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<SEC-DOCUMENT>0001178913-06-000606.txt : 20060405
<SEC-HEADER>0001178913-06-000606.hdr.sgml : 20060405
<ACCEPTANCE-DATETIME>20060405133737
ACCESSION NUMBER:		0001178913-06-000606
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20060405
FILED AS OF DATE:		20060405
DATE AS OF CHANGE:		20060405

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			BOS BETTER ONLINE SOLUTIONS LTD
		CENTRAL INDEX KEY:			0001005516
		STANDARD INDUSTRIAL CLASSIFICATION:	COMPUTER COMMUNICATIONS EQUIPMENT [3576]
		IRS NUMBER:				0000000
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		6-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-14184
		FILM NUMBER:		06741412

	BUSINESS ADDRESS:	
		STREET 1:		100 BOS RD
		CITY:			TERADION ISRAEL
		STATE:			L3
		ZIP:			00000

	MAIL ADDRESS:	
		STREET 1:		TERADION INDUSTRIAL PARK
		CITY:			BEIT RABIN
		STATE:			L3
		ZIP:			20179
</SEC-HEADER>
<DOCUMENT>
<TYPE>6-K
<SEQUENCE>1
<FILENAME>zk62392.htm
<TEXT>
<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        \\Backup\office\EDGAR Filing\BOS better online solutions Ltd\62392\a62392.eep -->
     <!-- Control Number: 62395                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    BOS better online solutions Ltd                                  -->
     <!-- Project Name:   6-K                                                              -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>6-K</TITLE>
</HEAD>
<BODY>

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<HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE STYLE="margin-top: -10px">

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="4"><B>FORM
6 &#150; K</B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="4"><B>SECURITIES AND EXCHANGE
COMMISSION</B> </FONT> </P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Washington, D.C. 20549 </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Report of Foreign Issuer </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to Rule 13a
&#150; 16 or 15d &#150; 16<BR>of the Securities Exchange Act of 1934 </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For the Month of April
2006 </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="5"><U><B>B.O.S. Better Online
Solutions Ltd.</B></U> </FONT> <BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">(Translation of
Registrant&#146;s Name into English) </FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Center Underline-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>100 BOS Road,
Teradyon 20179, Israel </U></FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>(Address of Principal
Corporate Offices) </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark whether the
registrant files or will file annual reports under cover Form 20-F or Form 40-F. </FONT></P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form 20-F <FONT size="3" face="Wingdings">x
</font>Form 40-F <FONT size="3" face="Wingdings">o
</font></FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark if the  registrant is submitting  the Form 6-K in paper as permitted by Regulation
S-T Rule 101(b)(1): ___________
</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark if the  registrant is submitting  the Form 6-K in paper as permitted by Regulation
S-T Rule 101(b)(7): ___________
</FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark whether the registrant
by furnishing the information contained in this form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of 1934. </FONT></P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Yes <FONT size="3" face="Wingdings">o
</font>No <FONT size="3" face="Wingdings">x</font></FONT></P>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">If &#147;Yes&#148; is marked,
indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): <U>N/A</U> </FONT> </P>


<p align=center>
<font size=2></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>THE PROXY STATEMENT ATTACHED TO THIS
FORM 6-K IS HEREBY INCORPORATED BY REFERENCE INTO THE REGISTRANT&#146;S REGISTRATION
STATEMENTS ON FORM F-3 (NO. 333-130048) AND FORM S-8 (NOS. 333-110696, 333-100971 AND
333-11650), AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS SUBMITTED, TO
THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Attached hereto and incorporated by
reference herein is the Registrant&#146;s notice of meeting and proxy statement for the
annual general meeting of shareholders to be held on May 18, 2006. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Signature </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized. </FONT></P>


<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B.O.S. Better Online Solutions Ltd.<BR>(Registrant)<BR>
<BR>BY: /S/ Nehemia Kaufman<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Nehemia Kaufman<BR>CFO</FONT></TD>
</TR>
</TABLE>
<BR>







<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dated: April 5, 2006</FONT></P>

<p align=center>
<font size=2></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. Better Online Solutions Ltd.
<BR>Beit Rabin
<BR>Teradyon Industrial Zone
<BR>Misgav, Israel</B> </FONT>
</P>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTICE OF ANNUAL
GENERAL MEETING OF SHAREHOLDERS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To Be Held on May 18,
2006 </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To our Shareholders: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>You are invited to attend an Annual
Meeting of Shareholders of B.O.S. Better Online Solutions Ltd. (the &#147;Company&#148;)
to be held in Israel at the offices of the Catalyst Fund LP at 3 Daniel Frisch Street,
Tel-Aviv, Israel, on May 18, 2006 at 11 a.m. local time, and thereafter as it may be
adjourned from time to time (the &#147;Meeting&#148;) for the following purposes: </FONT></P>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          To reelect Messrs. Edouard Cukierman, Joel Adler, Adiv Baruch, Avishai
          Gl&uuml;ck, Andrea Mandel-Mantello and Ronen Zavlik and to elect Mr. Jean-Marc
          Bally to the Company&#146;s Board of Directors, to serve until the next annual
          general meeting of shareholders and until their successors have been duly
          elected and qualified. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          To reappoint Kost, Forer, Gabbay &amp; Kasierer, a member of Ernst &amp; Young
          International, Ltd. as the Company&#146;s Independent Auditors. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          To increase the registered share capital of the Company and to amend article 4.1
          of the Articles of Association and section 4 of the Memorandum of Association,
          accordingly. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          To amend the Articles of Association of the Company in light of amendments to
          the Israeli Companies Law. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          To amend the indemnification agreements issued and to be issued in the future to
          directors of the Company, in light of the amendment to the Articles of
          Association. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          To approve the grant of shares to Adiv Baruch, CEO of the Company, and grant of
          options to Signum Ltd. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          To approve the grant of shares and options to Mr. Edouard Cukierman, Chairman of
          the Board of Directors. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          To authorize the audit committee and the Board to distribute bonuses to the
          Chairman and CEO. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          To approve an increase of options available for issuance under the
          Company&#146;s 2003 Israeli Share Option Plan. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          To receive the Auditor&#146;s Report and the Company&#146;s Consolidated
          Financial Statements for the fiscal year ended December 31, 2005. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          To transact such other business as may properly come before the Meeting or any
          adjournments thereof. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to the Company&#146;s
Articles of Association, the Board of Directors has fixed the close of business on April
10, 2006 as the date for determining the holders of record of Ordinary Shares entitled to
notice of and to vote at the Meeting and any adjournments thereof. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All the proposals are ordinary
resolutions, which require the affirmative vote of a majority of the Ordinary Shares of
the Company voted in person or by proxy at the Meeting on the matter presented for
passage. The votes of all shareholders voting on the matter will be counted. </FONT></P>

