Document:

20-F/A

Exhibit 4.18  

LONG TERM PURCHASING
AGREEMENT  

This agreement is entered into
between: 

			
			
			
			
			
	Israel Aircraft Industries Ltd.	 	Odem Electronic (1992) Technologies Ltd.
	Commercial Aircraft Group	 	20 Freiman Street, Second Floor
	Production Division	 	Rishon Letzion
	Ben Gurion International Airport,	and  	Israel
	70100, Israel	 	(hereafter referred to as "Seller") 
	(hereafter referred to as "IAI") 

	1.  	PREAMBLE 

	1.1 	The
purpose of this agreement is to establish a long term agreement between the Parties for
the purchase by IAI of the Parts set forth in Appendix “A” hereto (hereinafter
the “Parts”) for its G200 (Galaxy) and G150 Business Jet Programs
(including all derivatives thereof) and any other programs agreed to between the parties. 

	1.2 	The
aim of the parties in this Agreement is to establish a good and efficient working
relationship so as the parties will be able to work by deliveries “Ship to Bins”. 

	2.  	DURATION
OF AGREEMENT 

	2.2 	This
Agreement shall become effective upon its signature by both Parties (hereafter referred
to as the “Effective Date”), and shall remain in effect until the
earlier of (a) termination of this Agreement by IAI in accordance with paragraph 9 below,
or (b) 31 December 2008. 

	2.3 	Upon
mutual agreement of the parties, this Agreement may be extended until 31 December 2011,
provided that both parties agree in writing on such extension prior to 1 June 2009.
In the event that the parties elect to extend the agreement, the extended agreement shall
be subject to the terms and conditions of this agreement in effect on 31 December 2008,
including the terms and conditions of paragraph 9 below. 

	3.  	PURCHASE
ORDERS 

	3.1 	During
the term of this Agreement, IAI shall have an irrevocable option, exercisable at IAI’s
discretion at any time, and from time to time, to purchase Parts and/or spares or
replacements therefore, by way of (a) regular purchase orders or (b) “ship to bin”,
as specified in paragraph 8, all to be subject to the terms and conditions of this
Agreement and the Standard Purchase Order Terms and Conditions (hereafter referred to as
the “Standard T & C”) of IAI’s Purchase Orders. No Purchase
Order of IAI shall be binding on Seller if the Seller has rejected such Purchase Order
because of terms inconsistent with the terms of this Agreement in writing, no later than
three (3) Business Days after receipt of the Purchase Order, of Seller’s acceptance
thereof. 

	3.2 	The
terms of IAIs Standard T & C shall be incorporated by reference into this Agreement
for all IAI Purchase Orders for Parts. All Parts delivered hereunder shall be subject to
IAI’s quality assurance requirements which shall require, among other things, that:
(a) the manufacturer of the Part shall be included in the list of approved manufacturers,
as detailed and listed in the IAI’s website (the “Approved Manufacturer”),
and (b) the Part shall be detailed with the part number allocated to it by such Approved
Manufacturer, including the date code (“Date Code”), and any related
quality assurance information (collectively, the “Standard Requirements”).
In the event that IAI shall cease working with an Approved Manufacturer, IAI shall afford
Seller reasonable notice period in order for Seller to select and find a suitable
replacement Approved Manufacturer. Seller shall maintain all of the aforesaid Standard
Requirements for all Parts in Sellers buffer inventory, as detailed in paragraph 6 below.
In the event of a conflict between the Standard T & C and the terms of this
Agreement, the terms of this agreement shall be deemed to prevail. 

	3.3 	For
the sake of clarity, if the event of that IAI decides to issue a purchase order by way of
“ship to bin” as specified in paragraph 8, then IAI shall issue a Purchase
Order/s that shall only cover IAI’s due payments to Seller prior thereto. This
Purchase Order/s shall not create or form any liability from IAI to Seller. Therefore, if
for any reason this Agreement shall be terminated prior to delivery by Seller to IAI
under the “ship to bin” purchase order, then IAI shall not be liable for the
Purchase Order but only for the Parts consumed by Seller to meet the “ship to bin”purchase
order, as specified in accordance with paragraph 9. 

