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<SEC-DOCUMENT>0001178913-06-002306.txt : 20061211
<SEC-HEADER>0001178913-06-002306.hdr.sgml : 20061211
<ACCEPTANCE-DATETIME>20061211135210
ACCESSION NUMBER:		0001178913-06-002306
CONFORMED SUBMISSION TYPE:	F-3
PUBLIC DOCUMENT COUNT:		8
FILED AS OF DATE:		20061211
DATE AS OF CHANGE:		20061211

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:		F-3
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-139233
		FILM NUMBER:		061267902

	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>F-3
<SEQUENCE>1
<FILENAME>zk63200.htm
<TEXT>
<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        \\Backup\office\EDGAR Filing\BOS better online solutions Ltd\63200\a63200.eep -->
     <!-- Control Number: 63200                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    BOS better online solutions Ltd                                  -->
     <!-- Project Name:   F-3                                                              -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>F-3</TITLE>
</HEAD>
<BODY>


<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="70%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">As filed with the Securities and Exchange Commission on December 11, 2006</FONT></TD>
     <TD WIDTH="30%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Registration No. 333-______________</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD colspan=2><HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE STYLE="margin-top: -5px"><HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE STYLE="margin-top: -10px">
</TD>
</TR>
</TABLE>
<BR>


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>UNITED STATES</B> </FONT> <BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE="4"><B>SECURITIES AND EXCHANGE COMMISSION</B> </FONT> <BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">Washington, D.C. 20549 </FONT> </P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="4"><B>FORM F-3</B> </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>REGISTRATION STATEMENT<BR>UNDER THE SECURITIES ACT OF 1933 </FONT></P>

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<HR SIZE="1" NOSHADE WIDTH="15%" ALIGN="CENTER">

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="5"><B>B.O.S BETTER ONLINE
SOLUTIONS LTD.</B> </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>(Exact name of
Registrant as specified in its charter) </I></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>
     <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>
     <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>
     <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>
     <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"><B>Israel</B> </FONT></TD>
     <TD WIDTH=50% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Not Applicable</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>(State or other jurisdiction of</I> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>(I.R.S. Employer</I> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>incorporation or organization)</I> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Identification No.)</I> </FONT></TD></TR>
</TABLE>
<BR>


<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Beit Rabin, Teradyon Industrial Park,
<BR>Misgav, 20179, Israel
<BR>(+972) 4-990-7555
<BR><I>(Address and Telephone Number of Registrant's principal executive offices)</I> </FONT>
</P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Corporation Service Company
<BR>1133 Avenue of the Americas, Suite 3100
<BR>New York, NY 10036
<BR>Tel: (212) 299-9100
<BR><I>(Name, address and telephone number of agent for service)</I> </FONT>
</P>

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<HR SIZE="1" NOSHADE WIDTH="15%" ALIGN="CENTER">

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH WIDTH="50%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH WIDTH="50%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="CENTER" COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Copies To:</FONT></TD>
</TR>
<TR VALIGN=Bottom>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Brian Brodrick, Esq</B> </FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Shlomo Landress, Adv.</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Phillips Nizer LLP</B> </FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Amit, Pollak, Matalon &amp; Co.</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>666 Fifth Avenue</B> </FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NYP Tower, 17 Yitzhak Sadeh Street</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>New York, New York 10103</B> </FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Tel Aviv 67775, Israel</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(212) 841-0700</B> </FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>972-3-561-5268</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;<B>Approximate
date of commencement of proposed sale to the public</B>: From time to time after this
registration statement becomes effective. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the only securities being registered on this Form are being offered pursuant to dividend
or interest reinvestment plans, please check the following box. <FONT size="3" face="Wingdings">o
</font> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any of the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, please check the
following box. <FONT size="3" face="Wingdings">x
</font> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the
same offering. <FONT size="3" face="Wingdings">o
</font> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities
Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. <FONT size="3" face="Wingdings">o
</font> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this Form is a registration statement pursuant to General Instruction I.C. or a
post-effective amendment thereto that shall become effective upon filing with the
Commission pursuant to Rule 462(e) under the Securities Act, check the following
box. <FONT size="3" face="Wingdings">o
</font> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this Form is a post-effective amendment to a registration statement filed pursuant to
General Instruction I.C. filed to register additional securities or additional classes of
securities pursuant to Rule 413(b) under the Securities Act, check the following box. <FONT size="3" face="Wingdings">o
</font> </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="Head Major Center Bold-TNR" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CALCULATION OF
REGISTRATION FEE </FONT></H1>







<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Title of Each Class<BR>
of Securities to be Registered</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Amount to be<BR>
Registered</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Proposed Maximum<BR>
Offering Price<BR>
Per Share (1)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Proposed Maximum<BR>
Aggregate Offering<BR>
Price</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Amount of<BR>
Registration<BR>
Fee</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>
     <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>
     <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>
     <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>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <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>
     <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>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <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>
     <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>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=51% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Ordinary Shares, nominal value NIS 4.00 per share (2)</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% 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=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,000,000</FONT></TD>
        <TD WIDTH=3% 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>$</FONT></TD><TD WIDTH=4% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2.50</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 5,000,000</FONT></TD>
        <TD WIDTH=3% 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>$</FONT></TD><TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       535</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Rights to purchase Ordinary Shares (3)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,000,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    0</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>         0</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>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>
<BR><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>(1) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Included
solely for the purpose of calculating the registration fee. </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>(2) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Issuable
upon exercise of Rights at an exercise price of $2.50 per ordinary           share. </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>(3) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Each
right is exercisable to purchase one ordinary share. Pursuant to           Rule&nbsp;457(g),
no separate registration fee is payable with respect to the rights being offered hereby
since the rights are being registered in the same registration statement as the
securities to be offered pursuant thereto.</FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Registrant hereby amends this
Registration Statement on such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance with Section
8(a) of the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a), may
determine. </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>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>THE
INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE
SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT
IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.</B> </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px"></TD>
</TR>
</TABLE>
<BR>


<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SUBJECT TO COMPLETION, DATED December 11, 2006</FONT></P>

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

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B.O.S BETTER ONLINE
SOLUTIONS LTD. </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,000,000 Ordinary
Shares </FONT></H1>

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<HR SIZE="1" NOSHADE WIDTH="15%" ALIGN="CENTER">

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>DISTRIBUTION OF RIGHTS
TO PURCHASE ORDINARY SHARES </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are distributing transferable rights to purchase up to 2,000,000 of our ordinary shares
to those persons that, as of 5:00 p.m., New York City time (midnight, Israel time) on the
record date of ________ , 2006 were shareholders of our company. You will receive one
right for each 3.36 ordinary shares that you hold on the record date. If you hold 3 or
less ordinary shares, you will not receive any rights. Your rights will be aggregated for
all the shares that you own on the record date and then rounded down to the nearest whole
number, so that you will not receive fractional rights. For example, if you own 4 shares
on the record date, you will receive one right, and if you own 10,000 shares on the
record date, you will receive 2,976 rights. Each right will entitle you to purchase, at a
subscription price of $2.50, one ordinary share. The rights are exercisable during a
_______-day period, beginning after 5:00 p.m., New York City time (midnight, Israel time)
on _____________, 2006 (the record date) and ending on _______________ , 2007 at 5:00
p.m., New York City time (midnight, Israel time).  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
ordinary shares trade on the NASDAQ Global Market under the symbol &#147;BOSC&#148; and
on the Tel Aviv Stock Exchange in Israel under the symbol &#147;BOSC.&#148; On December
7, 2006 the last reported sale price of our ordinary shares on the NASDAQ Global Market was
$ 2.65 per ordinary share and on the Tel Aviv Stock Exchange was NIS 10.86 per
ordinary share.  </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
rights are transferable and will be listed for trading for a single day on the NASDAQ
Global Market under the symbol &#147;_______&#148; and on the Tel Aviv Stock Exchange
under the symbol &#147;BOSC.R1&quot;. The trading day will be ____________, 2006. If you
hold your rights through an Israeli brokerage company that holds the rights through the
nominee company of the Tel Aviv Stock Exchange, you will be considered to have instructed
your broker to sell all your rights on the Tel Aviv Stock Exchange with no price limit,
if you fail to give your broker instructions regarding the exercise, non-exercise or sale
of the rights prior to _________ ,_____ .  </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
offering is not secured by an underwriting commitment.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
should read both this prospectus and any prospectus supplement, together with the
additional information described under the heading &#147;Incorporation of Certain
Documents by Reference&#148; before you decide to invest in our ordinary shares. </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>INVESTING
IN THE SECURITIES OFFERED HEREIN INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 10 OF THIS PROSPECTUS.</B> </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Neither the Securities and
Exchange Commission nor any state securities commission or the Israeli Securities
Authority has approved or disapproved of these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal offense under
the laws of the United States and the laws of the State of Israel.</B> </FONT></P>

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<HR SIZE="1" NOSHADE WIDTH="15%" ALIGN="CENTER">

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The date of this prospectus is ________, 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>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TABLE OF CONTENTS </FONT></H1>




<TABLE CELLPADDING=3 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Page</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<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></FONT></TH></TR>
<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>
     <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>
     <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=90% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk101">Prospectus Summary</a></FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk102">Questions and Answers about B.O.S Better Online Solutions Ltd.</a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk103">Questions and Answers about the Rights Offering</a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk104">Risk Factors</a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk105">Forward-Looking Statements</a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk106">Recent Developments</a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk107">Capitalization</a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk120">Dilution; Effect of the Rights Offering on our Outstanding Shares and Convertible Securities</a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk121">Expenses of the Issue</a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk108">Use of Proceeds</a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk109">Price Range of Ordinary Shares</a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk110">The Rights Offering</a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>26&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk111">Material Income Tax Considerations</a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>32&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk112">Description of Ordinary Shares</a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>39&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk113">Undertaking to Refrain from Actions not Disclosed in this Prospectus</a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk114">Legal Matters</a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>41&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk115">Experts</a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>41&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk116">Where You Can Find More Information</a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>41&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk117">Incorporation of Certain Documents by Reference</a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>42&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk118">Enforceability of Civil Liabilities</a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>43&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk119">The Israel Securities Authority Exemption</a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>43&nbsp;</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;You
should rely only on the information contained or incorporated by reference in this
prospectus or any supplement. We have not authorized any other person to provide you with
different information. If anyone provides you with different or inconsistent information,
you should not rely on it. We are not, and any underwriter or agent is not, making an
offer to sell these securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information appearing in this prospectus is accurate
only as of the date on the front cover of this prospectus. Our business, financial
condition, results of operations and prospects may have changed since that date. </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>

<a name=zk101></a>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PROSPECTUS SUMMARY </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
prospectus does not contain all of the information set forth in the registration
statement, certain parts of which are omitted in accordance with the rules and regulations
of the SEC. Accordingly, you should refer to the registration statement and its exhibits
for further information about us and our ordinary shares. Copies of the registration
statement and its exhibits are on file with the SEC. Statements contained in this
prospectus concerning the documents we have filed with the SEC are not intended to be
comprehensive, and in each instance we refer you to a copy of the actual document filed as
an exhibit to the registration statement or otherwise filed with the SEC. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have not authorized anyone to provide you with information different from that contained
or incorporated by reference in this prospectus. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of our rights or our ordinary shares. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless
the context otherwise requires, all references in this prospectus to &#147;BOS,&#148;
&#147;we,&#148; &#147;our,&#148; &#147;our company,&#148; &#147;us&#148; and the
&#147;Company&#148; refer to B.O.S Better Online Solutions Ltd. and its consolidated
subsidiaries. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
references in this prospectus to &#147;ordinary shares&#148; refer to our ordinary shares,
nominal value NIS 4.00 per share. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
references in this prospectus to &#147;dollars&#148; or &#147;$&#148; are to United States
dollars. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
references in this prospectus to &#147;shekels&#148; or &#147;NIS&#148; are to New Israeli
Shekels. </FONT></P>

