapis

                          
	 	 
	
                            Schedule
                              11.4.1

                          	
                            Third
                              Party Assurances

                          
	 	 
	
                            Schedule
                              15.5.1

                          	
                            Notice
                              of Exercise

                          
	 	 
	
                            Schedule
                              15.6.1

                          	
                            Guarantee
                              for Mund Option

                          
	 	 
	
                            Schedule
                              15.6.2

                          	
                            Escrow
                              Agreement

                          

                  

                   

                   

                  
                    
                       

                    

                    
                      54

                      
                        

                      

                    

                    
                       

                    

                  

                  SCHEDULE
                    4.3 

                   

                  Closing
                    Arrangements

                   

                  Closing
                    Obligations

                   

                  Lapis’
                    Obligations

                   

                  
                    	1.	
                            At
                              Closing, Lapis shall deliver or procure that there
                              is delivered to the
                              Investor:

                          

                  

                   

                  
                    	
                          	1.1.	
                            the
                              share certificates in respect of all the Issued Shares
                              or such other
                              document evidencing the issue of the Issued Shares;
                              

                          

                  

                  
                    	
                          	1.2.	
                            a
                              letter of resignation in the Agreed Form duly executed
                              by each of the
                              directors of Lapis in respect of their directorships
                              and/or any committee of Lapis; 

                          

                  

                  
                    	
                          	1.3.	
                            a
                              letter of resignation in the Agreed Form duly executed
                              by the auditors of
                              Lapis in respect of their position as auditors of Lapis;

                          

                  

                  
                    	
                          	1.4.	
                            a
                              copy of a resolution of the board of directors of Lapis
                              authorising the
                              execution of and the performance by Lapis of its obligations
                              under this
                              Agreement and each of the Transaction Documents to
                              be executed by
                              it;

                          

                  

                  
                    	
                          	1.5.	
                            documents
                              evidencing release of the Third Party
                              Assurances;

                          

                  

                  
                    	
                          	1.6.	
                            a
                              certificate that the Mund and Lapis Warranties are
                              correct in all material
                              respects per the Date of Closing; 

                          

                  

                  
                    	
                          	1.7.	
                            a
                              copy of the Yearly Financial Statements, as such term
                              is defined in clause
                              5.2.2 of this Agreement; and

                          

                  

                  
                    	
                          	1.8.	
                            a
                              copy of the Trial Balance, as such term is defined
                              in clause 5.2.2 of this
                              Agreement.

                          

                  

                  

                  Investor’s
                    Obligations

                   

                  
                    
                      	2.	
                              At
                                Closing, the Investor shall deliver or procure that
                                there is delivered to
                                Lapis:

                            

                    

                  

                   

                  
                    	
                          	1.1.	
                            the
                              share transfer forms in respect of the transfer of
                              Investor’s SN Shares to
                              Lapis;

                          

                  

                  
                    	
                          	1.2.	
                            certified
                              true copy of the register of members of Star Night
                              evidencing the transfer
                              of the Investor’s SN Shares to Lapis; and

                          

                  

                  
                    	
                          	1.3.	
                            the
                              share certificates in respect of all the Investor’s SN
                              Shares.

                          

                  

                   

                  
                    	3.	
                            At
                              Closing, the Investor shall deliver or procure that
                              there is delivered to
                              Mund:

                          

                  

                   

                  
                    	
                          	1.1.	
                            documents
                              evidencing release of the Third Party
                              Assurances;

                          

                  

                  
                    	
                          	1.2.	
                            the
                              instrument of security over assets of the Investor
                              required for the
                              purpose of effecting the Mund Option;
                              and

                          

                  

                  
                    	
                          	1.3.	
                            the
                              cheques and other matters required under the Escrow
                              Agreement.

                          

                  

                  

                  
                    
                       

                    

                    
                      55

                      
                        

                      

                    

                    
                       

                    

                  

                  General

                   

                  
                    	4.	
                            All
                              documents and items delivered at Closing pursuant to
                              this Schedule
                              4.3
                              shall be held by the recipient to the order of the
                              person delivering the
                              same until such time as Closing shall be deemed to
                              have taken place in
                              accordance with clause 5 of this Schedule
                              4.3
                              below.

                          

                  

                   

                  
                    	5.	
                            Simultaneously
                              with
                              delivery of all documents and items required to be
                              delivered at Closing
                              (or waiver of the delivery thereof by the person entitled
                              to receive the
                              relevant document or item); the documents and items
                              delivered in
                              accordance with this Schedule shall cease to be held
                              to the order of the
                              person delivering the same and Closing shall be deemed
                              to have taken
                              place.