	3.4 	The
monthly delivery rate for each Purchase Order issued by IAI pursuant to this Agreement
shall be determined and specified by IAI in such Purchase Order. IAI shall not be
obligated to any minimum or maximum monthly rate of delivery. Seller shall only be
obligated to deliver in accordance with the Purchase Orders it has not rejected in
accordance with Section 3.1 above. 

	3.5  	There
 shall be no minimum or maximum  quantities  requirement  for any  Purchase  Orders for
       parts by IAI.

	3.6 	IAI
may, at no additional cost and on giving two (2) weeks written notice to Seller prior to
the scheduled delivery date of any Part on order, accelerate the delivery date of such
Part. 

	3.7 	IAI
may, at no additional cost and on giving one (1) week written notice to Seller prior to
the scheduled delivery of any Part on order, stretch-out the delivery date of such part. 

	4.  	SPECIAL
BUSINESS PROVISIONS 

	4.1 	IAI
shall be entitled, at any time subsequent to the Effective Date and on providing written
notice to Seller, to add Parts to Appendix “A”, as well as to change the
quantity of any Part required per shipset. The purchase and sale of any Parts added to
Appendix “A” shall be subject to the terms and conditions of this Agreement in
effect as at the date of such addition. The unit price of any Part added to Appendix
“A” shall be negotiated by the Parties in good faith prior to such addition
provided that the prices will not exceed the prices Seller grants to its most favored
customers for the same Parts, and shall be added to Appendix A. 

	4.2 	In
the event of a reduction in the quantity of any Part required per shipset, IAI shall
provide Seller at least thirty (30) days prior written notice and thereafter shall be
entitled, at no additional cost, to reduce the quantity of such Part/s, provided that IAI
pays any amounts due on any outstanding Purchase Orders. 

	5.  	PRICES
AND TERMS OF PAYMENT 

	5.1 	The
price for each Part is set forth in Appendix “A” hereto. Subject to IAI’s
right to terminate this Agreement, as detailed paragraph 9 below, the prices listed in
Appendix “A” shall remain valid for deliveries through 31 December 2008 (and
through 31 December 2011, if the parties elect to extend this Agreement as per Article 2
hereabove), and will not be subject to increase during this period. 

	 	
The
prices mentioned above DDP per Incoterms 2000 and include all costs for delivery and
insurance to IAI’s line station bins and/or plant receiving dock as per IAI’s
requirement. 

	 	
For
the sake of clarity, Title and risk of loss for any Parts delivered, shall pass on to IAI
only after the Parts are delivered in accordance with IAI’s instructions to the
required delivery place. 

	5.2 	For
Ship To Bin deliveries in accordance with paragraph here under, Invoices shall be
provided by Seller to IAI on a monthly basis. Seller shall invoice IAI only with respect
to those bags that have already been delivered in accordance with paragraph 5.1 above.
Each invoice shall be accompanied by a diskette with sale information broken down by Part
Number, price, quantities and any other criterion, as required by IAI. Such information
may be provided by Seller to IAI via Fax or email. 

	5.3 	The
terms of payment for any Purchase Order issued pursuant to the terms and conditions of
this Agreement shall be net ninety (90) days from the date IAI receives an invoice and
the goods ordered in accordance with the relevant delivery date. Payment will be effected
in accordance with IAI’s payment schedule, namely the 15th of the month if the date
IAI receives an invoice or the goods is on or before the 15th, or, the last day of the
month if the date IAI receives an invoice or the goods is after the 15th. 

	6.  	BUFFER
INVENTORY 

	6.1. 	Throughout
the duration of this agreement and notwithstanding the existence or           not of any
open IAI Purchase Orders, Seller will maintain, at no additional cost           to IAI, a
buffer inventory of the Parts set forth in Appendix “A” in           order to
support IAI’s production line in the event: 

	 	— 	of
stoppages on IAI’s production line arising from rejected and/or damaged and/or lost
and/or scrapped Parts;  

	 	— 	that
IAI increases its required monthly rate of delivery; or 

	 	— 	that
Seller's normal  production  schedule is interrupted due to unforeseen /  uncontrollable
           events arising.