<a name=zk102></a>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>QUESTIONS AND ANSWERS ABOUT B.O.S BETTER ONLINE SOLUTIONS LTD.</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
section answers in summary form some questions you may have about B.O.S Better Online
Solutions Ltd. and this rights offering. The information in this section is not complete
and does not contain all of the information that you should consider before exercising
your subscription rights. You should read the entire prospectus carefully, including the
&#147;Risk Factors&#148; section and the documents listed under &#147;Where You Can Find
More Information.&#148; </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>What is B.O.S. Better
Online Solutions Ltd.? </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are an Israeli based company, operating through our two wholly-owned Israeli subsidiaries: </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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BOScom
Ltd. that is engaged in the Software Solutions segment of our business (previously named
         connectivity solutions segment); and</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Odem
Electronic Technologies 1992 Ltd. ("Odem") that is engaged in the Supply-Chain  Solutions
         segment of our business (previously named electronic components
segment).</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;<B>Our</B>
<B>Software Solutions segment, </B>focuses on providing emulation solutions for the
popular IBM iSeries, enabling customers to extend its capabilities and life cycle. Our
server and associated modules empower the iSeries, providing a scaleable solution for
transparent expansion and growth. </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>Our
Supply-Chain Solutions segment, </B>provides, through Odem, solutions in RFID (Radio
Frequency Identification Devices), semiconductors, electronic components, CCD (Charge
&#150; Coupled Devices), imaging, networking, telecom and automation. </FONT></P>

<p align=center>
<font size=2>3</font></p>
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<page>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Where are we located? </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
headquarters, R&amp;D and manufacturing facilities are located at Teradyon Industrial
Park, Misgav Israel. The facilities of our subsidiary, Odem Electronic Technologies 1992
Ltd., are located in the center of Israel. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
telephone number is 972-4-990-7555 and our website address is www.boscorporate.com. The
information contained on, or linked from, our website is not a part of this prospectus. </FONT></P>

<a name=zk103></a>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>QUESTIONS AND ANSWERS
ABOUT THE RIGHTS OFFERING </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>What is a rights offering?
</B>&nbsp; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
rights offering is a distribution of rights on a pro rata basis to all shareholders of a
company. We are distributing to holders of our ordinary shares, at no charge, one right
for each 3.36 ordinary shares held by them at 5:00&nbsp;p.m., New York City time, on
&nbsp;________________, 2006, the &#147;record date&#148;. The 3.36 ratio was derived by
dividing the sum of the total number of our issued and outstanding ordinary shares by the
dollar amount being offered in the rights offering, multiplied by the subscription price.
If you hold 3 or fewer ordinary shares, you will not receive any rights. Your rights will
be aggregated for all the shares that you own on the record date and then rounded down to
the nearest whole number, so that you will not receive fractional rights. For example, if
you own 4 shares on the record date, you will receive one right, and if you own 10,000
shares on the record date, you will receive 2,976 rights. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>What securities and how many
securities may be purchased under each right?</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
full right entitles the holder to purchase one of our ordinary shares at a price of $2.50
per ordinary share. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>How many rights will you
receive? </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
person who, at the close of business at 5:00 p.m., New York City time (midnight, Israel
time), on ____________________________, 2006 (the record date), owns our ordinary shares
will receive, at no charge, one right for each 3.36 ordinary shares owned on the record
date. Your rights will be aggregated for all the shares that you own on the record date. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
may exercise all of your rights or a portion of your total rights (but only whole rights),
or you may choose not to exercise any of your rights. In addition, you may sell the rights
on either the NASDAQ Global Market or the Tel Aviv Stock Exchange, during one single
trading day, on ______________, 2006. You may pay us the subscription price either in U.S.
dollars, or if you are an Israeli resident, in New Israeli Shekels according to the U.S.
dollar/NIS representative exchange rate published by the Bank of Israel on the day before
payment of the subscription price. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Will the rights be
listed for trading? </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yes.
          The rights will be listed on the NASDAQ Global Market under the symbol _______
           and the Tel Aviv Stock Exchange under the symbol
          &#147;BOSC.R1&quot;.  </FONT></P>

<p align=center>
<font size=2>4</font></p>
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<page>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Why are we engaging in a rights
offering? </B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are engaging in this rights offering to provide our company with funds it requires for
general corporate purposes, including working capital and for future mergers and
acquisitions. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>How was the subscription price
determined? </B>&nbsp; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
board of directors set the terms and conditions of the rights offering, including the
subscription price, with the objective to reflect recent trading prices of our ordinary
shares, raise the targeted proceeds and provide all of our shareholders with a reasonable
opportunity to make an additional investment in our 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;In
establishing the commercial terms, including the subscription price, our board of
directors considered the following factors: the strategic alternatives available to us for
raising capital, the market price of our ordinary shares, the pro rata nature of the
offering, our business prospects and general conditions in the securities markets. </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
subscription price, however, does not necessarily bear any relationship to our past or
expected future results of operations, cash flows, current financial condition, or any
other established criteria for value. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>How long will the rights offering
last? </B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
will be able to exercise your rights only during a limited period. The rights are
exercisable during a ____-day period, beginning after 5:00 p.m. New York City time
(midnight, Israel time) on _____________ , 2006 (the record date) and ending at 5:00 p.m.
New York City time (midnight, Israel time) on ___________ , 2006 (the rights expiration
date). If you hold your shares through a broker, dealer or other nominee (including
through members of the Tel Aviv Stock Exchange), you will be required to comply with the
procedural requirements of such nominee, including the procedures relating to the last
time by which you may be required to provide notice of your intention to exercise your
rights (which may be earlier than the final expiration date of the rights), as well as
other procedural requirements described under the heading &#147;The Rights Offering.&#148;
If you do not exercise your rights by the date and in accordance with the procedures
applicable to you, your ability to exercise the rights and purchase the ordinary shares
will expire. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>How do you exercise your
rights? </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
will send a rights certificate to each holder of our ordinary shares that on the record
date is registered on our shareholder registry maintained at American Stock Transfer &amp;
Trust Co., the transfer agent for our ordinary shares. The rights certificate will
evidence the number of rights applicable to each holder and will be accompanied by a copy
of this prospectus. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you are a record holder of our ordinary shares and you wish to exercise your rights, you
should complete the exercise form on the back of the rights certificate and send the
certificate (or a notice of guaranteed delivery), accompanied by the subscription price
following the record date, to the offices of American Stock Transfer &amp; Trust Co., as
our Rights Agent, to the attention of: Reorganization Department, to be received no later
than the expiration date of the rights. </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>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
rights will expire on ________________, 2006, at 5:00 p.m. New York time, (midnight,
Israel time). You may make your payment to American Stock Transfer by wire transfer or
cashier&#146;s check or a money order drawn on a bank located in the United States payable
to the order of &#147;American Stock Transfer &amp; Trust Co., as Rights Agent.&#148;
Payment made to American Stock Transfer &amp; Trust Co. must be in U.S. dollars. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you are a record holder of rights that resides in Israel, you may exercise your rights by
delivering the completed exercise form on the back of the rights certificate to our
offices in Teradyon Industrial Park, Misgav, Israel, following the record date,
accompanied by evidence of a wire transfer or a cashier&#146;s check or a money order
drawn on a bank located in Israel payable to B.O.S Better Online Solutions Ltd. Payment to
us must be either in New Israeli Shekels in accordance with the representative exchange
rate published by the Bank of Israel on the day before payment of the subscription price
or in U.S. dollars if requested and we agree to such payment. The completed exercise form
and payment must be delivered to us by midnight Israel time on ____________, 2006 (the
rights expiration date). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you are a beneficial owner of our ordinary shares and hold them through a broker, dealer
or other nominee (including a member of the Tel Aviv Stock Exchange), see &#147;What
should you do if you want to participate in this rights offering, but your shares are held
in the name of your broker, dealer or other nominee?&quot; </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>How do you transfer your
rights? </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
subscription rights are transferable and will be evidenced by rights certificates. If you
are a record holder of our ordinary shares and wish to transfer your rights to another
person, you may do so by completing the transfer form on the back of your certificate and
submitting it to American Stock Transfer &amp; Trust Co., as Rights Agent, prior to
_________, 2006 . If you wish to sell your rights on the NASDAQ Global Market or the Tel
Aviv Stock Exchange, you should independently engage a broker to execute this sale on your
behalf. The rights will be listed for trading on these exchanges during their regular
trading hours for one day only on __________, 2006. We cannot assure you that a trading
market for the rights will exist or develop. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>After you exercise your rights,
can you change your mind? </B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No.
          You cannot revoke the exercise of your rights, even if you later learn
          information about us that you consider to be unfavorable. You should not send
          the completed exercise form on the back of the rights certificate unless you
are           certain that you wish to purchase the ordinary shares.  </FONT></P>


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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Is exercising your
rights risky? </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yes.
          The exercise of your rights involves substantial risks. Exercising your rights
          means buying additional securities, and you should carefully consider this
          purchase as you would do with respect to any other equity investment. Among
          other things, you should carefully consider the risks described under &#147;Risk
          Factors.&#148; </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Is there an over-subscription
privilege</B>? </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No.
          Unexercised rights will be listed for trading on the NASDAQ Global Market and
on           the Tel Aviv Stock Exchange for one day only on ________, 2006. Additional
          rights may be purchased from selling shareholders on such day.  </FONT></P>