<p align=center>
<font size=2>1</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors believes that
the shareholders of the Company should be represented as fully as possible at the Meeting
and encourages your attendance. Whether or not you plan to be present kindly complete,
date and sign the enclosed proxy exactly as your name appears on the envelope containing
this Notice of Annual General Meeting and mail it promptly so that your votes can be
recorded. No postage is required if mailed in the United States. Return of your proxy does
not deprive you of your right to attend the Meeting, to revoke the proxy or to vote your
shares in person. All proxy instruments and powers of attorney must be delivered to the
Company no later than 48 hours prior to the meeting. The Company&#146;s Proxy Statement is
furnished herewith. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Joint holders of Ordinary Shares
should take note that, pursuant to Article 14.13 of the Articles of Association of the
Company, the vote of the senior of joint holders of any share who tenders a vote, whether
in person or by proxy, will be accepted to the exclusion of the vote(s) of the other joint
holder(s) of the share, and for this purpose seniority will be determined by the order in
which the names stand in the shareholders&#146; register. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>By Order of the Board
of Directors, </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=50% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Edouard Cukierman</FONT></TD>
     <TD WIDTH=50% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Adiv Baruch</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chairman of the Board of Directors</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>President and Chief Executive Officer</FONT></TD></TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>April, 2006 </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>YOUR VOTE IS IMPORTANT. WHETHER OR
NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE DATE AND SIGN THE PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE FOR WHICH NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES. YOU CAN LATER REVOKE YOUR PROXY, ATTEND THE MEETING AND VOTE YOUR SHARES IN
PERSON. ALL PROXY INSTRUMENTS AND POWERS OF ATTORNEY MUST BE DELIVERED TO THE
COMPANY&#146;S CORPORATE OFFICE NO LATER THAN 48 HOURS PRIOR TO THE MEETING.</B> </FONT></P>

<p align=center>
<font size=2>2</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. Better Online Solutions Ltd.
<BR>Beit Rabin
<BR>Teradyon Industrial Zone
<BR>Misgav, Israel</B> </FONT>
</P>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ANNUAL GENERAL MEETING
OF SHAREHOLDERS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To be held on May 18,
2006 </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PROXY STATEMENT </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This Proxy Statement is furnished to
the holders of Ordinary Shares, NIS 4.00 nominal value (the &#147;Ordinary Shares&#148;),
of B.O.S. Better Online Solutions Ltd. (&#147;BOS&#148; or the &#147;Company&#148;) in
connection with the solicitation by the Board of Directors for use at the Annual Meeting
of Shareholders of the Company to be held in Israel at the offices of the Catalyst Fund LP
at 3 Daniel Frisch Street, Tel-Aviv, Israel, on May 18, 2006 at 11 a.m. local time, and
thereafter as it may be adjourned from time to time (the &#147;Meeting&#148;). At the
Meeting, shareholders of the Company will be asked, to vote upon the following matters: </FONT></P>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          To reelect Messrs. Edouard Cukierman, Joel Adler, Adiv Baruch, Avishai
          Gl&uuml;ck, Andrea Mandel-Mantello and Ronen Zavlik and to elect Mr. Jean-Marc
          Bally to the Company&#146;s Board of Directors, to serve until the next annual
          general meeting of shareholders and until their successors have been duly
          elected and qualified. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang Lv 0-TNR" FSL="Workstation" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          To reappoint Kost, Forer, Gabbay &amp; Kasierer, a member of Ernst &amp; Young
          International, Ltd. as the Company&#146;s Independent Auditors. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          To increase the registered share capital of the Company and to amend article 4.1
          of the Articles of Association and section 4 of the Memorandum of Association,
          accordingly. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          To amend the Articles of Association of the Company in light of amendments to
          the Israeli Companies Law. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          To amend the indemnification agreements issued and to be issued in the future to
          directors of the Company, in light of the amendment to the Articles of
          Association. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          To approve the grant of shares to Adiv Baruch, CEO of the Company, and grant of
          options to Signum Ltd. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          To approve the grant of shares and options to Mr. Edouard Cukierman, Chairman of
          the Board of Directors. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          To authorize the audit committee and the Board to distribute bonuses to the
          Chairman and CEO. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          To approve an increase of options available for issuance under the
          Company&#146;s 2003 Israeli Share Option Plan. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          To receive the Auditor&#146;s Report and the Company&#146;s Consolidated
          Financial Statements for the fiscal year ended December 31, 2005. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          To transact such other business as may properly come before the Meeting or any
          adjournments thereof. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
form of proxy for use at the Meeting and a return envelope for the proxy are also
enclosed. By appointing &#147;proxies,&#148; shareholders may vote their Ordinary Shares
at the Meeting whether or not they attend. Upon the receipt of a properly signed and dated
proxy in the form enclosed, the persons named as proxies therein will vote the Ordinary
Shares represented thereby in accordance with the instructions of the shareholder
indicated thereon, or, if no direction is indicated, in accordance with the
recommendations of the Board of Directors of the Company. The Company knows of no other
matters to be submitted at the Meeting other than as specified in the Notice of Annual
General Meeting of Shareholders enclosed with this Proxy Statement. If any other business
is properly brought before the Meeting, however, it is the intention of the persons named
as proxies to vote in respect thereof in accordance with their best judgment. Shares
represented by executed and unrevoked proxies will be voted. On all matters considered at
the Meeting, abstentions and broker non-votes will not be treated as either a vote
&#147;for&#148; or &#147;against&#148; the matter, although they will be counted to
determine if a quorum is present. </FONT></P>