	6.2. 	The
said buffer Inventory shall be comprised of sufficient shipsets of each Part
          set forth in Appendix “A” to support IAI’s required
          delivery rate for three (3) months (as at the date of signature hereof
          IAI’s monthly delivery rate for G200 is two (2) shipsets and for the G150
          – [TBD]). 

	6.3. 	Seller
will be required in writing to adjust its buffer inventory in accordance           with
any notification of change in IAI’s required monthly rate of delivery           and
/ or any change in the quantity of any Part required per shipset. 

	6.4. 	Seller
shall be required to update its buffer inventory to the latest           configuration at
all relevant times and shall replenish such inventory whenever           same is depleted
for any reason as soon as possible but no later than four (4)           weeks after such
depletion. 

	6.5. 	Seller’s
buffer inventory shall be available for shipment to IAI within one           (1) Business
Day of Seller’s receipt of IAI’s request therefor via           facsimile or
e-mail. 

	6.6. 	Seller
shall provide IAI, on IAI’s request in writing and discretion, at           any
time, a full status report of all Parts in Seller’s buffer inventory. 

	6.7. 	On
giving Seller reasonable written notice, IAI’s representatives shall be
          granted access to Seller’s premises in order to inspect the status of
          Seller’s buffer inventory and to review Seller’s quality assurance
          procedures. 

	7.  	WARRANTY 

	7.1 	Seller
warrants that all Parts delivered to IAI under this Agreement will conform to the
specifications in the relevant Purchase Order for such Parts, shall be free from any
defects in material, workmanship, design and will be fit for the purpose intended. The
aforesaid warranty shall apply to any defect discovered within eighteen (18) months of
delivery of any Part to IAI. 

	7.2 	If
any Parts as delivered do not comply with the Warranty set forth in 7.1 above, Seller
shall, at IAI’s option, replace such Part, repair such Part, or pay IAI’s or IAI’s
customer’s costs required to repair or replace such Part. 

	7.3 	Seller
shall have no obligation to provide such warranty if the material defect or substantial
non-compliance with the specifications in the relevant Purchase Order was caused (i)
through fault of IAI or otherwise through misuse of the Parts, or (ii) by modification of
the Parts other than by Seller or not as specifically authorized by Seller. 

	7.4 	The
foregoing warranties are the sole and exclusive warranties pertaining to the Parts.
Except as provided above, the Parts are delivered “as is”, without any other
warranty, whether express or implied, including, without limitation, any implied warranty
of merchantability or fitness for a particular purpose, and of any other obligation on
the part of Seller. Seller does not make, and IAI hereby waives, any other warranty,
express or implied. 

	7.5 	SELLER
SHALL NOT, UNDER ANY CIRCUMSTANCES, BE LIABLE TO IAI OR ANY THIRD PARTY FOR ANY SPECIAL,
INCIDENTAL, INDIRECT, OR CONSEQUENTIAL DAMAGES ARISING IN ANY WAY UNDER THIS AGREEMENT OR
FROM DEFECTS IN THE PARTS UNDER ANY THEORY OF LIABILITY, EVEN IF SELLER IS INFORMED IN
ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES. 

	7.6 	In
the event of non-compliance of any Part with any of the warranties set forth above,
Seller shall replace said Part within one (1) Business Day of IAI’s written notice
to Seller. 

	7.7 	In
the event that Seller has not delivered a Part to IAI on-time or has delivered a Part
with unsuitable Quality, and Seller has not rectified such within a grace period of seven
(7) business days, then IAI shall be entitled to purchase such Part from other sources
and Seller shall compensate IAI for the difference between the agreed prices per
Attachment A and the actual purchase price for such Part up to a limit of an additional
100% over the agreed prices per Attachment A. 

	8.  	SHIP
TO BIN 

	8.1 	All
deliveries of Parts shall be made to line station bins. Seller shall provide personnel
and institute procedures (to be approved by IAI), such as periodic plant checks, to
insure an interrupted flow of Parts at IAI station bins and, as applicable, at all times.
All deliveries of Parts shall be bar coded with the ordering IAI bar code information. A
delivery receipt may, at IAI’s discretion, be signed by a representative of the
ordering IAI plant for each Part delivered to the receiving dock and production line
bins. 