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

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Do you have to exercise
all of your rights? </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No.
          You may exercise any number of your rights, or you may choose not to exercise
          any rights. However, if you do not exercise your rights and other shareholders
          do, the percentage of our ordinary shares that you own will diminish, and your
          voting and other rights will be diluted.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Can you sell or give away your
rights? </B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yes.
          You may transfer or sell, at any time prior to the expiration date (
          ___________, 2006 , at 5:00 p.m. New York time, midnight, Israel time), all or
a           portion of the rights. You are responsible for all commissions, fees and
other           expenses, including brokerage commissions and transfer taxes, incurred in
          connection with the purchase or sale of rights. The unexercised rights will be
          listed for trading on the NASDAQ Global Market and on the Tel Aviv Stock
          Exchange for one day only on __________, 2006 . For further details regarding
          trading in our rights, please see &#147;The Rights Offering&#150;Transferability
          of Rights.&#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;Some
of the tax consequences of selling your rights for certain U.S. and Israeli shareholders
are described herein under the heading &#147;Material Income Tax Considerations.&#148; You
are, however, advised to seek specific tax advice from your personal tax advisor, as this
prospectus does not summarize all tax consequences arising under U.S. state tax laws,
Israeli tax laws, tax laws outside of the U.S. and Israel or any tax laws relating to
special tax circumstances or particular types of taxpayers. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>What are the federal income tax
and Israeli income tax consequences of exercising your rights?
</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </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
receipt and exercise of your rights are intended to be nontaxable; however, no ruling from
the U.S. Internal Revenue Service or the Israeli Income Tax Authority will be sought.
Therefore, you should seek specific tax advice from your personal tax advisor. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Disclosure
of the material income tax consequences in the United States resulting from the
distribution of the rights to a U.S. holder, and related transactions by the U.S. holder,
including the exercise or expiration of rights, and the disposition of rights or ordinary
shares issuable upon exercise of the rights is included under &#147;Material Income Tax
Considerations&#150;United States Tax Considerations&#148;. We have received an opinion of
Phillips Nizer LLP, regarding the material federal income tax consequences. Disclosure of
the material income tax consequences in Israel resulting from the distribution of the
rights to an Israeli holder, and related transactions by the Israeli holder is included
under &#147;Material Income Tax Considerations&#150;Israel Tax Considerations&#148;. This
prospectus does not conclusively summarize tax consequences arising under U.S. state tax
laws, Israeli tax laws, tax laws outside of the U.S. and Israel or any tax laws relating
to special tax circumstances or particular types of taxpayers. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>What happens if you
choose not to exercise your rights? </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
will retain your current number of ordinary shares even if you do not exercise your
rights. However, if you do not exercise your rights and other shareholders who receive
rights do, the percentage of our ordinary shares that you own will diminish, and your
voting and other rights will be diluted. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you hold our shares through the Company&#146;s nominee company (<I>Hevra Le-Rishumim of
Bank Leumi Le-Israel Ltd.</I>) and you do not provide notice of your exercise of the
rights or give any other instructions by the time determined by your broker on _________,
2006 (the rights trading day), under the rules of the Tel Aviv Stock Exchange, you will be
considered to have provided an instruction to sell all your rights on the Tel Aviv Stock
Exchange with no price limit. </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><B>Has our board of directors made a
recommendation regarding this offering?</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No.
          Our board of directors makes no recommendation to you about whether you should
          exercise any rights.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>What should you do if you want to
participate in this rights offering, but your shares are held in the name of your broker,
dealer or other nominee?</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you are a beneficial owner of our ordinary shares and hold them through a broker, dealer
or other nominee (including a member of the Tel Aviv Stock Exchange), you should expect
your broker, dealer or other nominee to notify you of this rights offering and the
procedures for exercising or transferring your rights. If you wish to exercise your
rights, you will need to have your broker, dealer or other nominee act for you. To
indicate your decision with respect to your rights, you should complete and return to your
broker, dealer or other nominee the form provided to you accompanied by the subscription
payment payable to your broker, dealer or other nominee. You should receive this form from
your broker, dealer or other nominee. If you are a beneficial owner of our ordinary shares
and hold them through a broker, dealer or other nominee (including a member of the Tel
Aviv Stock Exchange), you should NOT return your exercise form or transfer the
subscription payment directly to us. Your broker, dealer or other nominee will execute the
exercise of your rights through the appropriate facilities. However, if you own your
shares through a member of the Tel Aviv Stock Exchange, the rules of the Tel Aviv Stock
Exchange provide that if no contrary instructions have been received from you by the time
determined by your broker on ________, 2006 (the rights trading day), you will be
considered to have instructed your broker to sell all your rights on the Tel Aviv Stock
Exchange with no price limit. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>What fees or charges
apply if you exercise your rights? </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are not charging any fee or sales commission to issue rights to you and we are not
charging any fee or sales commission, other than the subscription price, to issue the
ordinary shares if you exercise your rights. If you exercise your rights through a broker,
dealer or other nominee, you are responsible for paying any fees that may be charged
thereby. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>How will this rights offering
affect the price of our ordinary shares on the Tel Aviv Stock Exchange and on NASDAQ?</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NASDAQ
will not reduce the opening price of the ordinary shares at the opening of trading on the
NASDAQ Ex-day, which is the first day that our ordinary shares will trade on NASDAQ
without entitlement to receive the rights. The NASDAQ Ex-day will be the first trading day
on NASDAQ following the record date. The NASDAQ Ex-day for the rights offering will,
therefore, be ___________,___ . In accordance with the rules of the Tel Aviv Stock
Exchange, the Tel Aviv Stock Exchange will reduce the opening price of the ordinary shares
at the opening of trading on the Tel Aviv Stock Exchange Ex-day, which is the first day
that our ordinary shares will trade on the Tel Aviv Stock Exchange following the record
date; the Tel Aviv Stock Exchange Ex-day for the rights offering will, therefore, be
_______________, ____. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>When will you receive your new
shares?</b> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you exercise your rights in this rights offering and the Rights Agent has received your
duly completed exercise form and your payment has cleared, your purchase of ordinary
shares will be effected at 5:00 p.m., New York City time (midnight, Israel time) on
_____________, 2006 (the rights&#146; expiration date), and you will receive certificates
representing the ordinary shares purchased upon exercise of the rights as soon as
practicable thereafter. We have the discretion to delay allocation and distribution of any
shares you may elect to purchase by exercise of your privilege in order to comply with
state securities laws and regulations. Brokers may be unwilling to sell your ordinary
shares until you have received certificates representing your ordinary shares. </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><B>Have any shareholders indicated
that they will exercise their rights?</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yes.
          Touareg Consulting Ltd. which owns an aggregate of 8.05% of our outstanding
          shares, has indicated its intention to exercise its rights, and may acquire and
          exercise additional rights, if they are available.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Members
of our management have not provided us with any indication as to whether they will
exercise rights to be granted to them. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Are there any conditions to the
consummation of the rights offering?</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
are no conditions to the consummation of the rights offering. However, we reserve the
right to reject your exercise of rights if your exercise is not in accordance with the
terms of the rights offering or in proper form. Neither we nor the Rights Agent will have
any duty to notify you of a defect or irregularity in your exercise of rights. We will not
be liable for failing to give you that notice. We will also not accept your exercise of
rights if our issuance of shares pursuant to your exercise could be deemed unlawful or
materially burdensome. In addition, we will not be required to issue shares prior to the
rights expiration date. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Can we withdraw the
rights offering? </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yes.
          Our board of directors may withdraw the rights offering in its sole discretion
          at any time prior to 5:00 p.m. New York City time (midnight, Israel time) on
          ____________ , 2006 (the record date), for any reason (including, without
          limitation, a change in the market price of our ordinary shares). If we
withdraw           the rights offering, we will issue a press release notifying
shareholders of the           cancellation, and any money received from subscribing
shareholders will be           refunded promptly, without interest.  </FONT></P>


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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>How much money will we
receive from the rights offering? </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
amount of gross proceeds from the rights offering depends on the number of rights that are
exercised into our ordinary shares. If all the rights are exercised, we will receive gross
proceeds of $5 million. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>If the rights offering is not
completed, will my subscription payment be refunded to me?</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yes.
          The Rights Agent will hold all funds it receives in a segregated bank account
          until completion of the rights offering. If the rights offering is not
          completed, we will immediately instruct the Rights Agent to return your payment
          in full. If you own shares in &#147;street name,&#148; it may take longer for
          you to receive payment because the Rights Agent will send payments through the
          record holder of your shares. You will not be credited interest on your
payment.  </FONT></P>


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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>How will we use the
proceeds from the rights offering? </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We will use the proceeds generated
from the exercise of rights in this rights offering towards general corporate purposes,
including working capital, as well as toward the financing of future mergers and
acquisitions. </FONT></P>

<p align=center>
<font size=2>9</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>How many shares will be
outstanding after the rights offering if all the rights are exercised?</B> </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
of the September 30, 2006, 6,726,061 of our ordinary shares were issued and outstanding.
The number of ordinary shares that will be outstanding after the rights offering depends
on the number of rights that are exercised. If all the rights are exercised in full, an
additional 2,000,000 of our ordinary shares will be outstanding. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Who should I contact if
I have other questions? </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If you have other questions or need
assistance, please contact the Information Agent, The Altman Group at 800-330-5136. </FONT></P>

<a name=zk104></a>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>RISK FACTORS </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>You
should carefully consider the risks described below and all the information contained or
incorporated by reference into this prospectus before making an investment decision
regarding our ordinary shares. Our business, financial condition or results of operations
could be materially adversely affected by any of these risks. The risks described below
are not the only risks facing our company. Additional risks and uncertainties that we are
not aware of or that we currently believe are immaterial may also adversely affect our
business, financial condition, results of operation and liquidity. The trading price of
our ordinary shares could decline due to any of these risks, and you may lose all or part
of your investment.</I> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Risks relating to our business: </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We have had a history of
losses and our future levels of sales and ability to achieve profitability are unpredictable.</I></B> </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have incurred net losses of $3.6 million in 2005, $2.1 million in 2004 and $21,000 in
2003. As of December 31, 2005, we had an accumulated deficit of $42.7 million. Only in the
fourth quarter of 2005 did we manage to breakeven, and there can be no assurance that this
trend will continue. According to our unaudited financial reports for the nine months ended
September 30, 2006, we had an operating loss of $773,000, other income of $899,000, which
was mainly due to the receipt of Qualmax Inc. shares, and a net loss of $220,000. Our ability to maintain and improve future levels of sales and
profitability depends on many factors. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>These factors include: </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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
continued demand for our existing products;</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>our
ability to develop and sell new products to meet customer needs;</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>management's
ability to control costs and successfully implement our business strategy; and</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>our
ability to manufacture and deliver products in a timely manner.</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;There
can be no assurance that we will experience any growth in sales or achieve profitability
in the future or that the levels of historic sales or profitability experienced during
previous years will continue in the future or that our net losses will not increase in the
future. </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 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We may be unable to
maintain our gross profit margins.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
sales and profitability may vary in any given year, and from quarter to quarter. In order
to increase sales and enter into new markets with new products we may find it necessary to
decrease prices in order to be competitive. Additionally, the gross profit margin of our
subsidiary, Odem Electronic Technologies, whose sales accounted for 75% of our total sales
in 2005, tends to fluctuate. We may not be able to maintain current gross profit margins
in the future, which would have a material adverse effect on our business. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We have limited capital
resources and we may encounter difficulties raising capital.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Continued
expansion requires additional resources and especially working capital. If our efforts to
raise capital do not succeed, our efforts to increase our business and to compete in the
marketplace may be seriously jeopardized, which would have a materially adverse effect on
our business. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>A significant part
of&nbsp;the revenues of our wholly-owned subsidiary, Odem Electronic Technologies 1992 Ltd.
(&#147;Odem&#148;), is from one major customer, Israel Aircraft Industries
(&#147;IAI&#148;). Our business relationship with IAI involves the following risks:</I></B> </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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>An
interruption in our business relationship with IAI would materially adversely
impact our  financial results.</I></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;Sales
to IAI accounted for 14% of our revenues in year 2005 and for 22% in the first nine months
of 2006. An interruption in our business relationship with IAI&nbsp;would result in a
significant reduction in our revenues and in a write-off of inventory, and would have an
adverse effect on our business and results of operations.&nbsp; </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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Significant
appreciation in the cost price of electronic components under a long term sales </I></B><I></I><B><I>agreement
with a fixed sales price with IAI, may materially adversely impact our financial </I></B><I></I><B><I>results.</I></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
September 2004, Odem entered into a long term sales agreement with IAI for the supply of
electronic components for two models of business jets. The agreement provides for a fixed
sales price of the components during the term of the agreement through December 2008.
Absent the flexibility to increase our prices as a result of increased costs of the
components, significant increased costs may adversely impact our financial results. </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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>The
relationship with IAI requires us to hold a large inventory, in order to meet its short
</I></B><I></I><B><I>lead time and delivery requirements. If we are unable to sell this
inventory on a timely basis, </I></B><I></I><B><I>we could incur charges for excess and
obsolete inventory, which would materially adversely </I></B><I></I><B><I>affect our
results of operations.</I></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;Under
the agreement with IAI, we are obligated to hold inventory of products necessary for three
months of IAI&#146;s production of two models of business jets. This requires us to incur
the costs of purchasing inventory without having an outstanding purchase order for the
products. If we are unable to sell products that are purchased to hold in inventory, we
may incur write-offs and write-downs as a result of slow-moving items, technological
obsolescence, excess inventories, discontinued products and products with market prices
lower than cost. Such write-offs and write-downs could adversely affect our operating
results and financial condition. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>We may be unable to maintain
and continue developing marketing and distribution arrangements and expand our reach into
overseas markets. Additionally, we have limited experience in selling in the Far East,
which could have a materially adverse impact on our results of operation.</I></B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2005, nearly half of our revenues were generated from sales outside Israel. If we are not
able to maintain our existing distribution channels and expand to new international
markets, our operating results may be materially adversely affected. Additionally, in 2005
and in the first nine months of 2006, our sales to the Far East accounted for 22% and 11%
of our total sales, respectively. We have limited sales and marketing experience in the
Far East. Furthermore, in October 2005 the major supplier of products sold by Odem in the
Far East territory, opened a headquarters in China, and began selling in competition with
Odem in this territory. If we are unable to continue to achieve the same Far East sale
levels as were achieved in 2005, our business condition and results of operation may be
materially adversely affected. </FONT></P>