<p align=center>
<font size=2>3</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
proxy solicited hereby may be revoked at any time prior to its exercise by means of a
written notice delivered to the Company at its mailing address, which is c/o American
Stock Transfer &amp; Trust Company, 59 Maiden Lane &#150; Plaza Entrance, New York, New
York 10038, USA, by the substitution of a new proxy bearing a later date or by a request
for the return of the proxy at the Meeting. All proxy instruments and powers of attorney
must be delivered to the Company no later than 48 hours prior to the meeting. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company expects to mail this Proxy Statement and the enclosed form of proxy to
shareholders on or about April 12, 2006. All expenses of this solicitation will be borne
by the Company. In addition to the solicitation of proxies by mail, directors, officers
and employees of the Company, without receiving additional compensation therefore, may
solicit proxies by telephone, telegraph, in person or by other means. Brokerage firms,
nominees, fiduciaries and other custodians have been requested to forward proxy
solicitation materials to the beneficial owners of Ordinary Shares of the Company held of
record by such persons, and the Company will reimburse such brokerage firms, nominees,
fiduciaries and other custodians for reasonable out-of-pocket expenses incurred by them in
connection therewith. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Shareholders
Entitled to Vote</B>. Only holders of record of Ordinary Shares at the close of business
on April 10, 2006 are entitled to notice of and to vote at the Meeting. The Company had
6,607,514 Ordinary Shares issued and outstanding on March 31, 2006, each of which is
entitled to one vote on each matter to be voted on at the Meeting. The Articles of
Association of the Company do not provide for cumulative voting for the election of the
directors or for any other purpose. The presence, in person or by proxy, of at least two
shareholders holding at least 33<SUP>1</SUP>/<SUB>3</SUB>%<B> </B>of the voting rights, will constitute a quorum
at the Meeting. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Votes
Required</B>. All proposals are ordinary resolutions, which require the affirmative vote
of a majority of the Ordinary Shares of the Company voted in person or by proxy at the
Meeting on the matter presented for passage. The votes of all shareholders voting on the
matter will be counted. </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>I.</B> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U><B>PRINCIPAL
SHAREHOLDERS</B></U></FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth, as of March 31, 2006, information to the best of the
Company&#146;s knowledge, as to each person known to the Company to be the beneficial
owner of more than five percent (5%) of the Company&#146;s outstanding Ordinary Shares and
as to all directors and officers of the Company as a group. Except where indicated, to the
best of the Company&#146;s knowledge based on information provided by the owners, the
beneficial owners of the Ordinary Shares listed below have sole investment and voting
power with respect to those shares. Applicable percentage ownership in the following table
is based on 6,607,514 shares outstanding as of March 31, 2006. </FONT></P>







<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Shares Beneficially Owned</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH COLSPAN="3" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Name and Address</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Number</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Percent</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="53%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Catalyst Fund, LP</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="15%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="15%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT" colspan=7><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3 Daniel Frisch Street,</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tel-Aviv 64731, Israel</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,292,275</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19.6</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Jacob and Sara Neuhof (1)<BR>5 Yitzhak Berger Street,<BR>
Rishon Letzion 75260, Israel</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>450,135</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.8</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Officers and directors as a group (2)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>108,695</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.65</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
</TABLE>
<BR>


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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1)
          Jacob Neuhof holds 225,861 ordinary shares and his spouse, Sara Neuhof, holds
          224,274 ordinary shares. As they are husband and wife, each is deemed to
          indirectly hold the shares of the other, however, each disclaims beneficial
          ownership of these shares. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2)
          Does not include 436,282 options to purchase Ordinary Shares of the Company
          granted and currently held by Officers and/or Directors of the Company. Does not
          include 65,217 options of Brada Investments Limited, a shareholder of the
          Company owned by a discretionary trust of which Mr. Joel Adler, a director of
          the Company, is one of the beneficiaries. </FONT></P>

<p align=center>
<font size=2>4</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>II.</B> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>RESOLUTIONS</U></B></FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>1.</B> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>ELECTION
OF DIRECTORS</B></FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
the Meeting, six directors currently serving on the Board of Directors, will be nominated
for reelection. Additionally, the board of directors recommends nominating an additional
director &#150; Mr. Jean-Marc Bally. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section
239 of the Israeli Companies Law, 1999, requires that companies whose shares are publicly
traded have at least two external directors on the board of directors. Their term of
service is three years, and they may be elected to serve for up to two terms. Dr. Yael
Ilan and Prof. Adi Raveh currently serve as external directors and their term of service
shall expire in November 2008 and February 2009, respectively. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
rest of the directors are elected at the annual general meeting of shareholders to serve
until the next annual general meeting of shareholders and until their respective
successors are duly elected and qualified. It is the intention of the persons named in the
proxy to vote for the election of the seven nominees named below, each to hold office
until the next annual general meeting of shareholders and until their respective
successors are duly elected and qualified, unless any office is vacated earlier pursuant
to the relevant provisions of the Articles of Association of the Company. The Company is
unaware of any reason why any nominee, if elected, should be unable to serve as a
director. If any of the nominees are unable to serve, the persons named in the proxy will
vote the shares for the election of such other nominees as the Board of Directors may
propose. All nominees listed below have advised the Board of Directors that they intend to
serve as directors if elected. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nominees for the Board
of Directors </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certain information concerning the
nominees: </FONT></P>