	8.2 	Upon
Seller’s request, on 1 January and 1 July of each calendar year during the term of
this Agreement, IAI shall provide Seller with a reasonable forecast of its usage of Parts
for the next six (6) month period, based on bona fide reasonable assumptions of IAI in
good faith for the next six (6) months period. IAI shall not be bound to any quantity of
Parts forecasted. IAI shall furthermore be entitled to change its forecasts when
necessary and for any reason. On receiving any forecast from IAI, including any changes
to a forecast, Seller shall coordinate with its suppliers in order to ensure that they
effect an appropriate allocation of their production time and material resources to
provide for the said forecast. 

	8.3 	Seller
shall survey all line station bins and loading dock facilities each two (2) weeks. Seller
shall replenish all line station bins and loading dock facilities one (1) week after each
such survey. The quantity of stock Seller shall maintain in each line station bin, will
conform with IAI’s monthly rate of production (as at the date of signature hereof IAI’s
monthly delivery rate for G200 is two (2) shipsets and TBD per year for the G150
program). 

	8.4 	Deliveries
shall be effectuated through a “two bag” system, whereby (a) two shipsets of
Parts shall be included in each bag, and (b) Seller shall ensure that there are always
two bags, one open and one closed, of each Part in the station bins. 

	8.5 	Seller
shall send to IAI’s Security Department a list of Seller’s workers that will
deliver the Parts into IAI’s facilities. This list will be subject to the approval
of IAI’s Security Department. IAI’s Security Department is the only body that
can approve any entrance of Seller’s workers into IAI. 

	8.6 	IAI’s
Standard T & C’s shall apply to this paragraph 8. In the event of a conflict
between the Standard T & C and the terms of this paragraph, the terms of this
paragraph shall be deemed to prevail. 

	8.7 	For
sake of clarity, in order to continue the smooth flow of Parts to IAI and whereas IAI has
inventory of all Parts at the date of signing this agreement, the parties agree that IAI
shall continue to consume all its inventory before using any Parts from the station bins. 

	8.8 	The
parties shall agree to and create a flow chart of activities and procedures that shall
detail the flow of work and payment between the parties. 

	9.  	CANCELLATION
FOR CONVENIENCE TERMINATION OF AGREEMENT 

	9.1 	IAI
may at any time, cancel this Agreement or a Purchase Order or a portion of a Purchase
Order or any Part on the attached Appendices. In such event, IAI shall pay Seller for all
Parts delivered to IAI and for Sellers buffer inventory in Israel for such cancelled
Parts in accordance with sub-paragraph 6.2 for all Parts that Seller has not succeeded in
diverting to other customers and has given IAI written confirmation of its efforts to
this effect. 

	 	
In
the event of termination of any program, then IAI’s sole liability shall be for all
Parts delivered to IAI and for not more than 60% of Sellers buffer inventory in Israel for
such cancelled Parts in accordance with sub-paragraph 6.2 for all Parts that Seller has
not succeeded in diverting to other customers and has given IAI written confirmation of
its efforts to this effect. Seller shall also invest all efforts to support IAI with
Selling all the Parts delivered to IAI. 

	 	
For
the sake of clarity, IAI’s above liabilities shall not exceed the then current rate
of delivery in accordance with Sub-paragraph 6.2. 

	9.2  	This
Agreement may be terminated by a party upon the occurrence of any of the following:

	 	(1) 	The
other party has not cured a breach within forty-five (45) days after having
                    received written notice of such breach from the other party; 

	 	(2) 	The
other party ceases doing business or commences dissolution and winding up of
                    its affairs; or 

	 	(3) 	The
other party is unable to fulfill its obligations under this Agreement for
                    more than ninety (90) days due to a Force Majeure event as defined in
paragraph                     11.3 below. 

	10.  	QUALITY
ASSURANCE 

With regard to any ship to bin
orders, Seller undertakes to abide by all of the Quality Assurance requirements, including
but not limited to CAG9000. 