                          

                  

                   

                  

                  

                  

                  

                  

                   

                  
                    
                       

                    

                    
                      56

                      
                        

                      

                    

                    
                       

                    

                  

                  SCHEDULE
                    11.4.1

                   

                  Third
                    Party Assurances

                   

                  [To
                    be updated prior to Closing]

                   

                  

                   

                  
                    	 	
                            §

                          	
                            Third
                              Party Assurances Mund attached as separate
                              documents

                          

                  

                  

                  
                    	 	
                            §

                          	
                            Third
                              Party Assurances Avni attached as separate
                              documents

                          

                  

                  

                  
                    	 	
                            §

                          	
                            Third
                              Party Assurances Electronics attached as separate
                              documents

                          

                  

                  

                   

                  

                   

                  
                    
                       

                    

                    
                      57

                      
                        

                      

                    

                    
                       

                    

                  

                  SCHEDULE
                    5.30.1 

                   

                  Limitations
                    on Liability

                   

                   

                  
                    	
                            1.

                          	
                            Time
                              Limits

                          

                  

                   

                  Mund
                    and/or Lapis shall not be liable for any Claim unless Mund receives
                    from the
                    Investor written notice (within thirty (30) days of the Investor
                    becoming aware
                    of such Claim) containing reasonably specific details of the
                    Claim: prior to the
                    end of a period of 20 months immediately following the Date of
                    Closing.

                   

                  
                    	
                            2.

                          	
                            Thresholds
                              for Claims

                          

                  

                   

                  
                    	
                            1.1.

                          	
                            Notwithstanding
                              any other provision of this Agreement, Mund and/or
                              Lapis shall not be
                              liable for any Claim unless the amount of the liability
                              pursuant to the
                              aggregate of all Claims exceeds fifty thousand US Dollars
                              (US$50,000) (in
                              which case the Investor shall be able to claim only
                              for the excess over
                              fifty thousand US Dollars
                              (US$50,000)).

                          

                  

                   

                  
                    	
                            3.

                          	
                            Maximum
                              limit for all Claims

                          

                  

                   

                  
                    	
                            1.2.

                          	
                            Notwithstanding
                              any other provision of this Agreement, the aggregate
                              maximum amount of the
                              liability of Mund for all Claims shall not exceed the
                              sum of that part of
                              the Minimum Value (as adjusted from time to time) minus
                              the sum the is
                              equal to the Purchase Price as such term is defined
                              in the Systems SPA.
                              The indemnification for all Claims shall be by way
                              of reduction of the
                              Minimum Value. 

                          

                  

                   

                  
                    	
                            4.

                          	
                            Matters
                              disclosed or taken into account in
                              adjustments

                          

                  

                   

                  
                    	
                            1.3.

                          	
                            Mund
                              and/or Lapis shall not be liable for any Claim for
                              breach of the Mund and
                              Lapis Warranties if and to the extent that the fact,
                              matter, event or
                              circumstance giving rise to such
                              Claim:

                          

                  

                   

                  
                    	 	
                            1.1.1.

                          	
                            is
                              disclosed
                              in
                              this Agreement or any other Transaction Document, the
                              Disclosure Letter or
                              in any document disclosed in the Due Diligence
                              Information;

                          

                  

                   

                  
                    	 	
                            1.1.2.

                          	
                            is
                              allowed, provided or reserved for in the financial
                              statements of Lapis
                              and/or its Subsidiaries and/or was disclosed in the
                              financial due
                              diligence conducted in respect of Lapis and its Subsidiaries
                              by the
                              Investor and its advisors and any documents and information
                              provided
                              within the framework thereof.

                          

                  

                   

                  
                    	
                            5.

                          	
                            Contingent
                              liabilities

                          

                  

                   

                  If
                    any
                    Claim for breach of the Mund and Lapis Warranties is based upon
                    a liability
                    which is contingent only, Mund and/or Lapis shall not be liable
                    to make any
                    payment unless and until such contingent liability gives rise
                    to an obligation
                    to make a payment.

                   

                  
                    	
                            6.

                          	
                            No
                              liability for Claims arising from acts or omissions
                              of
                              Investor

                          

                  

                   

                  Mund
                    and/or Lapis shall not be liable for any Claim which would not
                    have arisen but
                    for any voluntary act, omission or transaction carried out after
                    the date of
                    this Agreement by the Investor or its respective directors, employees
                    or agents
                    or successors in title.