<TABLE CELLPADDING=3 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Name</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Age</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Position</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Ordinary Shares<BR>
beneficially owned*</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Percentage of<BR>
beneficial holdings</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="30%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mr. Edouard Cukierman</FONT></TD>
     <TD WIDTH="10%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>41&nbsp;</FONT></TD>
     <TD WIDTH="30%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chairman of the Board of Directors</FONT></TD>
     <TD WIDTH="15%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>------</FONT></TD>
     <TD WIDTH="15%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>------</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mr. Adiv Baruch</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>43&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director, President and</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>------</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>------</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chief Executive Officer</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mr. Joel Adler</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>52&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>108,695**</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.65%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mr. Avishai Gluck (2)</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>34&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>------</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>------</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mr. Andrea Mandel-Mantello</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>47&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-------</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>------</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mr. Ronen Zavlik (1)</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>45&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>------</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>------</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mr. Jean-Marc Bally</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>35&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-------</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>------</FONT></TD></TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>* does not include options held by
the directors. </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>** Mr. Joel Adler is one of the
beneficiaries of a discretionary trust that owns Brada Investments Limited, a shareholder
of the Company. Does not include 65,217 options of Brada Investments Limited to purchase
ordinary shares of the Company. </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1)           Member of the Audit Committee. </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2)          Member of the Remuneration Committee. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Mr.
          Edouard Cukierman</B>, 41, has been a director since May 2003, and Chairman of
          the Company since June 2003. Mr. Cukierman is the founder and CEO of Catalyst
          Investments and Chairman of Cukierman &amp; Co. Investment House. Since 1993,
          Cukierman &amp; Co, Investment House realized 1.7 Billion &#128; of Corporate
          Finance transactions. Mr. Cukierman is a former Board member of Orex, MTI
          Wireless and other technology companies. He was the President and CEO of the
          Astra Fund. He served as a Board member of Otto Capital, a Singapore based VC
          fund. He was the former President of the Supervisory Board of Citec-Environment
          and Services in Paris and a Board member of Lamina Technologies in Switzerland.
          He is also on the Board of Sar-El, an Israeli Defence Forces volunteer
          organization and is an Officer of the IDF Spokesman Unit (Reserves), as well as
          an officer of the Hostage Negotiation Team. Mr. Cukierman holds an MBA from
          INSEAD, Fontainebleau, France and a B.Sc from the Technion &#150; Israel
          Institute of Technology. He is a guest Lecturer at Tel Aviv University, the
          Technion and the Harvard Business School. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Mr.
          Adiv Baruch</B>, 43, has been a director since February 2004 and the
          Company&#146;s President and CEO service provider since January 1, 2004. From
          June 2004 he also serves as the CEO service provider of the Company&#146;s
          subsidiary, BOScom Ltd. From 1999 to 2003 he served as Executive VP Business
          Development of Ness Technologies, and has expertise in the Telecom and High-tech
          industries. Mr. Baruch is also a former partner and active director of IPEX,
          acquired by Ness. He has served as founder and an executive or director for
          several IT companies and Internet start-ups, and was significantly involved in
          the M&amp;A process and in assisting these companies in their global expansion.
          Mr. Baruch is actively involved as the chairman of the Israeli Export Institute
          Hi-Tech and Telecom Division, and serves as a director for MLL Software
          Industries Ltd. and Maayan Ltd., two Israeli public company traded on the TASE,
          as well as for Zone 4 Play Ltd. He has a B.Sc. in Information Systems and
          Industrial Engineering from the Technion &#150; Israel Institute of Technology. </FONT></P>

<p align=center>
<font size=2>5</font></p>
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<page>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Mr.
          Joel Adler</B>, 52, has been a director since June 2005. Mr. Adler is a partner
          in Speechly Bircham, a leading law firm in the City of London. He specializes in
          mergers &amp; acquisitions and corporate finance work, in particular
          international corporate transactions. Joel advises a number of major Israel
          based companies on their business activities in the UK and Europe and on IPO of
          foreign companies on the London Stock Exchange ( AIM ).&nbsp; Mr. Adler joined
          Speechly Bircham as a partner in 1999 from Rakisons (now part of US law firm
          Steptoe &amp; Johnson), where he was head of the corporate department for 12
          years. Previously was with other leading law firms in London Herbert Oppenheimer
          Nathan &amp; Vandyck, London (now Denton Wilde Sapte) and D JF Reeman. He is a
          member of the Israeli Bar and worked for the well known Israeli law firm Caspi
          &amp; Co for two years. Mr. Adler holds a law degree from Bar Ilan University in
          Israel, and a LLM from London University. He was born and educated in Vienna. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Mr.
          Avishai Gl&uuml;ck</B>, 34, has been a director since February 2004. He serves
          as the Executive Vice President of Catalyst Investments. Mr. Gl&uuml;ck has
          financial management, accounting and tax consultation experience, as well as
          extensive knowledge of the Israeli high tech market, having screened hundreds of
          companies for Catalyst and as a senior corporate consultant at E&amp;Y Israel.
          Mr. Gl&uuml;ck currently serves as a director in Onset Technology Ltd. Prior to
          joining Catalyst, he held the position of Corporate Finance Consultant and
          accountant with Ernst &amp; Young&#146;s Israeli affiliate Kost Forer &amp;
          Gabbay, a leading Israeli CPA firm with a dominant position among Israeli
          technology companies. Mr. Gl&uuml;ck has a BA from Tel-Aviv University in
          Accounting and Economics and is a licensed CPA. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Mr.
          Andrea Mandel-Mantello</B>, 47, has been a director since November 2003. Mr.
          Mandel-Mantello is Founder and Partner of Advicorp PLC, a UK Investment Bank
          regulated by the UK Financial Services Authority. From 2000 to 2001 he was an
          advisor to a US based private equity group on business development in Israel.
          Prior to his work at Advicorp, Mr. Mandel Mantello spent 9 years at SBC Warburg
          (now known as UBS) in London in various senior management positions including
          Executive Director of SBC Warburg, member of the Board of SBC Warburg Italia SIM
          S.p.A, and Country Head for Israel. Prior to working at SBCW Mr. Mandel-Mantello
          spent 2 years at Chemical Bank International Ltd. in London and 3 years at Banca
          Nazionale dell&#146;Agricoltura in Rome. During his investment banking career Mr
          Mandel-Mantello has pioneered several financial instruments in Italy including
          securitisations, equity linked products and high yield bonds. He is currently on
          the boards of Telit Plc (telecom equipment) listed on AIM; Coraline S.p.A., a
          company set up to acquire the business of Frette S.p.A. (luxury homeware
          products); and Moto S.p.A., a joint venture between Cremonini S.p.A. and Compass
          Group Plc (motorway restaurants). He holds a Bachelors degree in Economics and
          Political Science from Yale University. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Mr.
          Ronen Zavlik</B>, 45, has been a director since May 2003. He is a partner in the
          CPA firm of Grinberg-Zavlik, which he founded in 1987. His firm provides a wide
          range of audit, tax consultancy and CFO services&nbsp;to a
          wide&nbsp;variety&nbsp;of companies.&nbsp;Mr. Zavlik provides internal auditing
          services to&nbsp;a number of large&nbsp;companies whose shares are traded on the
          Tel Aviv Stock Exchange, including&nbsp;Ma&#146;ariv Holdings Ltd, Extra Plastic
          Ltd., Israel Land Development Malls and Shopping Centers Ltd., Rapid Vision
          Ltd., and Optima Management and Investments 66 Ltd. Mr. Zavlik&nbsp;holds a B.A.
          in Accountancy and Business Management from the College of Management in
          Tel-Aviv. Mr. Zavlik is a licensed CPA in Israel and a member of the Institute
          of Certified Public Accountants in Israel. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Information about the additional
nominee: </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Mr.
          Jean-Marc Bally</B>, 35, has served as the General Partner &amp; Managing
          Director of Schneider Electric Ventures, a venture capital company with &#128;50
          Millions under management, since March 2006. Previously, Mr Bally was an
          Investment Partner at Schneider Electric Ventures for 5 years where he was
          responsible for communications and IT industries investments across Europe
          focusing in particular on microtechnologies and electronics. Mr Bally currently
          serves as a director in Ixiasoft Inc (Canada), ConnectBlue ab (Sweden), Tracetel
          SA (France) and HBA SA (France) and has observer positions in Microbridge
          Technologies Inc. (Canada), Netasq SA (France) and Tronic&#146;s Microsystems SA
          (France). Prior to the creation of Schneider Electric Ventures, Mr Bally spent 5
          years in Corporate Finance in Schneider Electric SA. Mr Bally holds a Licence
          degree in Mathematics, a Master of Science in Management from Grenoble Graduate
          School of Business, and an executive education from INSEAD. </FONT></P>