Seller shall invest all it’s
best efforts to complete all Quality Assurance requirements in order to provide Parts by
way of Ship to Bin Per Paragraph 8, no later than four (4) months after signature of this
contract. 

In the event that any Part is
delivered by Seller to IAI without the required documentation then Seller shall pay IAI
$150 per each Part, provided Seller has not rectified such within seven (7) business days. 

	11.  	MICELLANEOUS 

	11.1 	Reporting.
Seller shall provide IAI with any reports required by IAI that shall include any
information associated with the delivery of all Parts, for example Sellers stock, Seller’s
orders to manufacturers, delivery dates to Sellers facility and etc. Such information
shall be supplied to IAI in written format approved by IAI. 

	11.2 	Kit
to Floor. In the event that IAI shall request to work by way of “Kit to Floor” meaning
that Seller shall provide IAI with Kits (a set/group of Parts in accordance with a
defined and quantified list that is to be supplied as one lot), then Seller shall be
entitled to an additional two percent (2%) to the Part prices and the parties shall agree
on the procedure and method to implement such Kit to Floor. 

	11.3 	Force
Majeure. The performance by either party of its obligations under this Agreement
shall be suspended for a period that is reasonable under the circumstances if the failure
or delay thereof is caused by Approved Manufacturer’s default or delay, strike,
riot, fire flood, natural disaster, or similar cause beyond such party’s reasonable
control. The party wishing to claim relief by reason of force majeure shall notify the
other party in writing without delay of such event and of any cessation thereof. In event
of force majeure, the parties shall continue to perform their respective obligations that
are not affected by such force majeure. 

	11.4 	Confidentiality.
Each party shall treat as confidential all confidential information of the other party,
shall not use such confidential information except as set forth herein, and shall not
disclose such confidential information to any third party. Each party shall promptly
notify the other party of any actual or suspected misuse or unauthorized disclosure of
the other party’s confidential information. This provision shall also apply to each
of the parties’ agents, affiliates, employees, consultants, subcontractors and
distributors. 

	11.5 	Modifications.
This Agreement may be modified only by a written document duly signed by an authorized
officer of both parties which references this Agreement. 

	11.6 	This
Agreement, including the Appendixes, constitute the entire agreement between the parties
with respect to the subject matter hereof and supersedes all representations,
undertakings and agreements previously made between the parties with respect to the
subject matter of this Agreement. 

	11.7 	This
Agreement shall be subject to the laws of the state of Israel, and the competent courts
of the Tel Aviv District Court, Israel shall have exclusive jurisdiction over any dispute
arising thereunder. 

	11.8 	Seller
will act as an independent contractor under the terms of this Agreement. There shall be
no employer/employee or agency relationship between Seller and IAI. 

	11.9 	This
Agreement may be executed in any number of counterparts, each of which shall be deemed an
original and enforceable against the Parties actually executing such counterpart, and all
of which together shall constitute one and the same instrument. 

THIS AGREEMENT IS NOT VALID UNLESS
AND UNTIL DULY EXECUTED BY IAI MANAGEMENT. 

SIGNED ON THIS 19TH DAY
OF SEPTEMBER 2004 

	Israel Aircraft Industries Ltd.

/s/ J. Guttman
——————————————

By: Jacob Guttman
Title: Director of procurement & logistics  	Odem Electronic (1992) Technologies Ltd.

/s/ J. Neuhof
——————————————

By: Jacob Neuhof
Title: Managing director  

	/s/ J.
Vistanetzky
——————————————

By: J. Vistanetzky
Title: Group Director FinanceF-3/A

Exhibit 4.5  

MASTER SECURITY
AGREEMENT  

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

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

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

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

NOW, THEREFORE, IT IS AGREED AS
FOLLOWS: 

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

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

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

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

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

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

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

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

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

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

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

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

2

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

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

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

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

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

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

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

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

3

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

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

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

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

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

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

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

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

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

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

4

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

          

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

          

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

          

5

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

          

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

          

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

          

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

          

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

          

6

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

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

Beit Rabin, 100 BOS Road, Teradyon 

Industrial Park, Misgav 20179, Israel

Attention:    Chief Financial Officer

Facsimile:    (972) 4 999-0334

______________________________  

	By:  	/s/
Adiv Baruch 

	Title:  	Chief
Executive Officer 

	Date:  	August
16, 2006 

______________________________  

	By:  	/s/
Nehemia Kaufman 

	Title:  	Chief
Financial Officer 

	Date:  	August
16, 2006 

Laurus Master Fund Ltd. 