<p align=center>
<font size=2>11</font></p>
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<page>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We recently sold our
Communication segment to IP Gear Ltd., a subsidiary of Qualmax Inc., in exchange for shares
of Qualmax Inc. common stock. If Qualmax is not successful in its business, we may lose
the value of our investment.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
December 31, 2005 we closed a transaction for the sale of our Communications segment to IP
Gear Ltd., a wholly owned subsidiary of Qualmax Inc. The consideration was comprised
mostly of common stock of Qualmax Inc. Qualmax has a limited operating history on which to
judge whether or not this company will be successful. If Qualmax is not successful in its
business or if Qualmax&#146;s share price is subject to a prolonged decline, we may lose
the value of our investment, and be required to record an impairment of the investment,
which could materially adversely affect our results of operation. Additionally, we are
entitled to certain earn-out shares in 2006 based upon revenues that IP Gear will generate
from the sold segment. In June 2006, we received 250,000 shares of Qulamax common stock,
however there is no assurance that the revenues shall be such that will grant us any
additional earn-out shares. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
September 18, 2006, Qualmax announced that it had consummated the transfer of all of its
assets and liabilities to New World Brands, Inc. (&#147;New World&#148;), in exchange for
certain voting preferred stock of New World convertible into common stock with
approximately 86% of the voting power of New World. The shares of common stock of New
World are quoted on the Over the Counter Bulletin Board. Immediately prior to the closing
of this transaction, New World sold all of its former business operations. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We have limited order
backlog. If revenue levels for any quarter fall below our expectations, our results of
operations will be adversely affected.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have a limited order backlog, which makes revenues in any quarter substantially dependent
on orders received and delivered in that quarter. We base our decisions regarding our
operating expenses on anticipated revenue trends, and our expenses level are relatively
fixed, or require some time for adjustment. Hence, revenue levels below our expectations
will adversely affect our results of operations. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>In 2004 we completed the
acquisition of a controlling stake in Odem. In September 2005, we acquired another 23.9%
of Odem&#146;s shares and in November 2005, we increased our holdings in Odem to 100%. The
integration of this acquisition may interrupt the activities of the combined companies and
could have an adverse effect on our business, results of operations, financial condition
or prospects.</I></B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
acquisition of Odem involved the integration of a company that had previously operated
independently. The difficulties of combining Odem&#146;s operations with our other
operations included, and continue to be, but are not limited to: the necessity of
coordinating geographically separate organizations and integrating personnel with diverse
business backgrounds, potential difficulties in retaining employees and the associated
adverse effects on relationships with existing partners. The integration may interrupt the
activities of the combined companies&#146; businesses and may result in the loss of key
personnel. This could have an adverse effect on our business, results of operations,
financial condition or prospects. </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><I>The
sales of our Software Solutions segment in the United States depend on one master
distributor. In the event that we cease working with the master distributor, we may
experience an interruption in sales until an alternative source of distribution can be
found, which may have a material adverse effect on our business.</I></B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
market Software Solutions in the United States through one master distributor. In 2005 and
in the first nine months of 2006, our sales of Software Solutions (connectivity products)
in the US market accounted for 9% and 8% of our total sales, respectively, and for
approximately 23% and 21% of our gross profit, respectively. In the event that we cease
working with the master distributor, we may experience an interruption in sales until an
alternative source of distribution can be found, which may have a material adverse effect
on our business. </FONT></P>

<p align=center>
<font size=2>12</font></p>
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<page>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Our Software Solutions
segment is engaged in a highly competitive industry, and if we are unable to keep up with
or ahead of the technology our sales could be adversely affected.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
offer our Software Solutions to the IBM midrange computer communications market. IBM sells
competing products to our own, and can exercise significant customer influence and
technology control in the IBM host connectivity market. We may experience increased
competition in the future from IBM or other competitors, which may adversely affect our
ability to successfully market our products and services. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also compete against various companies that offer computer communications products based
on other technologies that in certain circumstances can be competitive in price and
performance to our products. There can be no assurance that these or other technologies
will not capture a significant part of the existing or potential IBM midrange computer
communications market. </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
market for our Software Solutions is also characterized by significant price competition.
We may therefore face increasing pricing pressures. There can be no assurance that
competitors will not develop features or functions similar to those of our products, or
that we will be able to maintain a cost advantage or that new companies will not enter
these markets. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some
of our current and potential competitors for Software Solutions have longer operating
histories, greater name recognition, access to larger customer bases and significantly
greater financial, technical and marketing resources than ours. As a result, they may be
able to adapt more quickly to new or emerging technologies and changes in customer
requirements or to devote greater resources to the promotion and sale of their products
than us. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>In late 2002 we decided
to wind up the business of our subsidiary, Pacific Information Systems, Inc.(&#147;PacInfo&#148;), due to its severe financial situation.</I></B> </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
wind up process was accompanied by settlements with a majority but not all of
PacInfo&#146;s creditors. An action by any of such remaining creditors would result in
additional costs to 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;Furthermore,
certain actions involving PacInfo, if occurred before the end of 2003, may have triggered
a tax event for PacInfo&#146;s former owners (the &#147;Sellers&#148;). In such event, we
may be obligated, under the purchase agreement, to grant the Sellers a loan on a full
recourse basis for certain tax payments the Sellers may be liable for, currently estimated
at approximately $2 million. The purchase agreement provides that the Company is to
receive a security interest in shares of the Company that the Sellers hold at the time of
the loan with a fair market value as of the date of the loan of at least 125% of the
amount of the loan as security for the repayment of the loan. In addition, in the event we
are required to loan such sum to the Sellers, we may also be required to reimburse the
Sellers for certain interest on taxes that they may owe. It is possible that the wind up
of PacInfo during 2002 and 2003 may have triggered such a tax event for the Sellers, which
would result in our obligation to loan the Sellers such amount and to reimburse them for
interest expenses incidental to the tax event. Such a loan and reimbursement may have a
material adverse effect on our business condition and results of operations. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>If actual market
conditions prove less favorable than those projected by management, additional inventory
write-downs may be required.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories
may be written down for estimated obsolescence based upon assumptions about future demand
and market conditions and such write-downs could adversely affect our business condition
and results of operations. As of September 30, 2006, inventory is presented net of $100,000
general provision for technological obsolescence and slow-moving items. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Our acquisitions, to
date, have not always proved successful.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Over
the past years we have pursued the acquisition of businesses, products and technologies.
However, our acquisitions have not always proven to be successful. In June 1998, we
acquired PacInfo, which was based in Portland, Oregon, and in 2001 PacInfo acquired Dean
Technologies LLC (&#147;Dean Tech&#148;), which was based in Grapevine, Texas. Both
businesses have since ceased operations. In September 2004, we acquired the majority of
the assets of Quasar Communications Systems Ltd., which we sold, as part of the sale of
the Communication Solutions segment in 2005, as the segment did not fare well. </FONT></P>

<p align=center>
<font size=2>13</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;Acquisitions
involve a number of risks, including the difficulty of assimilating geographically diverse
operations and personnel of the acquired businesses or activities and of maintaining
uniform standards, controls, procedures and policies. There can be no assurance that we
will not encounter these and other problems in connection with any future acquisitions we
may undertake. There can be no assurance that we will ultimately be effective in executing
additional acquisitions. Any failure to effectively execute and integrate future
acquisitions could have an adverse effect on our business, operating results or financial
condition. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We depend on certain key
products for a significant part of our gross profit and if sales of these products decline,
it would have a material adverse effect on us.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
Software Solutions to the IBM midrange computer communications market contributed 30% of
our gross profit in year 2005 and 29% of our gross profit in the first nine months of the
year 2006. If sales of our Software Solutions were to decline significantly for any
reason, or the profit margins on such products were to decrease significantly for any
reason (including in response to competitive pressures), our financial results would be
adversely affected. Over the past few years there has been a continuous global decrease in
sales and revenues from our Software Solutions segment. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
reduce the risk of such a decline or decrease due to competitive pressures or technical
obsolescence, we are continually seeking to reduce costs, upgrade and expand the features
of our IBM related products, expand the applications for which the products can be used
and increase marketing efforts to generate new sales. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although
we are developing and introducing new remote data access communication products and
increasing our marketing efforts, there can be no assurance that the planned enhancements
or the new developments will be commercially successful, or that we will be able to
increase sales of our IBM midrange products. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>If we are unsuccessful in
developing and introducing new products, we may be unable to expand our business.</I></B> </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
market for some of our products is characterized by rapidly changing technology and
evolving industry standards. The introduction of products embodying new technology and the
emergence of new industry standards can render existing products obsolete and unmarketable
and can exert price pressure on existing products. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
ability to anticipate changes in technology and industry standards and successfully
develop and introduce new and enhanced products as well as additional applications for
existing products, in each case on a timely basis, will be critical in our ability to grow
and remain competitive. Although these products are related to, and even incorporate our
existing products, there can be no assurance that we will be able to successfully develop
and market any such new products. If we are unable to develop products that are
competitive in technology and price and responsive to customer needs, for technological or
other reasons, our business will be materially adversely affected. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We depend on key
personnel and need to be able to retain them and our other employees.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
success depends, to a significant extent, on the continued active participation of our
executive officers, other members of management and key technical and sales and marketing
personnel. In addition, there is significant competition for employees with technical
expertise in our industry. Our success will depend, in part, on: </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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>our
ability to retain the employees who have assisted in the development of our products;</FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>14</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>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>our
ability to attract and retain additional qualified personnel to provide technological
depth           and support to enhance existing products and develop new products; and</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>our
ability to attract and retain highly skilled computer operating, marketing and financial
          personnel.</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
cannot make assurances that we will be successful in attracting, integrating, motivating
and retaining key personnel. If we are unable to retain our key personnel and attract
additional qualified personnel as and when needed, our business may be adversely affected. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We may be unable to
successfully defend ourselves against claims brought against us.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are defendants in a number of lawsuits filed against us, and from time to time in the
normal course of our business, may receive written demands for payments from prospective
plaintiffs,. Legal proceedings can be expensive, lengthy and disruptive to normal business
operations, and can require extensive management attention and resources regardless of
their merit. Moreover, we cannot predict the results of all proceedings and there can be
no assurance that we will be successful in defending ourselves against them. An
unfavorable resolution of a lawsuit or proceeding could materially adversely affect our
business, results of operations and financial condition. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We depend on third
parties&#146; licenses for the development of our products.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Third
party developers or owners of technologies may not be willing to enter into, or renew,
license agreements with us regarding technologies that we may wish to incorporate in our
products, either on acceptable terms or at all. If we cannot obtain licenses to these
technologies, we may be at a disadvantage compared with our competitors who are able to
license these technologies. In addition, when we do obtain licenses to third party
technologies, we may have little or no ability to determine in advance whether the
technology infringes the intellectual property rights of others. Our suppliers and
licensors may not be required or may not be able to indemnify us in the event that a claim
of infringement is asserted against us, or they may be required to indemnify us only up to
a maximum amount, above which we would be responsible for any further costs or damages.
Additionally, from time to time there may arise disputes with respect to royalties owed to
third parties from which we obtained licenses. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We may be obligated to
indemnify our directors and officers</I></B> </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 has agreements with its directors and senior officers which provide, subject to
Israeli law, for the Company to indemnify these directors and senior officers for (a)
monetary liability imposed upon them in favor of a third party by a judgment, including a
settlement or an arbitral award confirmed by the court, as a result of an act or omission
of such person in his capacity as a director or officer of the Company, (b) reasonable
litigation expenses, including attorney&#146;s fees, incurred by them pursuant to an
investigation or a proceeding commenced against them by a competent authority and that was
terminated without an indictment and without having a monetary charge imposed on them in
exchange for a criminal procedure (as such terms are defined in the Israeli Companies
Law), or that was terminated without an indictment but with a monetary charge imposed on
them in exchange for a criminal procedure in a crime that does not require proof of
criminal intent, as a result of an act or omission of such person in his capacity as a
director or officer of the Company, and (c) reasonable litigation expenses, including
attorney&#146;s fees, incurred by such a director or officer or imposed on him by a court,
in a proceeding brought against him by or on behalf of the Company or by a third party, or
in a criminal action in which he was acquitted, or in a criminal action which does not
require criminal intent in which he was convicted, in each case relating to acts or
omissions of such person in his capacity as a director or officer of the Company. Such
indemnification may materially adversely affect our financial condition. </FONT></P>