<p align=center>
<font size=2>6</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Information regarding the incumbent
external directors: </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Dr.
          Yael Ilan</B>, 57, has been an external director since November 2002. Dr. Ilan
          is the president of Yedatel Ltd., an economic consulting company, and serves as
          a director of CI Systems in the technology sector. Until 1998 she served on the
          board of Bezeq &#150; Israel&#146;s Telecommunication Company in which she
          headed the committee of technological policy and infrastructure and was a member
          of the audit committee and the committee for strategic planning and investment.
          From 1998 through 2000 she served as an external director of Elron Industries.
          In 2000-01 she founded and managed Optichrom, an optical component start-up.
          From 1995 through 2000 Dr. Ilan served as the head of program of the Broad Band
          Communication, a consortium of MAGNET &#150; the Israeli Government hi-tech
          cooperation initiative. Dr. Ilan holds a Ph.D. in industrial engineering from
          Stanford University, a Ph.D. in physical chemistry from the Hebrew University
          and a Masters degree in business administration from the Hebrew University. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Prof.
          Adi Raveh</B>, 58, has been an external director since February 2003. Prof.
          Raveh is a professor and head of the B.A. Program at the School of Business
          Administration, Hebrew University, Jerusalem. Since 1998 he serves as an
          external director at Clal Insurance Company Ltd. Since 2002 he serves as the
          Chairman of the Board of Jerusalem Capital Markets Underwriting limited. He also
          serves as a director of Meitav &#150; a Mutual Funds Management company (since
          1995), and as a director of Peilim &#150; a Portfolio Management company &#150;
          part of Bank Hapoalim Group (since 1996). Since 1992 he is a director who
          represents the Hebrew University at Hi-Tech &#150; a Technology Entrepreneurship
          located at Har-Hahotzvim, Jerusalem. Prof. Raveh also serves as a director of
          two start-up companies: A.D.M (Advanced Dialysis Methods Ltd.) and Virtouch Ltd.
          Between 1994-1999 he served as a director and a member of the executive
          committee of the Bank of Jerusalem, Ltd. Between 1996-1998 he served as a member
          of an ad-hoc committee of the Council of Higher Education. In 1999 he served as
          a member of the Budget Committee for Research at the Israel Science Foundation.
          Prof. Raveh holds a Ph.D. from the Hebrew University. He is the author of about
          50 professional publications, was a visiting professor at Stanford University,
          Columbia University and Baruch College, N.Y., and has received a number of
          grants and honors. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Compensation of
Directors and Officers </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth the aggregate compensation paid to or accrued on behalf of all
directors and officers of the Company as a group for the year ended December 31, 2005: </FONT></P>





<TABLE CELLPADDING=3 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Salaries, Directors' Fees, Service<BR>
Fees, Commissions and Bonuses</FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Pension, Retirement and Similar<BR>
Benefits</FONT></TH></TR>
<TR>
      <TD> &nbsp;</TD>
      <TD> </TD>
      <TD> </TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT  WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All directors and officers as a group (then 16 persons)</FONT></TD>
     <TD ALIGN="CENTER" WIDTH="25%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$1,492,254&nbsp;</FONT></TD>
     <TD ALIGN="CENTER" WIDTH="25%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$78,742&nbsp;</FONT></TD></TR>
</TABLE><BR>
<BR>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Such
remuneration does not include amounts expended by the Company for expenses, including
business association dues and expenses, reimbursed to said officers, and other fringe
benefits commonly reimbursed or paid by companies in the location at which the particular
executive officer of the Company is located, as the case may be. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
the Meeting, the Board of Directors will propose that the following resolution be adopted: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;<B>RESOLVED</B>, to elect the
following persons to serve as members of the Board of Directors of the Company: Edouard
Cukierman, Joel Adler, Adiv Baruch, Avishai Gl&uuml;ck, Andrea Mandel-Mantello, Ronen
Zavlik and Jean-Marc Bally, to serve until the next Annual General Meeting of Shareholders
and until their successors have been duly elected and qualified.&#148; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
the receipt of a properly signed and dated proxy and unless otherwise instructed in the
proxy, the persons named in the enclosed proxy will vote the shares represented thereby
FOR the above-mentioned proposal. </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>REAPPOINTMENT
OF INDEPENDENT AUDITORS</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors recommends that the shareholders reappoint Kost, Forer, Gabbay &amp;
Kasierer, a member of Ernst &amp; Young International, Ltd., as the independent auditors
of the Company, until the next annual general meeting of shareholders. Kost, Forer, Gabbay
&amp; Kasierer have served as the Company&#146;s independent auditors since the first
quarter of 2002. </FONT></P>