______________________________  

	By:  	/s/
David Grin 

	Title:  	Director 

	Date:  	August
16, 2006 

7

DEBENTURE 

(FIXED CHARGE
AGREEMENT) 

for
an Unlimited Amount

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

WHEREAS Pledgor and the Purchaser,
have entered into an Securities Purchase Agreement dated August 16, 2006 (the
“Agreement”) and into a certain Master Security Agreement of the same
date, which this Debenture is attached as Exhibit B thereto (the “Security
Agreement”); and 

WHEREAS under the Agreement Pledgor
undertook to pay for all Obligations and in order to secure such payment of all
Obligations, the parties agreed that the Purchaser shall have a pledge over the shares of
BOScom Ltd. (“BOScom”) and the shares of Quasar Telecom (2004) Ltd.
(“Quasar”) held by the Pledgor; 

NOW, THEREFORE, IT IS AGREED AS
FOLLOWS: 

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

	 	2. 	To
secure the performance of the Pledgor’s obligations pursuant to this
               Debenture, the Agreement, the Note, the Warrant and the Related
Agreements, and                pursuant to the provisions of Section 165 of the Companies’ Ordinance
(New                Version) 1983, the Pledgor hereby pledges and grants the Purchaser, a
first                priority fixed charge on the following (the fixed charge shall be
referred                herein as the “Fixed Charge”): 

	 	(i) 	all
of its right, title and interest in 144,465 Ordinary Shares of BOScom held
               by the Pledgor and any additional shares of BOScom that the Pledgor may
acquire,                receive and/or otherwise be entitled to (the “BOScom
Pledged Shares”), for as long as the Fixed Charge is in effect.  

	 	(ii) 	all
of its right, title and interest in 1,000 Ordinary Shares of Quasar held by
               the Pledgor and any additional shares of Quasar that the Pledgor may
acquire,                receive and/or otherwise be entitled to (the “Quasar
Pledged Shares”), for as long as the Fixed Charge is in effect.  

	 	
(The
Boscom Pledged Shares together with the Quasar Pledged Shares, the "Pledged Shares")  

	 	
It
is hereby clarified, that the Pledged Shares are currently pledged by a fixed charge to
the benefit of the Purchaser under a certain fixed charge agreement dated September 29,
2005 (the “2005 Fixed Charge”). The Fixed Charge under this Agreement
shall rank in parity with the 2005 Fixed Charge (which for the avoidance of doubt will
not be removed upon execution of this Agreement).  

	 	3.	The
Pledgor shall not without prior written consent of the Purchaser, sell,           pledge,
transfer, assign, encumber, charge, grant a security interest or option           in any
of the Pledged Shares. The execution of this Agreement shall be deemed as           the
Purchaser’s consent for creating the Fixed Charge hereunder together           with
the 2005 Fixed Charge. 

	 	4.	The
Purchaser shall be entitled to enforce the Fixed Charge against the Pledgor           and
the Pledged Shares shall be subject to immediate foreclosure at any time
          without any further demand, immediately upon the occurrence of any Default
Event           (as such term is defined in the Security Agreement). 

	 	5.	The
Pledgor shall cooperate with the Purchaser and execute all documents as may           be
reasonably necessary to register this Fixed Charge with the Israeli Registrar
          of Companies and shall bear all stamp taxes with respect to such registration,
          if any. The Pledgor undertakes to register such registration with the Israeli
          Registrar of Companies and/or any other Registrar, including the Registrar of
          Pledges, if required, within 3 business days in Israel. The Pledgor shall pay
          upon demand, all reasonable expenses, including reasonable attorney’s
fees,           of enforcing the Purchaser’s rights and remedies hereunder in the
event of           a breach by the Pledgor as well as with respect to expenses resulting
from           exercising this Fixed Charge. 