<p align=center>
<font size=2>15</font></p>
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<page>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We may be unable to
effectively manage our growth and expansion, and as a result, our business results may be
adversely affected.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
goal is to grow significantly over the next few years. The management of our growth, if
any, will require the continued expansion of our operational and financial control
systems, as well as a significant increase in our manufacturing, testing, quality control,
delivery and service capabilities. These factors could place a significant strain on our
resources. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
inability to meet our manufacturing and delivery commitments in a timely manner (as a
result of unexpected increases in orders, for example) could result in losses of sales,
our exposure to contractual penalties, costs or expenses, as well as damage to our
reputation in the marketplace. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
inability to manage growth effectively could have a material adverse effect on our
business, financial condition and results of operations. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>The measures we take in
order to protect our intellectual property may not be effective or sufficient.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
success is dependent upon our proprietary rights and technology. We currently rely on a
combination of trade secret, copyright and trademark law, together with non-disclosure and
invention assignment agreements, to establish and protect the proprietary rights and
technology used in our products. Much of our proprietary information is not patentable. We
generally enter into confidentiality agreements with our employees, consultants, customers
and potential customers and limit the access to and the distribution of our proprietary
information. Despite these precautions, it may be possible for a third party to copy or
otherwise obtain and use our technology without authorization, or to develop similar
technology independently. We do not believe that our products and proprietary rights
infringe upon the proprietary rights of others. However, there can be no assurance that
any other party will not argue otherwise. The cost of responding and adequately protecting
ourselves against any such assertion may be material, whether or not the assertion is
valid. Further, the laws of certain countries in which we sell our products do not protect
our intellectual property rights to the same extent as do the laws of the United States.
Substantial unauthorized use of our products could have a material adverse effect on our
business. We cannot make assurances that our means of protecting our proprietary rights
will be adequate or that our competitors will not independently develop similar
technology. Additionally, there are risks that arise from the use of intranet networks and
the Internet. Although we utilize firewalls and protection software, we cannot be sure
that our proprietary information is secured against penetration. Such penetration, if
occurs, could have an adverse effect on our business. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We rely on certain key
suppliers for the supply of components in our products.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
purchase certain components and subassemblies used in our existing products from a single
supplier or a limited number of suppliers. In the event that any of our suppliers or
subcontractors becomes unable to fulfill our requirements in a timely manner, we may
experience an interruption in production until an alternative source of supply can be
obtained. A prolonged disruption in supply may force us to redesign and retest our
products. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One
of Odem&#146;s major suppliers accounted for 25% of our purchases in the year 2005 and for
15% of our purchases in the first six months of the year 2006. An interruption in our
business relationship with such supplier&nbsp;would have an adverse effect on our business
and results of operations.&nbsp; </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>New industry standards,
the modification of our products to meet additional existing standards or the addition of
features to our products may delay the introduction of our products or increase our costs.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
industry standards that apply to our software segment products are continually evolving.
In addition, since our products are integrated into networks consisting of elements
manufactured by various companies, they must comply with a number of industry standards
and practices established by various international bodies and industry forums. Should new
standards gain broad acceptance, we will be required to adopt those standards in our
products. We may also decide to modify our products to meet additional existing standards
or add features to our products. It may take us a significant amount of time to develop
and design products incorporating these new standards. </FONT></P>

<p align=center>
<font size=2>16</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>There can be no assurance that
we will not be classified as a passive foreign investment company (a &#147;PFIC&#148;).</I></B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based
upon our current and projected income, assets and activities, we do not believe that at
this time BOS is a passive foreign investment company (a &#147;PFIC&#148;) for US federal
income tax purposes, but there can be no assurance that we will not be classified as such
in the future. Such classification may have grave tax consequences for US shareholders.
One method of avoiding such tax consequences is by making a &#147;qualified electing
fund&#148; election for the first taxable year in which the Company is a PFIC. However,
such an election is conditioned upon our furnishing US shareholders annually with certain
tax information. We do not presently prepare or provide such information, and such
information may not be available to US shareholders if we are subsequently determined to
be a PFIC. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We may be required to pay
stamp taxes on documents executed by us on or after June&nbsp;2003.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Israeli Stamp Tax on Documents Law, 1961, or the &#147;Stamp Tax Law&#148;, provides that
certain documents signed by Israeli companies are subject to a stamp tax, generally at a
rate of between 0.4% and 1% of the value of the subject matter of the applicable document.
As a result of an amendment to the Stamp Tax Law that came into effect in June&nbsp;2003,
the Israeli tax authorities have commenced enforcement of the provisions of the Stamp Tax
Law. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consequently,
we may be liable to pay stamp taxes on some or all of the documents we have signed since
June&nbsp;2003, which could have a material adverse effect on our results of operations. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recently
promulgated regulations provide for the cancellation of the stamp tax with respect to
documents signed from January 1, 2006 onwards. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We have significant sales
worldwide and could encounter problems if conditions change in the places where we
market our products.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have sold and intend to continue to sell our products in markets through distributors in
North America, Europe and Asia. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
number of risks are inherent in engaging in international transactions, including &#150; </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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>international
sales and operations being limited or disrupted by longer sales and payment
          cycles,</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>possible
problems in collecting receivables,</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>imposition
of governmental controls, or export license requirements,</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>political
and economic instability in foreign countries,</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>trade
restrictions or changes in tariffs being imposed; and</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>laws
and legal issues concerning foreign countries.</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;If
we should encounter such difficulties in conducting our international operations, it may
adversely affect our business condition and results of operations. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>The slowdown in
technology markets and technology-focused corporations in prior years has had an adverse impact
on us and on the value of our shares.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
Company, like other technology companies, has been significantly impacted by the market
slowdown in the technology industry in prior years. There can be no assurance that the
technology market will fully recover or that our operating results will not continue to
suffer as a consequence. </FONT></P>

<p align=center>
<font size=2>17</font></p>
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<page>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Inflation and foreign
currency fluctuations significantly impact on our business results.</I></B> </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
vast majority of our sales are made in US dollars and most of our expenses are in US
dollars and New Israel Shekels (&#147;NIS&#148;). The US dollar cost of our operations in
Israel is influenced by the extent to which any increase in the rate of inflation in
Israel over the rate of inflation in the United States is offset by the devaluation of the
NIS in relation to the dollar. Our dollar costs in Israel will increase if inflation in
Israel exceeds the devaluation of the NIS against the dollar or if the timing of such
devaluations lags behind inflation rate increases in Israel. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>If we are forced to repay
our secured convertible notes in cash, we may not have enough cash to fund our operations
and may not be able to obtain additional financing.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
secured convertible term notes issued in September 2005 and in August 2006, contain
certain provisions and restrictions, which if violated, could result in the full principal
amounts together with interest and other amounts becoming immediately due and payable in
cash. If such an event occurred and if the holder of such notes demanded repayment, we
might not have the cash resources to repay such indebtedness when due. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
of the notes is repayable in monthly installments, commencing January 1, 2006 for the
September 2005 note and December 1, 2006 for the August 2006 note, with principal payments
which start at $15,000 and increase to $55,200. Subject to certain conditions, the monthly
principal and interest payment on the notes may be paid in cash or ordinary shares. If we
are required to pay the note in cash rather than in ordinary shares, it would reduce the
amount of cash available to fund operations. Also, in connection with the issuance of the
notes, we agreed to certain restrictions upon incurring additional indebtedness such as in
case of certain mergers and acquisitions. The existence of debt service obligations and
the terms and anti-dilution provisions of the notes may limit our ability to obtain
additional financing on favorable terms, or at all. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the notes are converted and/or the warrants that were issued with the notes are exercised,
or if we elect to pay principal and/or interest on the notes with our ordinary shares, a
significantly greater number of our ordinary shares will be outstanding and the interests
of our existing shareholders will be diluted. If these additional shares are sold into the
market, it could decrease the market price of our ordinary shares and encourage short
sales although the purchaser of the notes has agreed to not engage in short sales of our
ordinary shares. Short sales and other hedging transactions could place further downward
pressure on the price of our ordinary shares. We cannot predict whether or how many of our
ordinary shares will become issuable as a result of these provisions. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Our assets are subject to
security interests in favor of holders of our secured convertible notes. Our failure to
repay the secured convertible notes, if required, could result in legal action against us,
which could require the sale of all of our assets.</I></B> </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
repayment of our convertible notes is secured by a first priority floating charge on all
of our company&#146;s assets, present and future as they may be changing from time to
time, and by a first priority fixed charge on all of our right, title and interest in our
wholly-owned subsidiaries, BOScom Ltd. and Quasar Telecom (2004) Ltd. If we are unable to
repay the secured notes when required, the holders of the notes could commence legal
action against us and foreclose on all of our assets to recover the amounts due. Any such
action would require us to curtail or cease operations. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>If we are forced to
immediately pay our short term bank loans, we may not have sufficient resources to fund
our operations and may not be able to obtain additional financing.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
bank loans contain certain provisions and restrictions, which if violated, could result in
the full principal amounts together with interest becoming immediately due and payable, in
cash. If such an event occurred, we might not have sufficient cash resources to repay such
indebtedness and to continue funding our operations. </FONT></P>

<p align=center>
<font size=2>18</font></p>
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<page>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Risks Related to the
Rights Offering: </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>If you do not exercise
all of your rights, you may suffer significant dilution of your percentage ownership of
our ordinary shares.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
rights offering is designed to enable us to raise capital while allowing all shareholders
on the record date to invest in our company. To the extent that you do not exercise your
rights, but rights are exercised by other rightholders, your percentage ownership of our
equity and voting rights will be diluted. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>The price of our ordinary
shares is volatile and may decline after you purchase our ordinary shares.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
cannot assure you that the public trading market price of our ordinary shares will not
decline after you elect to exercise your rights. If that occurs, you may have committed to
buy ordinary shares in the rights offering at a price greater than the prevailing market
price, and could have an immediate unrealized loss. Moreover, we cannot assure you that
following the exercise of your rights you will be able to sell your ordinary shares at a
price equal to or greater than the subscription price. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Once you exercise your
rights, you may not revoke the exercise.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Once
you exercise your rights, you may not revoke the exercise, even if less than all of the
rights that we are offering are actually exercised. The public trading market price of our
ordinary shares may decline before the rights expire. If you exercise your rights and,
afterwards, the public trading market price of our ordinary shares decreases below the
subscription price, you will have committed to buying ordinary shares at a price above the
prevailing market price. Moreover, you may be unable to sell your ordinary shares at a
price equal to or greater than the subscription price you paid for such shares. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>The subscription price is
not an indication of our present or future value.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
board of directors set the terms and conditions of the rights offering, including the
subscription price, with the objective to reflect recent trading prices, raise the
targeted proceeds and provide all of our shareholders with a reasonable opportunity to
make an additional investment in our company. In establishing the commercial terms,
including the subscription price, our board of directors considered the following factors:
the strategic alternatives available to us for raising capital, the market price of our
ordinary shares, the pro rata nature of the offering, our business prospects and general
conditions in the securities markets. The subscription price, however, does not
necessarily bear any relationship to our past or expected future results of operations,
cash flows, current financial condition, or any other established criteria for value. </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
subscription price does not necessarily bear any relationship to the book-value of our
assets, past operations, cash flow, losses or financial condition. You should not consider
the subscription price for the rights as an indication of our present or future value. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>If you do not act
promptly and follow the subscription instructions, your exercise of subscription rights
may be rejected.</I></B> </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders
who desire to purchase shares in the rights offering must act promptly to ensure that all
required forms and payments are actually received by the Rights Agent or the Company prior
to______________, 2006, the expiration date of the rights offering. If you are a
beneficial owner of shares, you must act promptly to ensure that your broker, dealer or
other nominee acts for you and that all required forms and payments are actually received
by the Rights Agent or the Company prior to the expiration date of the rights offering. We
shall not be responsible if your broker, custodian or nominee fails to ensure that all
required forms and payments are actually received prior to the expiration date of the
rights offering. If you fail to complete and sign the required subscription forms, send an
incorrect payment amount or otherwise fail to follow the subscription procedures that
apply to the exercise of your rights, we may, depending on the circumstances, reject your
subscription or accept it only to the extent of the payment received. Neither we nor our
Rights Agent undertake to contact you concerning an incomplete or incorrect subscription
form or payment, nor are we under any obligation to correct such forms or payment. We have
the sole discretion to determine whether a subscription exercise properly follows the
subscription procedures. </FONT></P>