<p align=center>
<font size=2>7</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
the Meeting, the Board of Directors will propose that the following resolution be adopted: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>&#147;RESOLVED</B>, that Kost,
Forer, Gabbay &amp; Kasierer be, and they hereby are, reappointed as independent auditors
of the Company, until the next annual general meeting of shareholders.&#148; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
the receipt of a properly signed and dated proxy and unless otherwise instructed in the
proxy, the persons named in the enclosed proxy will vote the shares represented thereby
FOR the above-mentioned proposal. </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>INCREASE
OF REGISTERED SHARE CAPITAL</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company&#146;s registered share capital is currently 35,000,000 NIS, divided into
8,750,000 ordinary shares 4 NIS nominal value each. The Company&#146;s issued and
outstanding share capital, on a fully diluted basis, has nearly reached the registered
share capital limit, and therefore, the Board of Directors recommends increasing the
registered share capital of the Company to 140,000,000 NIS divided into 35,000,000
ordinary shares of 4 NIS nominal value each. The increase is necessary, <I>inter alia</I>,
for future fundraising and future M&amp;A transactions that the Company is interested in
seeking, and in which, some or all of the consideration may be paid in ordinary shares of
the Company. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
the meeting, the Board of Directors will propose that the following resolution be adopted: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;<B>RESOLVED</B>, to increase
the registered share capital of the Company to 140,000,000 NIS divided into 35,000,000
ordinary shares 4 NIS nominal value each, and to amend article 4.1 of the Articles of
Association and section 4 of the Memorandum of Association, accordingly.&#148; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
the receipt of a properly signed and dated proxy and unless otherwise instructed in the
proxy, the persons named in the enclosed proxy will vote the shares represented thereby
FOR the above-mentioned proposal. </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>4.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>AMENDMENTS
TO THE COMPANY&#146;S ARTICLES OF ASSOCIATION</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
light of recent amendments to the Israeli Companies Law, 1999, the Board of Directors
recommends amending certain provisions of the Company&#146;s Articles of Association, as
follows: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Article 4.3 &#150; after the
sentences &#147;<I>The board of directors may issue shares and other securities which are
convertible or exercisable into shares up to the limit of the Company&#146;s authorised
share capital. With regard to computing the limit of the authorised capital, securities
convertible or exercisable into shares shall be deemed to have been converted or exercised
on the date of their issue</I>&#148;, the following shall be inserted: &#147;<I>Such
authority of the board of directors may be delegated only as permitted by law</I>.&#148;
Such amendment clarifies that that the authority to issue securities may be delegated, but
only as permitted by law. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Article 16.9 &#150; after the
sentence <I>&#147;Every board of directors&#146; member may appoint an alternate for
himself, provided that such an appointment shall not be for a period exceeding one month,
and that someone who was appointed as an alternate for another director and/or who is
already serving as a director of the Company may not be appointed as an
alternate&#148;</I>, the following shall be inserted: <I>&#147;execpt as provided in
section 237(d) of the Companies Law&#148;. </I>Section 237(d) of the Companies Law
provides that someone who is already serving as a director may be appointed as an
alternate for a director serving as a committee member, if he is not already a member of
that committee. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Article 17.6 currently provides:
<I>&#147;The board of directors may also pass written resolutions without actually
convening, provided that all the directors entitled to participate in the discussion and
vote on a matter that is brought for resolution agree thereto.&#148; </I>The word
&#147;written&#148; shall be stricken, and the word &#147;thereto&#148; shall be replaced
with <I>&#147;&#133;not to convene for discussion of the matter.&#148;</I> after which the
following shall be inserted: <I>&#147;In such a case, minutes of the resolutions
(including the decision not to convene) shall be signed by the chairman of the board of
directors, or alternatively, signatures of the directors shall be attached to the minutes.
Instead of a director&#146;s signature, the chairman of the board or the corporate
secretary may attach a signed memo regarding the oral vote of a director. Resolutions
passed without convening, as aforementioned, shall be passed by an ordinary majority and
shall have the same effect as resolutions passed at a duly convened meeting.&#148;
</I>Such amendments allow flexibility for the passing of Board resolutions without
convening, and require only an ordinary majority of the directors to approve the
resolution (although all must agree that resolutions on the matter shall be adopted
without convening). </FONT></P>

<p align=center>
<font size=2>8</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Article 19.1 &#150; at the end of the
article, the following sentence shall be added: <I>&#147;If a committee merely has a
recommendation role, the board of directors may also appoint to the committee members who
are not directors.&#148; </I> Such amendment allows the appointment of non-directors to
certain committees. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Article 22 &#150; Sub articles
22.1-22.5 shall be replaced in their entirety, due to the recent changes in the law, as
follows (the italicized words represent new additions to the current article): </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22.1</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Company may exempt an Office Holder therein in advance for his liability, or any part
thereof, for damage in consequence of a breach of the duty of care vis-a-vis it, <I>except
with respect to Distribution (as defined in the Companies Law)</I>.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22.2</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Company may indemnify an Office Holder retroactively for an obligation or expense as
specified in sub-paragraphs 22.2.1 22.2.2 <I>and</I> <I>22.2.3</I> below, imposed on him
in consequence of act done in his capacity as an officer in the Company.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22.2.1 </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a
monetary obligation imposed on him in favor of another person pursuant to a judgment,
including a judgment given in settlement or an arbitrator&#146;s award that has been
approved by a court;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22.2.2</FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>reasonable
litigation expenses, including advocates&#146; professional fees, incurred by the Office
</I><I>Holder pursuant to an investigation or a proceeding commenced against him by </I><I>a
competent authority and that was terminated without an indictment and </I><I>without
having a monetary charge imposed on him in exchange for a criminal </I><I>procedure (as
such terms are defined in the Companies Law), or that was </I><I>terminated without an
indictment but with a monetary charge imposed on him </I><I>in exchange for a criminal
procedure in a crime that does not require proof </I><I>of criminal intent;</I> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22.2.3</FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>reasonable
litigation expenses, including advocates&#146; professional fees, incurred by the Office
Holder or which he is ordered to pay by a court, in proceedings filed against him by the
company or on its behalf or by another person, or in a criminal indictment in which he is
acquitted, or in a criminal indictment in which he is convicted of an offence that does
not require proof of criminal intent.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22.3</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Company may give an advance undertaking vis-a-vis an Office Holder to indemnify him in
respect of an obligation or expense as specified in paragraph 22.2 above, provided that
the undertaking <I>specified in paragraph 22.2.1 </I>is limited to types of events which
in the board of directors&#146; opinion may be anticipated, <I>in light of the </I>
<I>Company&#146;s activities,</I> at the time of giving the indemnity undertaking, and to
an amount <I>or criteria</I> which the board of directors determines is reasonable in the
circumstances of the case<I>, both to be specified in the Company&#146;s undertaking</I>.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22.4</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
A company may enter into a contract to insure the liability of an Office Holder therein
for an obligation imposed on him in consequence of an act done in his capacity as an
Office Holder therein, in any of the following cases:</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>                    22.4.1 </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a
breach of the duty of care  vis-a-vis  the Company or vis-a-vis  another
                                person; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22.4.2 </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a
breach of the duty of fidelity vis-a-vis the Company, provided that the Office Holder
acted in good faith and had reasonable basis to assume that the act would not harm the
Company;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>                    22.4.3 </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a
monetary obligation imposed on him in favor of another person. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>         22.5 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Paragraphs
22.1 to 22.4 shall not apply in any of the following cases -</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22.5.1 </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a
breach of the duty of fidelity, save <I>regarding insurance and indemnity </I><I>provided
that the Office Holder acted in good faith and had reasonable </I><I>basis to assume that
the act would not harm the Company</I>;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>                    22.5.2 </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>an
 intentional  or rash  breach  of the duty of care, <I> except  where  the
                                breach was negligent only; </I></FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>                    22.5.3 </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>an
act done with the intention of unlawfully producing a personal profit; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>                    22.5.4 </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a
fine imposed on an Office Holder. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
the meeting, the Board of Directors will propose that the following resolution (which,
with respect to the amendment of Article 22, has been approved by the Audit Committee as
well as the Board of Directors &#150; including, in both, those directors having a
personal interest in the decision, being the majority) be adopted: </FONT></P>