	 	6.	The
amount being secured under the Fixed Charge created by this Debenture is
          unlimited in amount and is created in accordance with the Security Agreement. 

	 	7.	This
Debenture shall terminate upon the fulfillment of the Obligations, as           defined
in the Security Agreement, including payment of the Note and any           interest
thereon, and the Purchaser undertakes to promptly sign any and all           forms
required in order to remove any and all security interests granted by           Pledgor
hereunder. 

	 	8.	All
terms and conditions of the Security Agreement shall be embedded into this
          Debenture as an integral part, unless they conflict with any of the terms or
          conditions of this Debenture, and in such event the terms and conditions of
this           Debenture shall govern. 

	 	9.	This
Debenture shall be governed by and construed in accordance with the laws of           the
State of Israel. 

	 	10.	None
of the rights, privileges, or obligations set forth in, arising under, or
          created by this Debenture may be assigned or transferred by either party hereto
          without the prior consent in writing of the other parties. Notwithstanding the
          above, the Purchaser may assign its rights and obligations under this Debenture
          without acquiring the Pledgor’s consent to any parent of the Purchaser,
any           of Purchaser’s subsidiaries and any co-subsidiaries of the Purchaser’s
          parent, whether now existing or hereafter created or acquired. 

	 	11.	Any
notices to be provided by one party to the other shall be done in accordance
          with the notice provisions set forth in the Securities Agreement. 

- 2 -

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

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

	 	
______________________________  

	 	By: 	/s/
Adiv Baruch 

	 	Title: 	Chief
Executive Officer 

	 	Date: 	August
16, 2006 

	 	
______________________________  

	 	By: 	/s/
Nehemia Kaufman

	 	Title: 	Chief
Financial Officer 

	 	Date: 	August
16, 2006 

	 	
Laurus
Master Fund Ltd.  

	 	
______________________________  

	 	By: 	/s/
David Grin 

	 	Title: 	Director 

	 	Date: 	August
16, 2006 

- 3 -

DEBENTURE 

(FLOATING CHARGE
AGREEMENT) 

for an Unlimited Amount 

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

WHEREAS Pledgor and the Purchaser
have entered into an Securities Purchase Agreement dated August 16, 2006 (the
“Agreement”) and into a certain Master Security Agreement of the same date,
which this Debenture is attached as Exhibit A thereto (the “Security
Agreement”); and  

WHEREAS under the Agreement, Pledgor
undertook to pay for all Obligations and in order to secure such payment of all
Obligations, the parties agreed that the Purchaser shall have a pledge over the Collateral
defined below; 

NOW, THEREFORE, IT IS AGREED AS
FOLLOWS: 

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

	 	2.	To
secure the performance of the Pledgor’s Obligations pursuant to this
Debenture, the Agreement, the Note, the Warrant and the Related Agreements, and
pursuant to the provisions of Section 165 of the Companies’ Ordinance (New
Version) 1983, the Pledgor hereby pledges and grants the Purchaser, a first
priority floating charge on all of its right, title and interest in all the
assets of the Pledgor now owned or at any time hereafter acquired by any
Pledgor, or in which any Pledgor now have or at any time in the future may
acquire any right, title or interest, including without limitation: all
accounts, inventory, equipment, goods, documents, instruments (including
without limitation, promissory notes), contract rights (subject to any
assignment or pledge limitations included therein), chattel paper, investment
property (including, without limitation, all equity interests owned by the
Pledgor, but excluding the Pledged Shares and any interests in Surf
Communications Solutions Ltd.), letter-of-credit rights, intellectual property,
trademarks and tradestyles in which the Pledgor now has or hereafter may
acquire any right, title or interest, all proceeds and products thereof
(including, without limitation, proceeds of insurance) and all additions,
accessions and substitutions thereto or therefore (the “Collateral”)
(the said floating charge shall be referred herein as the “Floating Charge”),
for as long as the Floating Charge is in effect. It is hereby clarified, that
the Collateral is currently pledged by a floating charge to the benefit of the
Purchaser under a certain floating charge agreement dated September 29, 2005
(the “2005 Floating Charge”). The Floating Charge under this
Agreement shall rank in parity with the 2005 Floating Charge (which for the
avoidance of doubt will not be removed upon execution of this Agreement).  