<p align=center>
<font size=2>19</font></p>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Risks related to our location in
Israel: </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Political, economic, and
security conditions in Israel affect our operations and may limit our ability to produce
and sell our products or provide our services.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are incorporated under the laws of the State of Israel, where we also maintain our
headquarters and our principal manufacturing, research and development facilities.
Political, economic, security and military conditions in Israel directly influence us. We
could be adversely affected by any major hostilities involving Israel, the interruption or
curtailment of trade between Israel and its trading partners or a significant downturn in
the economic or financial condition of Israel. In July 2006, Israel became involved in a
major military conflict with the Hizbullah organization in Lebanon, which subjected the
north of Israel to missile attacks. Certain of our facilities are located in the north of
Israel near the City of Haifa. Israel&#146;s military operations required the drafting of
a substantial number of reserve soldiers. In addition, the future of the &#147;peace
process&#148; with the Palestinians is uncertain and has deteriorated due to Palestinian
violence, with the threat of a large-scale attack by Palestinians on Israeli civilians and
key infrastructure remaining a constant concern. The past few years of renewed terrorist
attacks by the Palestinians has severely affected the Israeli economy in many ways. In
January 2006, Hamas, an Islamic movement responsible for many attacks against Israelis,
won the majority of the seats in the Parliament of the Palestinian Authority. The election
of a majority of Hamas-supported candidates is expected to be a major obstacle to
relations between Israel and the Palestinian Authority, as well as to the stability in the
Middle East as a whole. In addition, several countries still restrict business with Israel
and with companies doing business in Israel. We could be adversely affected by adverse
developments in the &#147;peace process&#148; or by restrictive laws or policies directed
towards Israel or Israeli businesses. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally,
all nonexempt male adult citizens and permanent residents of Israel, including some of the
our officers and employees, are obligated to perform military reserve duty annually, and
are subject to being called to active duty at any time under emergency circumstances.
While we have operated effectively under these requirements since our incorporation, we
cannot predict the full impact of such conditions on us in the future, particularly if
emergency circumstances occur. If many of our employees are called for active duty, our
business may be adversely affected. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
in recent years Israel has been going through a period of recession in economic activity,
resulting in low growth rates and growing unemployment. Our operations could be adversely
affected if the economic conditions in Israel continue to deteriorate. Also, due to
significant economic reforms proposed by the Israeli government, there have been several
general strikes and work stoppages in 2003 and 2004, affecting all banks, airports and
ports. These strikes have had an adverse effect on the Israeli economy and on business.
Following the passing of laws to implement economic measures, the Israeli trade unions
have threatened further strikes or work stoppages, and these may have an adverse effect on
the Israeli economy and our business. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore,
Israel is a party to certain trade agreements with other countries, and material changes
to these agreements could have an adverse effect on our business. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>If the Israeli Government
programs that we benefit from are reduced or terminated, our taxes may increase.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Israeli Law for Encouragement of Capital Investments, 1959, facilities that meet
certain conditions can apply for &#147;Approved Enterprise&#148; status (or be a
&#147;Benefited Enterprise&#148;, if qualified, without prior application and approval).
This status confers certain benefits including tax benefits. The existing facilities of
our wholly owned subsidiary, BOScom, have been designated as Approved Enterprises. If we
attain taxable income in Israel, these tax benefits will help reduce BOScom&#146;s tax
burden. </FONT></P>

<p align=center>
<font size=2>20</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;In
order to maintain our eligibility for the tax benefits BOScom receives, BOScom must
continue to satisfy certain conditions, including making certain investments in fixed
assets and operations and achieving certain levels of export. If BOScom fails to satisfy
such conditions in the future, BOScom could be disqualified from receiving the tax
benefits pursuant to the Approved Enterprise status. </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
Israeli Government authorities have indicated that the government may reduce or eliminate
these benefits in the future. A termination or reduction of certain programs and tax
benefits (particularly benefits available to BOScom as a result of the Approved Enterprise
status of BOScom&#146;s facilities and programs) would have an adverse effect on the
Company&#146;s business and financial condition. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>The anti-takeover effects
of Israeli laws may delay or deter a change of control of the Company.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Israeli Companies Law, a merger is generally required to be approved by the
shareholders and Board of Directors of each of the merging companies. Shareholder approval
is not required if the company that will not survive the merger is controlled by the
surviving company. Additionally, the law provides some exceptions to the shareholder
approval requirement in the surviving company. Shares held by a party to the merger and
certain of its affiliates are not counted towards the required approval. If the share
capital of the company that will not be the surviving company is divided into different
classes of shares, the approval of each class is also required. A merger may not be
approved if the surviving company will not be able to satisfy its obligations. At the
request of a creditor, a court may block a merger on this ground. In addition, a merger
can be completed only after all approvals have been submitted to the Israeli Registrar of
Companies, provided that 30 days have elapsed since shareholder approval was received and
50 days have passed from the time that a proposal for approval of the merger was filed
with the Registrar. </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
Israeli Companies Law provides that an acquisition of shares in a public company must be
made by means of a tender offer, if as a result of the acquisition, the purchaser would
become a holder of 25% or more of the voting power at general meetings, and no other
shareholder owns a 25% stake in the Company. Similarly, the Israeli Companies Law provides
that an acquisition of shares in a public company must be made by means of a tender offer
if, as a result of the acquisition, the purchaser would become a holder of 45% or more of
the voting power at general meetings, unless someone else already holds 45% of the voting
power. An acquisition from a 25% or 45% holder, which results in the purchaser becoming a
25% or 45% holder respectively, does not require a tender offer. An exception to the
tender offer requirement may also apply when the additional voting power is obtained by
means of a private placement approved by the general meeting of shareholders. These rules
also do not apply if the acquisition is made by way of a merger. </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
Israeli Companies Law also provides specific rules and procedures for the acquisition of
shares held by minority shareholders, if the majority shareholder shall hold more than 90%
of the outstanding shares. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
laws may have the effect of delaying or deterring a change in control of the Company,
thereby limiting the opportunity for shareholders to receive a premium for their shares
and possibly affecting the price that some investors are willing to pay for the
Company&#146;s securities. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>All of our directors and
officers are non-U.S. residents and enforceability of civil liabilities against them is
uncertain.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
of our directors and officers reside outside of the United States. Service of process upon
them may be difficult to effect within the United States. Furthermore, because the
majority of our assets are located in Israel, any judgment obtained in the United States
against us or any of our directors and officers may not be collectible within the United
States. </FONT></P>

<p align=center>
<font size=2>21</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Risks related to our ordinary shares: </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Our share price has been
and may continue to be volatile, which could result in substantial losses for individual
shareholders.</I></B> </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
market price of our ordinary shares has been and may continue to be highly volatile and
subject to wide fluctuations. From January 2005 through November 2006, the daily closing
price of our ordinary shares has ranged from $2.15 to $3.74 per share. We believe that
these fluctuations have been in response to a number of factors including the following,
some of which are beyond our control: </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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>actual
or anticipated variations in our quarterly operating results;</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>announcements
of technological innovations or new products or services or new pricing practices
         by us or our competitors;</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>increased
market share penetration by our competitors;</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>announcements
by us or our competitors of significant acquisitions, strategic partnerships,
         joint ventures or capital commitments;</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>additions
or departures of key personnel; and</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>sales
of additional ordinary shares.</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
addition, the stock market in general, and stocks of technology companies in particular,
have from time to time experienced extreme price and volume fluctuations. This volatility
is often unrelated or disproportionate to the operating performance of these companies.
These broad market fluctuations may adversely affect the market price of our ordinary
shares, regardless of our actual operating performance. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>The Company&#146;s shares
may be delisted from the NASDAQ Global Market if it does not meet NASDAQ&#146;s continued
listing requirements.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
late 2002 and early 2003 the Company received notice from the NASDAQ Stock Market that its
ordinary shares were subject to delisting from the NASDAQ National Market (recently
renamed the NASDAQ Global Market) for failure to meet NASDAQ&#146;s minimum bid price and
shareholders&#146; equity requirements ($10 million) for continued listing on the National
Market. As a result of the hearing requested by the Company and supplemental information
presented by the Company to the NASDAQ Listing Qualifications Panel by the Company, the
Panel determined to continue the listing of the Company&#146;s securities on the NASDAQ
National Market pursuant to a detailed exception to the NASDAQ National Market Rules, and
the Company successfully met all the conditions set forth in the exception. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
August 30, 2004, we received notice from the NASDAQ Stock Market that our ordinary shares
are subject to delisting from the NASDAQ National Market for failure to meet NASDAQ&#146;s
minimum market value of publicly held shares requirement ($5 million) for continued
listing on the National Market. On November 4, 2004, we were notified by NASDAQ that we
have regained compliance with this requirement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
January 25, 2005, we received notice from the NASDAQ Stock Market that we were not in
compliance with the minimum $10 million shareholders&#146; equity requirement for
continued listing on the National Market. Following that notice, on January 28, 2005, we
received an additional notice indicating that based on further review of our financial
statements as they appeared in our filing on Form 6-K dated January 10, 2005, it was
determined that the shareholders&#146; equity was $10,601,000 on a pro forma basis as of
September 30, 2004. Therefore we were in compliance with the stockholders&#146; equity
requirement for continued listing on the National Market and the matter had been closed. </FONT></P>

<p align=center>
<font size=2>22</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
June 2, 2005, the Company again received notice from the NASDAQ Stock Market indicating
that based on the results for the period ended March 31, 2005, the shareholders&#146;
equity was $9,425,000, and accordingly not in compliance with the minimum $10,000,000
shareholders&#146; equity requirement for continued listing on the National Market. The
Company was requested to provide by June 17, 2005, its specific plan to achieve and
sustain compliance with the listing requirements. The Company subsequently submitted a
proposed plan of compliance to NASDAQ based upon completing a previously announced private
placement offering of its ordinary shares. On July 11, 2005, the Company was advised by
the NASDAQ Staff that contingent upon completion of the private placement by August 11,
2005, the Staff believed that the Company had provided a definitive plan evidencing its
ability to achieve and sustain compliance with the listing requirements. The private
placement took place in June 2005, and consequently the Company regained compliance with
NASDAQ&#146;s minimum $10,000,000 shareholders&#146; equity requirement for continued
listing on the National Market. However, the Company has been advised by NASDAQ Staff that
the Staff will continue to monitor its ongoing compliance with the stockholder&#146;s
equity requirement and, if at the time of the Company&#146;s next periodic report, the
Company does not evidence compliance, it may be subject to delisting. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
can be no assurance that we will be able to meet and continue to meet these or other
NASDAQ requirements to maintain our NASDAQ Global Market listing, in which case we will
have the right to apply for a transfer of our ordinary shares to the NASDAQ Capital
Market. </FONT></P>

<a name=zk105></a>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
prospectus contains forward-looking statements that are intended to be, and are hereby
identified as, forward-looking statements for the purposes of the safe harbor provisions
of the Private Securities Reform Act of 1995. These statements address, among other
things: our strategy; the anticipated development of our products; our anticipated use of
proceeds; our projected capital expenditures and liquidity; our development of additional
revenue sources; our development and expansion of relationships; the market acceptance of
our products; and our technological advancement. Actual results could differ materially
from those anticipated in these forward-looking statements as a result of various factors,
including all the risks discussed above and elsewhere in this prospectus. You should
therefore not rely on these forward-looking statements, which are applicable only as of
the date hereof. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
urge you to consider that statements which use the terms &#147;believe&#148;, &#147;do not
believe&#148;, &#147;expect&#148;, &#147;plan&#148;, &#147;intend&#148;,
&#147;estimate&#148;, &#147;anticipate&#148;, &#147;projections&#148;,
&#147;forecast&#148; and similar expressions are intended to identify forward-looking
statements. These statements reflect our current views with respect to future events, are
based on assumptions and are subject to risks and uncertainties. Except as required by
applicable law, including the Federal securities laws of the United States, we do not
intend to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. We disclaim any obligation to publicly revise any
such statements to reflect any change in expectations or in events, conditions, or
circumstances on which any such statements may be based. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Market
data and forecasts used in this prospectus have been obtained from independent industry
sources. We have not independently verified the data obtained from these sources and we
cannot assure you of the accuracy or completeness of the data. Forecasts and other
forward-looking information obtained from these sources are subject to the same
qualifications and additional uncertainties accompanying any estimates of future market
size. </FONT></P>