<p align=center>
<font size=2>9</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;<B>RESOLVED</B>, to amend the
Articles of Association of the Company, as recommended by the Board of Directors.&#148; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
the receipt of a properly signed and dated proxy and unless otherwise instructed in the
proxy, the persons named in the enclosed proxy will vote the shares represented thereby
FOR the above-mentioned proposal. </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>5.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>AMENDMENT
TO INDEMNIFICATION AGREEMENTS</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
February 18, 2003 the Company&#146;s Shareholders approved the grant of indemnification
letters to all directors of the Company, including directors to be appointed in the
future. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indemnification
of directors requires, under the Companies Law, the approval of the Company&#146;s Audit
Committee, Board of Directors, and Shareholders. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
the meeting, the Board of Directors will propose that the following resolution (which has
been approved by the Audit Committee and the Board of Directors &#150; including, in both,
those directors having a personal interest in the decision, being the majority) be
adopted: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;<B>RESOLVED</B>, to amend the
indemnification agreements issued and to be issued in the future to directors of the
Company, in light of the amendment to Article 22 of the Company&#146;s Articles of
Association.&#148; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
the receipt of a properly signed and dated proxy and unless otherwise instructed in the
proxy, the persons named in the enclosed proxy will vote the shares represented thereby
FOR the above-mentioned proposal. </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>6.</B> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>GRANT
OF SHARES TO ADIV BARUCH AND GRANT OF OPTIONS TO SIGNUM LTD.</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Signum
Ltd. (&#147;Signum&#148;) provides management services to the Company, exclusively through
Mr. Adiv Baruch. Mr. Baruch is one of the controlling shareholders of Signum and serves,
pursuant to the management agreement in the capacity of President and Chief Executive
Officer of the Company and also, since February 2004, serves as a director. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Executive Session of Independent Directors has recommended and the Audit Committee and the
Board of Directors have approved (subject to Shareholder approval), to (i) grant Mr. Adiv
Baruch a bonus of 65,000 ordinary shares (for no consideration), and (ii) to grant Signum
187,100 options to purchase ordinary shares of the Company, pursuant to the Company&#146;s
2003 Israeli Share Option Plan, at an exercise price equal to the average closing price of
the Company&#146;s shares on the Nasdaq National Market on the 20 trading days preceding
the date of the Meeting at which the grant shall be approved (the &#147;Grant Date&#148;),
to be vested in three equal parts on the first, second and third anniversary of the Grant
Date, for a maximum exercise period of 3 years from the vesting date of each portion of
the Grant. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Previous
grants of options to Signum include 216,282 options at an exercise price of $3.00 per
share, as part of the January 2004 management agreement between Signum and the Company,
and 20,000 options at an exercise price of $3.08 per share, granted in June 2005.
Additionally, as a bonus for the year 2005, Signum was granted an additional 20,000
options, subject to the Company achieving profitability in the financial statements as of
December 31, 2005, however, the milestone was not reached and the options were not
granted. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
general purpose of the issuance of options is to provide an incentive to the
Company&#146;s CEO, by enabling him to share in the future growth of the business of the
Company. The Board of Directors believes that the granting of stock options promotes
continuity of management and increases incentive and personal interest in the welfare of
the Company by those who are primarily responsible for shaping and carrying out the long
range plans of the Company and securing its growth and financial success. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
Mr. Adiv Baruch is a director of the Company, and since, under the Israeli Companies Law,
1999, his conditions of service with the Company (including remuneration for other
positions he holds in the Company), including the issuance of options, must be approved by
the shareholders of the Company, at the Meeting, the Board of Directors will propose that
the following resolution (which has been recommended by the Executive Session of
Independent Directors and approved by the Audit Committee and the Board of Directors
&#150; excluding Mr. Adiv Baruch who has a personal interest in the decision), be adopted: </FONT></P>