	 	3.	The
Pledgor shall not without the Purchaser’ prior written consent, which
          consent shall not be unreasonably withheld, sell, exchange, lease, pledge or
          otherwise dispose of or give any other rights in the Collateral except for
sales           and/or exchanges of tangible assets that are part of the Collateral and
for           leases or other dispositions in the ordinary course of business. In
addition,           Pledgor will keep the Collateral free and clear of all attachments,
levies,           taxes, liens, security interests and encumbrances of every kind and
nature           (“Encumbrances”), except for such Encumbrances which by
their           terms are junior to the security interests granted to the Purchaser
hereunder           and were created after receipt of Purchaser’s written consent
(not to be           unreasonably withheld) and except for pledges on assets imposed in
connection           with the purchase or lease thereof. The execution of this Agreement
shall be           deemed as the Purchaser’s consent for creating the Floating
Charge           hereunder together with the 2005 Floating Charge. 

	 	4. 	The
Purchaser shall be entitled to enforce the Floating Charge against the           Pledgor
and the Collateral shall be subject to immediate foreclosure at any time
          without any further demand, immediately upon the occurrence of any Default
Event           (as such term is defined in the Security Agreement). 

	 	5.	The
Pledgor shall cooperate with the Purchaser and execute all documents as may           be
reasonably necessary to register this Floating Charge with the Israeli
          Registrar of Companies, and shall bear all stamp taxes with respect to such
          registrations, if any. The Pledgor undertakes to make such registration with
the           Israeli Registrar of Companies and/or any other Registrar, including the
          Registrar of Pledges, if required, within 3 business days in Israel. The
Pledgor           shall pay upon demand, all reasonable expenses, including reasonable
          attorney’s fees, of enforcing the Purchaser’s rights and remedies
          hereunder in the event of a breach by the Pledgor as well as with respect to
          expenses resulting from exercising this Floating Charge. 

	 	6.	The
amount being secured under the Floating Charge created by this Debenture is
          unlimited in amount and is created in accordance with the Security Agreement. 

	 	7.	This
Debenture shall be deemed null and void upon the fulfillment of all the
          Obligations as defined in the Security Agreement, including payment of the Note
          and any interest thereon, and the Purchaser undertakes to promptly sign any and
          all forms required under the Israeli law in order to remove any and all
security           interests granted by Pledgor hereunder. 

	 	8.	All
terms and conditions of the Security Agreement shall be embedded into this
          Debenture as an integral part, unless they conflict with any of the terms or
          conditions of this Debenture, and in such event the terms and conditions of
this           Debenture shall govern. 

	 	9.	This
Debenture shall be governed by and construed in accordance with the laws of           the
State of Israel. 

	 	10.	None
of the rights, privileges, or obligations set forth in, arising under, or
          created by this Debenture may be assigned or transferred by either party hereto
          without the prior consent in writing of the other party. Notwithstanding the
          above, the Purchaser may assign its rights and obligations under this Debenture
          without acquiring the Pledgor’s consent to any parent of the Purchaser,
any           of Purchaser’s subsidiaries and any co-subsidiaries of the Purchaser’s
          parent, whether now existing or hereafter created or acquired. 

	 	11.	Any
notices to be provided by one party to the other shall be done in accordance
          with the notice provisions set forth in the Securities Agreement. 

- 2 -

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

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

______________________________  

	By:  	/s/
Adiv Baruch 

	Title:  	Chief
Executive Officer 

	Date:  	August
16, 2006 

______________________________  

	By:  	/s/
Nehemia Kaufman 

	Title:  	Chief
Financial Officer 

	Date:  	August
16, 2006 

Laurus Master Fund Ltd. 

______________________________  

	By:  	/s/
David Grin 

	Title:  	Director 

	Date:  	August
16, 2006 

- 3 -

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