<a name=zk106></a>

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

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
October 29, 2006, the Company&#146;s Board of Directors approved the raise by the Company
of equity of at least $3 million by way of a Rights Offering, the terms and conditions of
which shall be negotiated by management and subject to further Board approval. In a
special general shareholders meeting, held on October 19, 2006, the Company&#146;s
shareholders resolved, that if the Company shall not be able to raise at least $3 million
via the Rights Offering, then the raise of equity by way of a public offering in Israel,
or alternatively, at management&#146;s discretion, by way of a private placement, is
approved. </FONT></P>




<p align=center>
<font size=2>23</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
October 4, 2006 the Company filed a draft prospectus with the Israeli Securities Authority
and the Tel Aviv Stock Exchange in connection with an underwritten offering to the public
in Israel of Ordinary Shares and Warrants. This contemplated offering will now be stayed
pending the outcome of the abovementioned Rights Offering. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
September 27, 2006 the Company announced that Mr. Adiv Baruch, President and CEO of the
Company, has notified the Board that he shall be leaving the Company at the end of 2006.
The Company further announced that the new President and CEO will be Mr. Shmuel Koren. Mr.
Koren assumed his position on November 1, 2006. Mr. Baruch will continue to serve the
Company and support the incoming President and CEO, as well as serve on the Company&#146;s
Board of Directors, until the end of 2006, ensuring a smooth transition. </FONT></P>


<a name=zk107></a>

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

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
table below sets forth our consolidated current liabilities and capitalization at
September 30, 2006 on an actual basis and as adjusted to give effect to the offering,
assuming the offering is fully subscribed for. The amounts as adjusted reflect the gross
proceeds to be received form this rights offering. You should read the table in
conjunction with &#147;Item 5. Operating and Financial Review and Prospects&#148; of our
Form 20-F for year 2005, and with our consolidated financial statements and notes thereto
incorporated by reference herein. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated Current
Liabilities and Capitalization </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>(in US thousands of
dollars) </FONT></H1>




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>As of September 30, 2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Actual (unaudited)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>As adjusted (unaudited)</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>
     <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>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <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>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <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>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="69%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash and cash equivalents</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>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   2,788</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   7,788</FONT></TD>
        <TD WIDTH="2%" 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>&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"><U><B>Short term debt</B></U> </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>Secured</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>4,254</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>4,254</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>Unsecured</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>4,086</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>4,086</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total short term debt</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>8,340</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>8,340</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>&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"><U><B>Long term debt</B></U> </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>Secured</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>1,528</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>1,528</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>Unsecured</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>1,244</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>1,244</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total long term debt</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>2,772</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>2,772</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>&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"><U><B>Shareholders equity</B></U> </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" colspan=7><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Share capital: Ordinary Shares</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>&nbsp;issued 6,726,061</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>6,554</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>8,410</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>Additional paid-in Capital</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>48,181</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>51,325</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>Accumulated deficit</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>(42,881</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</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>(42,881</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total shareholders equity</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  11,854</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  16,854</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>
<BR>



<a name=zk120></a>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>DILUTION; EFFECT OF THE RIGHTS OFFERING ON OUR OUTSTANDING
<BR>SHARES AND CONVERTIBLE SECURITIES</B> </FONT>
</P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Assuming
that all of the rights we are distributing are exercised, we will issue an additional
2,000,000 of our ordinary shares. This would represent an approximate 30% increase over
our 6,726,061issued and outstanding ordinary shares as of September 30, 2006.  </FONT></P>




<p align=center>
<font size=2>24</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;As
of September 30, 2006, we have a principal amount of $2,769,600 in outstanding convertible
notes, which are convertible into a total of 837,978 ordinary shares, at conversion prices
ranging from $3.08 to $4.08. The convertible notes provide for an adjustment of their
conversion prices, if we issue securities convertible into ordinary shares for
consideration which is less than the applicable note&#146;s conversion price. </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
a result of the right issuance, assuming a full subscription, the number of ordinary
shares issuable upon conversion of the notes will be increased by 44,760, to a total of
882,738. </FONT></P>

<a name=zk121></a>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
following table sets forth all costs and expenses payable by us in connection with the
sale of the securities being registered hereunder. All of the amounts shown are estimates
except for the SEC registration fee. </FONT></P>



<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="600" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <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="76%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SEC registration fee</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</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>$</FONT></TD><TD WIDTH="15%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     535</FONT></TD>
        <TD WIDTH="2%" 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>Offering consultants fees and expenses</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>62,000</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>Subscription agent fees and expenses</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>12,000</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>Information agent fees and expenses</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>11,000</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>Legal fees and expenses</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>117,000</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>Accounting fees and expenses</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>25,000</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>Printing and delivery costs</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>10,000</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>Miscellaneous expenses</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>24,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 261,535</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>
<BR>



<a name=zk108></a>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to use the net proceeds from this rights offering towards general corporate
purposes, including working capital as well as toward the financing of future mergers and
acquisitions. Our gross proceeds from the rights offering will depend on the number of
rights that are exercised. There can be no assurance that any of the rights will be
exercised. If all of the rights are exercised, then we will receive immediate proceeds of
$5 million, before deducting estimated expenses payable by us of approximately $260,000. </FONT></P>



<a name=zk109></a>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Since April 1996, our ordinary shares
were traded, and our warrants, until they expired on April 2, 2000, were traded in the
over-the-counter market in the United States, and quoted on what is now called the NASDAQ
Capital Market under the symbol &#147;BOSC&#148; and &#147;BOSCW,&#148; respectively. In
September 2000, our shares started to be traded on what is now called the NASDAQ Global
Market. In January 2002, our shares began trading also on the Tel-Aviv Stock Exchange,
under the symbol &#147;BOSC&#148;, pursuant to the dual-listing regulations of the Israeli
Securities Authority. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Prices set forth below are high and
low reported closing prices for our ordinary shares as reported by NASDAQ and the TASE for
the period indicated. All share prices have been retroactively adjusted to reflect the 1:4
reverse stock split effected May 29, 2003. </FONT></P>


<p align=center>
<font size=2>25</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN="6" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Period</FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>NASDAQ</FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>TASE</FONT></TH>
</TR>
<TR VALIGN=Bottom>
     <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>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>High ($)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Low ($)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>High (NIS)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Low (NIS)</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>
     <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>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <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>
     <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>
     <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>
     <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>
     <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>
     <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="10%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="46%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Annual</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="3%" 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="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.74</FONT></TD>
        <TD WIDTH="2%" 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="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.15</FONT></TD>
        <TD WIDTH="2%" 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="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16.33</FONT></TD>
        <TD WIDTH="2%" 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="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.00</FONT></TD>
        <TD WIDTH="2%" 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>&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>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>First Quarter</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>3.50</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>2.35</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>16.33</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>10.77</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>&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>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Second Quarter</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>2.79</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>2.15</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>13.95</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>9.00</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>&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>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Third Quarter</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>3.74</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>2.15</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>16.17</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>10.12</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>&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>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Fourth Quarter</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>2.89</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>2.24</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>13.57</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>10.54</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>&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>2006&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>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>January</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>2.79</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>2.39</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>13.19</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>10.87</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>&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>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>February</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>2.70</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>2.57</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>13.00</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>11.88</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>&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>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>March</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>2.97</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>2.54</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>14.58</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>11.80</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>&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>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>April</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>2.71</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>2.55</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>13.63</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>11.85</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>&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>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>May</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>2.84</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>2.60</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>13.08</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>11.27</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>&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>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>June</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>2.79</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>2.62</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>12.60</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>11.57</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>&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>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>July</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>2.84</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>2.70</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>12.85</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>11.57</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>&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>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>August</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>2.75</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>2.38</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>12.85</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>10.46</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>&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>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>September</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>2.49</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>2.11</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>10.50</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>9.63</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>&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>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>October</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>2.73</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>2.40</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>11.98</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>10.50</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>&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>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>November </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>2.58</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>2.50</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>11.98</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>10.23</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>&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>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December (until Dec. 7<SUP>th</SUP>) </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></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>2.65</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>2.53</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>11.37</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>10.70</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>
<BR>



<a name=zk110></a>



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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Before exercising any rights, you
should read carefully the information set forth under &#147;Risk Factors.&#148; </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Rights </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are distributing transferable rights to shareholders who own our ordinary shares at 5:00
p.m., New York time (midnight, Israel time) on _____________, 2006, the record date, at
no cost to the shareholders. We will distribute to you one right for each 3.36 ordinary
shares that you own at 5:00 p.m. New York time (midnight, Israel time) on the record
date. Your rights will be aggregated for all the shares that you own on the record date
and then rounded down to the nearest whole number, so that you will not receive
fractional rights. For example, if you own 4 shares on the record date, you will receive
one right, and if you own 10,000 shares on the record date, you will receive 2,976
rights.  </FONT></P>




<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
subscription price for each ordinary share is $2.50 and must be paid to American Stock
Transfer &amp; Trust Co., as Rights Agent, or directly to us under the procedures
described herein. If you hold your shares through the Company&#146;s nominee company (<I>Hevra
Le-Rishumim of Bank Leumi Le-Israel Ltd.</I>), the subscription price is to be paid in
New Israeli Shekels according to the representative exchange rate that will be published
by the Bank of Israel on the day before payment of the subscription price.  </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
rights are exercisable during a _____-day period, beginning after 5:00 p.m. New York City
time (midnight, Israel time) on _________, 2006 (the record date) and ending at 5:00 p.m.
New York City time (midnight, Israel time) on ____________ , 2006 . We will issue to you
certificates representing the ordinary shares you purchased in this offering as soon as
practicable after the rights expiration date ( ________, 2006 ), provided that the Rights
Agent has received your duly completed exercise form and your payment has cleared. If you
hold your shares through a broker, dealer or other nominee (including through members of
the Tel Aviv Stock Exchange), your time to exercise will be subject to the timing
requirements of your broker, dealer or other nominee (which may be earlier than the final
expiration date of the rights), in addition to other procedural requirements of your
broker, dealer or other nominee, as described below.  </FONT></P>

<p align=center>
<font size=2>26</font></p>
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<page>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>No Recommendation to
Rights Holders </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are not making any recommendations as to whether or not you should exercise your rights.
You should make your decision based on your own assessment of your best interests after
reading this prospectus.  </FONT></P>



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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Withdrawal Right </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
board of directors may withdraw the rights offering in its sole discretion at any time
prior to 5:00 p.m., New York City time (midnight, Israel time), on ______________ , 2006
(the record date) for any reason (including, without limitation, a change in the market
price of our ordinary shares).  </FONT></P>


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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Determination of
Subscription Price </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
board of directors set the terms and conditions of the rights offering, including the
subscription price, with the objective to reflect recent trading prices, raise the
targeted proceeds and provide all of our shareholders with a reasonable opportunity to
make an additional investment in our company. In establishing the commercial terms,
including the subscription price, our board of directors considered the following
factors: the strategic alternatives available to us for raising capital, the market price
of our ordinary shares, the pro rata nature of the offering, our business prospects and
general conditions in the securities markets. The subscription price, however, does not
necessarily bear any relationship to our past or expected future results of operations,
cash flows, current financial condition, or any other established criteria for value.  </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
subscription price should not be considered an indication of our actual value, or the
actual value of our ordinary shares. We cannot assure you that the market price of our
ordinary shares will not decline during the rights offering or that the market price of
our ordinary shares will not decline after the rights offering. We also cannot assure you
that you will be able to sell the ordinary shares issuable upon exercise of the rights
offering at a price equal to or greater than the subscription price paid. On December
7, 2006, the last reported sale price of our ordinary shares on the NASDAQ Global
Market was $ 2.65 per share and on the Tel Aviv Stock Exchange was NIS 10.86 per share.
We urge you to obtain a current quote for our ordinary shares before exercising your
rights.  </FONT></P>