<p align=center>
<font size=2>10</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;<B>RESOLVED</B>, to approve the
grant of shares to Mr. Adiv Baruch and the grant of options to Signum Ltd., under the
above-mentioned terms and conditions, subject to the increase in the Company&#146;s
registered share capital (proposal 3) and the Company&#146;s 2003 Israeli Share Option
Plan (proposal 9).&#148; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
the receipt of a properly signed and dated proxy and unless otherwise instructed in the
proxy, the persons named in the enclosed proxy will vote the shares represented thereby
FOR the above-mentioned proposal. </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>7.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>GRANT
OF SHARES AND OPTIONS TO EDOUARD CUKIERMAN</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.
          Edouard Cukierman serves as the Chairman of the Board of Directors of the
          Company since June 2003. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Executive Session of Independent Directors has recommended and the Audit Committee and the
Board of Directors have approved (subject to Shareholder approval), to grant Mr. Edouard
Cukierman: (i) a bonus of 21,666 ordinary shares (for no consideration), and (ii) 233,876
options to purchase ordinary shares of the Company, pursuant to the Company&#146;s 2003
Israeli Share Option Plan, at an exercise price equal to the average closing price of the
Company&#146;s shares on the Nasdaq National Market on the 20 trading days preceding the
date of the Meeting at which the grant shall be approved (the &#147;Grant Date&#148;), to
be vested in three equal parts on the first, second and third anniversary of the Grant
Date, for a maximum exercise period of 3 years from the vesting date of each portion of
the Grant. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.
          Edouard Cukierman has not previously been granted shares or options as Chairman
          of the Board, although in August 2003 he was granted 7,500 options at an
          exercise price of $1.84, as were all the directors of the Company at the time,
          which he has transferred to the Catalyst Fund, the Company&#146;s largest
          shareholder, where he serves as the CEO. The Board of Directors believes that
          the issuance of options to the Company&#146;s Chairman provides him with an
          incentive to secure the Company&#146;s growth and financial success, by enabling
          him to share in such success in the future. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
Mr. Edouard Cukierman is a director of the Company, and since, under the Israeli Companies
Law, 1999, his conditions of service with the Company (including remuneration for other
positions he holds in the Company), including the issuance of options, must be approved by
the shareholders of the Company, at the Meeting, the Board of Directors will propose that
the following resolution (which has been recommended by the Executive Session of
Independent Directors and approved by the Audit Committee and the Board of Directors
&#150; excluding Mr. Edouard Cukierman who has a personal interest in the decision), be
adopted: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;<B>RESOLVED</B>, to approve the
grant of shares and options to Mr. Edouard Cukierman, under the above-mentioned terms and
conditions, subject to the increase in the Company&#146;s registered share capital
(proposal 3) and the Company&#146;s 2003 Israeli Share Option Plan (proposal 9).&#148; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
the receipt of a properly signed and dated proxy and unless otherwise instructed in the
proxy, the persons named in the enclosed proxy will vote the shares represented thereby
FOR the above-mentioned proposal. </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>8.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>AUTHORIZATION
TO DISTRIBUTE BONUSES TO THE CHAIRMAN AND THE CEO</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Executive Session of Independent Directors has recommended and the Audit Committee and the
Board of Directors have approved (subject to Shareholder approval), that in the event that
the Company will have a net profit according to the audited financial statements of any
given financial year thru fiscal year 2008, the Audit Committee and the Board of Directors
shall have the authority, at their discretion, to grant the persons holding the positions
of Chairman and CEO (and other senior executive officers of the Company and its
subsidiaries), up to an aggregate of 5% of the net profit, in cash (although, for the
avoidance of doubt, they shall not be under any obligation to do so). </FONT></P>

<p align=center>
<font size=2>11</font></p>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
the Chairman, and currently also the CEO, are directors of the Company, and since, under
the Israeli Companies Law, 1999, their conditions of service with the Company (including
remuneration for other positions they hold in the Company), must be approved by the
shareholders of the Company, at the Meeting, the Board of Directors will propose that the
following resolution (which has been recommended by the Executive Session of Independent
Directors and approved by the Audit Committee and the Board of Directors &#150; excluding
Mr. Edouard Cukierman and Mr. Adiv Baruch who have a personal interest in the decision, as
they currently hold the positions of Chairman and CEO), be adopted: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;<B>RESOLVED</B>, to authorize
the Audit Committee and Board of Directors to distribute bonuses to the Chairman and the
CEO, at their discretion, under the above-mentioned terms and conditions.&#148; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
the receipt of a properly signed and dated proxy and unless otherwise instructed in the
proxy, the persons named in the enclosed proxy will vote the shares represented thereby
FOR the above-mentioned proposal. </FONT></P>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>9.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>INCREASE
OF 2003 ISRAELI SHARE OPTION PLAN</B> </FONT> </TD>
</TR>
</TABLE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the 2003 Israeli Share Option Plan,<B> </B>employees, directors, consultants and service
providers of the Company or its subsidiaries may be offered an opportunity to acquire
ordinary shares of the Company. The Board of Directors has approved (subject to
Shareholder approval) to increase the number of options available for issuance under the
Company&#146;s 2003 Israeli Share Option Plan, from 1 million to 1.5 million, as the
current option pool has nearly been depleted (and in the event the grants in proposals 6
and 7 shall be approved, they will be subject to Shareholder approval to increase the
option plan). This 2003 Plan is currently the only active Plan from which options are
being granted. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
the Meeting, the Board of Directors will propose that the following resolution be adopted: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>&#147;RESOLVED</B>, subject to the
increase of the registered share capital of the Company (proposal 3), to approve&nbsp;an
increase of the number of options available for issuance under the Company&#146;s 2003
Israeli Share Option Plan, from 1 million to 1.5 million.&#148; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
the receipt of a properly signed and dated proxy and unless otherwise instructed in the
proxy, the persons named in the enclosed proxy will vote the shares represented thereby
FOR the above-mentioned proposal. </FONT></P>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>10.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>RECEIPT
OF AUDITOR&#146;S REPORT AND FINANCIAL STATEMENTS</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
the Meeting the shareholders shall receive and consider the Auditor&#146;s Report and the
Consolidated Financial Statements of the Company for the fiscal year ended December 31,
2005. </FONT></P>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>11.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>OTHER
BUSINESS</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Meeting is called for the purposes set forth in the Notice accompanying this Proxy
Statement. As of the date of the Notice, the Board of Directors knows of no business which
will be presented for consideration at the Meeting other than the foregoing matters. If
other matters not now known properly come before the Meeting, however, it is intended that
the persons named as proxies or their substitutes will vote the Ordinary Shares in
accordance with their best judgment with respect to such matters. </FONT></P>


<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>By Order of the Board of Directors,</FONT></P>



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<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=50% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Edouard Cukierman</FONT></TD>
     <TD WIDTH=50% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Adiv Baruch</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chairman of the Board of Directors</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>President and Chief Executive Officer</FONT></TD></TR>
</TABLE><BR>



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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>April, 2006 </FONT></P>


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