                   

                  
                    
                       

                    

                    
                      58

                      
                        

                      

                    

                    
                       

                    

                  

                   

                  
                    	
                            7.

                          	
                            Nothing
                              to restrict Investor’s duty to
                              mitigate

                          

                  

                   

                  Nothing
                    in this Schedule
                    1.12.1
                    shall in
                    any way restrict or limit the general obligation of the Investor
                    to mitigate any
                    loss or damage which it may suffer in consequence of any breach
                    by Mund and/or
                    Lapis of the terms of this Agreement or any fact, matter, event
                    or circumstance
                    likely to give rise to a Claim.

                   

                  
                    	
                            8.

                          	
                            No
                              double recovery

                          

                  

                   

                  The
                    Investor shall not be entitled to recover damages or obtain payment,
                    reimbursement, restitution or indemnity more than once in respect
                    of any one
                    liability, loss, cost, shortfall, damage, deficiency, breach
                    or other set of
                    circumstances which gives rise to more than one Claim.

                   

                  
                    	
                            9.

                          	
                            No
                              recovery if compensation in another manner is
                              available

                          

                  

                   

                  
                    	
                            1.4.

                          	
                            The
                              Investor shall not be entitled to recover
                              damages or obtain payment, reimbursement, restitution
                              or indemnity in
                              respect of any one liability, loss, cost, shortfall,
                              damage, deficiency,
                              breach or other set of circumstances which:

                          

                  

                   

                  
                    	 	
                            1.1.1.

                          	
                            is
                              or can be recovered by the Investor under any policy
                              of insurance
                              maintained or
                              customary to be obtained in the field of activity of
                              Lapis or from a third
                              party, or would have been so recoverable but for any
                              change in the current
                              terms of insurance instigated by the Investor
                              after Closing; and/or

                          

                  

                   

                  
                    	 	
                            1.1.2.

                          	
                            give
                              rise to or result in
                              a
                              benefit accruing to the Investor out of the same, including,
                              but not
                              limited to, any relief from taxation obtainable by
                              the Investor and/or its
                              affiliates, and any amount by which any taxation for
                              which the Investor
                              and/or its affiliates are accountable is reduced or
                              extinguished.

                          

                  

                   

                  
                    	
                            10.

                          	
                            Investor’s
                              knowledge

                          

                  

                   

                  Mund
                    and/or Lapis shall not be liable for any Claim for breach of
                    the Mund and Lapis
                    Warranties if and to the extent that the Investor is aware at
                    the date of this
                    Agreement of the fact, matter, event or circumstance which is
                    the subject matter
                    of the Claim; and

                   

                  
                    	
                            11.

                          	
                            Opportunity
                              to remedy breaches

                          

                  

                   

                  A
                    breach
                    of the Mund and Lapis Warranties which is capable of remedy shall
                    not entitle
                    the Investor to compensation unless Mund and/or Lapis are given
                    written notice
                    of the breach by the Investor and such breach is not remedied
                    within a
                    reasonable period of time after the date on which such notice
                    is served on the
                    Seller. Without prejudice to its duty to mitigate any loss, the
                    Investor shall
                    provide all reasonable assistance to the Seller to remedy any
                    such
                    breach.

                   

                  
                    
                       

                    

                    
                      59

                      
                        

                      

                    

                    
                       

                    

                  

                   

                  SCHEDULE
                    15.5.1 

                   

                  NOTICE
                    OF EXERCISE

                  

                  

                  
                    	To:	
                            Mordechai
                              Solomon

                          

                  

                  11
                    Dganya
                    St. 

                  Ra’anana

                  Israel
                    

                  

                  By:
                    fax
                    and e-mail

                  

                  Date:
                    [ ]
                    2009/2010

                  

                  

                  The
                    undersigned hereby elects to exercise the Mund Option in respect
                    of [
  ]
                    Common
                    Shares of Lapis Technologies, Inc. (the “Company”) that are subject to and
                    pursuant to the terms of the Mund Option as set out in clause
                    15 of an agreement
                    for the issue and sale of shares in the Company and the transfer
                    of shares in
                    Star Night Technologies Ltd. dated the [ ] day of [ ] 2008 (the
“Lapis SPA”),
                    between the Company, the addressee and the undersigned, and requests
                    herewith
                    payment of the sum of US$[ ]
                    in
                    accordance with clause 15 of the Lapis SPA

                  

                  

                  Kind
                    regards,

                  

                  

                   

                  ________________________

                  Harry
                    Mund

                   

                  
                    
                       

                    

                    
                      60

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