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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our Decision will be
Binding on You </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
questions concerning the timeliness, validity, form and eligibility of any exercise of
rights will be determined by us in accordance with the terms of this prospectus, and our
determinations will be final and binding. In our sole discretion, we may waive any defect
or irregularity, or permit a defect or irregularity to be corrected within such time as
we may determine, or reject the purported exercise of any right by reason of any defect
or irregularity in such exercise. Subscriptions will not be deemed to have been received
or accepted until all irregularities have been waived or cured within such time as we
determine in our sole discretion. In determining whether to waive any defect or
irregularity regarding the exercise of the rights, we will consider the materiality of
the defect or irregularity. If we determine that any such defect or irregularity is
material then the subscription will not be deemed to have been received or accepted until
such defect or irregularity is cured within such time as we determine in our sole
discretion. We will not be under any duty to notify you of any defect or irregularity in
connection with the exercise of your rights or incur any liability for failure to give
such notification. However, liabilities under the U.S. federal securities laws and
Israeli securities laws cannot be waived.  </FONT></P>

<p align=center>
<font size=2>27</font></p>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>No Revocation of
Exercise of Rights </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
After you have exercised your rights, you may not revoke that exercise. You should not
exercise your rights unless you are certain that you wish to purchase our ordinary shares. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Method of Exercise of
Rights for Record Holders&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Shortly after the date of this prospectus, we will send by registered mail or personal
delivery to each holder of our ordinary shares that is registered on our shareholder
registry maintained at American Stock Transfer &amp; Trust Co. a rights certificate
conferring the number of rights applicable to each holder. The rights certificate will be
accompanied by a copy of this prospectus, and on the back of the rights certificate will
be a rights exercise form and a rights transfer form. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the subscription period ending on __________ , 2006 , if you are a record owner of our
ordinary shares, you may exercise your rights by delivering a signed exercise form on the
back of your rights certificate or a notice of guaranteed delivery to American Stock
Transfer &amp; Trust Co., our Rights Agent, at the address noted below together with
payment in full of the subscription price for each right being exercised, by 5:00 p.m.,
New York City time (midnight Israel time), on ____________, 2006. This rights offering
will not be extended beyond the subscription period ending on _____________, 2006, except
as disclosed in this prospectus.  </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you are a record owner and reside in Israel, you may also exercise your rights by
delivering a signed exercise form on the back of your rights certificate to us at the
address noted below, together with payment in full of the subscription price in New
Israeli Shekels for each right being exercised, by midnight, Israel time, on ____________,
2006 . If you are a record owner who resides in Israel, we may accept payments in U.S.
dollars if requested and agreed to by us. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
and American Stock Transfer &amp; Trust Co., our Rights Agent, as applicable, may refuse
to accept improperly completed or delivered or unexecuted exercise forms. We and American
Stock Transfer &amp; Trust Co., our Rights Agent, as applicable, must receive payment in
full of the subscription price for each right being exercised together with the exercise
form (or notice of guaranteed delivery).  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you are delivering your completed exercise form (or notice of guaranteed delivery) and
payment for the exercise of your rights to American Stock Transfer &amp; Trust Co., our
Rights Agent, please do so by mail, overnight or hand delivery to one of the following
addresses:  </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>
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     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<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>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<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>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<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>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<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>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=45% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><U>Hand delivery</U></I> </FONT> </TD>
     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><U>Mail and Overnight mail</U></I> </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>American Stock Transfer &amp; Trust Company</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>American Stock Transfer &amp; Trust Company</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>59 Maiden Lane</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6201 15th Avenue</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>New York, New York 10038</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Brooklyn, New York 11219</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>Attention: Reorganization Department</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Attention: Reorganization Department</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;Record
owners who reside in Israel, and who wish to deliver their completed exercise form and
subscription payment in New Israeli Shekels for the exercise of their rights directly to
us, should do so by mail, overnight or hand delivery to the following address:  </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>
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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>
     <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>
     <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>
     <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=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=95% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B.O.S Better Online Solutions Ltd.</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>Beit Rabin, Teradyon Industrial Park</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>Misgav, 20179, Israel</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>Attention: Mr. Nehemia Kaufman, CFO</FONT></TD></TR>
</TABLE>
<BR>

<p align=center>
<font size=2>28</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;Any
payments to American Stock Transfer &amp; Trust Co., as Rights Agent, must be made in
U.S. dollars by check drawn on a bank located in the United States and payable to &#147;American
Stock Transfer &amp; Trust Co., as Rights Agent,&#148; or by wire transfer of funds to
the account maintained by American Stock Transfer &amp; Trust Co., our Rights Agent, for
this rights offering at JP Morgan Chase, 55 Water Street, New York, New York 10005, ABA
No.021000021, Account No. 333-113052, reference B.O.S Better Online Solutions Ltd.,
Attention: Reorganization Department.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
payments to us shall be made in New Israeli Shekels according to the representative
exchange rate published by the Bank of Israel on the day before payment of the
subscription price and shall be by wire transfer or by check drawn on a bank located in
Israel, and payable to &#147;B.O.S Better Online Solutions Ltd.&#148; Any wire transfer
to us should be made to United Mizrahi Bank Ltd., Haifa Business Center, 2 Palyam St.,
Haifa, Israel, Branch #&nbsp;444, Account #&nbsp;125542, Swift Code: MIZBILIT. We may
accept other forms of payment or payments in U.S. dollars if requested and agreed to by
us.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
will choose the method of delivery of exercise forms and payment of the subscription price
and will bear the risk of such election. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IF
YOU SEND YOUR COMPLETED EXERCISE FORM AND PAYMENTS BY MAIL, WE URGE YOU TO USE REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, AND TO ALLOW A SUFFICIENT NUMBER
OF DAYS TO ENSURE DELIVERY AND CLEARANCE OF PAYMENT PRIOR TO THE EXPIRATION DATE. WE
STRONGLY URGE YOU TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF A CHECK DRAWN ON A BANK
LOCATED IN THE UNITED STATES OR IN ISRAEL. We will not consider any payment by check,
other than a cashier&#146;s check or a money order, to have been made until the check
clears through the account of American Stock Transfer &amp; Trust Co., our Rights Agent,
or to our account, as applicable, before the expiration date.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payments
for the exercise of your rights made to American Stock Transfer &amp; Trust Co., our
Rights Agent, will be held in a segregated interest bearing money market account, and
will be sent to us in accordance with our written instructions.  </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Guaranteed Delivery Procedures in
the United States</B>. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you want to exercise your rights, but time will not permit your rights certificate to
reach American Stock Transfer &amp; Trust Co., our Rights Agent, prior to 5:00 p.m., New
York City time (midnight, Israel time), on ______________, 2006, you may exercise your
subscription rights if you send, and the Rights Agent receives, (1) payment in full for
each right being exercised, (2) a notice of guaranteed delivery, substantially in the form
provided to you with your rights certificate, from a member firm of a registered national
securities exchange or a member of the National Association of Securities Dealers, Inc.,
or a commercial bank or trust company having an office or correspondent in the United
States, and (3) your properly completed and duly executed rights certificate, including
any required signature guarantees, within three NASDAQ trading days following the date of
your notice of guaranteed delivery. The notice of guaranteed delivery may be delivered to
the Rights Agent in the same manner as your rights certificate as set forth herein, or may
be transmitted to the Rights Agent by facsimile transmission, to facsimile number
718-234-5001. You can obtain additional copies of the form of notice of guaranteed
delivery by requesting them from the Rights Agent. </FONT></P>

<p align=center>
<font size=2>29</font></p>
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<page>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Transferability of Rights </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
rights are transferable. You may sell or otherwise transfer them to others. The
unexercised rights will be eligible for trading on the NASDAQ Global Market and the Tel
Aviv Stock Exchange for one day only on _______________, 2006. If you are one of our
affiliates, you may transfer your rights only if there is an effective registration
statement or exemption covering such transfer under the United States securities laws.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Record
holders wishing to transfer their rights to another person may do so by executing the
rights transfer form on the back of the rights certificate and submitting it to American
Stock Transfer &amp; Trust Co. prior to __________, 2006. Record holders wishing to sell
their rights on the NASDAQ Global Market or the Tel Aviv Stock Exchange, should
independently engage a broker to execute this sale on their behalf. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
no contrary instructions have been received by ______________, 2006 and your rights
remain unexercised, your rights will expire. If you hold your shares through ournominee
company (<I>Hevra Le-Rishumim of Bank Leumi Le-Israel Ltd.</I>), the rules of the Tel
Aviv Stock Exchange provide that if no contrary instructions have been received from you
by the time determined by your broker on _______________, 2006, you will be considered to
have instructed your broker to sell all your rights on the Tel Aviv Stock Exchange with
no price limit.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
are responsible for all commissions, fees and other expenses, including brokerage
commissions and transfer taxes, incurred in connection with the purchase, sale or
exercise of rights.  </FONT></P>


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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Ambiguities in Exercise
of Rights </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you do not specify the number of rights being exercised, or if your payment is not
sufficient to pay the total subscription price for all of the shares that you indicated
you wished to purchase, you will be deemed to have exercised the maximum number of rights
that could be exercised for the amount of the payment received from you. If your payment
exceeds the total subscription price for all of the rights you have elected to exercise,
we will promptly refund to you the balance with no interest.  </FONT></P>


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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Beneficial Owners Who
Are Not Record Holders </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you are a beneficial owner of our ordinary shares and hold them through a broker, dealer
or other nominee (including a member of the Tel Aviv Stock Exchange), you should expect
your broker, dealer or other nominee to notify you of this rights offering and the
procedures for exercising or transferring your rights. If you wish to exercise your
rights, you will need to have your broker, dealer or other nominee act for you. To
indicate your decision with respect to your rights, you should complete and return to
your broker, dealer or other nominee the form provided to you accompanied by the
subscription payment. You should receive this form from your broker, dealer or other
nominee with the other rights offering materials. You should NOT return your subscription
form or transfer the subscription payment directly to us.  </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Summarized
below are the procedures for exercising your rights if you are a beneficial owner whose
ordinary shares are held through the Company&#146;s nominee company (<I>Hevra Le-Rishumim
of Bank Leumi Le-Israel Ltd.</I>).  </FONT></P>


<p align=center>
<font size=2>30</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Procedures Applicable to Holders
of Shares Through a Nominee Company.</I> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you hold your ordinary shares through the Company&#146;s nominee company (<I>Hevra
Le-Rishumim of Bank Leumi Le-Israel Ltd.</I>), you should expect to receive a letter
regarding this rights offering from the member of the Tel Aviv Stock Exchange through
which you hold your shares. In that letter, you will be requested to make ONE of the
following three elections:  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(1) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exercise
your rights and subscribe for our ordinary shares. If this alternative is elected, you
may give a member of the Tel Aviv Stock Exchange through which you hold your shares an
exercise notice commencing after 5:00 p.m., New York City time (midnight, Israel time),
on _________________ , 2006 (the record date) and no later than the time determined by
your broker on ________________, 2006. You must attach the subscription payment to your
notice. You will need to arrange with your broker the method of payment of your
subscription payment. The subscription price is to be paid in New Israeli Shekels
according to the representative exchange rate published by the Bank of Israel on the day
before payment of the subscription price; or  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp; (2) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sell
the rights or any part of them on the Tel Aviv Stock Exchange. If you select this
alternative, you may give your broker price limit instructions as to the sale of the
rights; or  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;        (3) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Refrain
from exercising your rights and from selling them. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Your
notice should reach the member of the Tel Aviv Stock Exchange through which you hold your
shares by no later than ______________________, 2006 (the rights trading day) at the time
determined by your broker. If notice is not received from you by such time, you will be
considered to have instructed your broker to sell your rights on the Tel Aviv Stock
Exchange, with no price limit.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you hold rights and wish to transfer them to another person, you may do so by executing
the rights transfer form that will be made available to you by your broker.  </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
rights will trade on the Tel Aviv Stock Exchange for one trading day, ________________,
2006. Pursuant to the Tel Aviv Stock Exchange rules, if the trading of our ordinary
shares or the rights is halted for a period in excess of 45 minutes, and the trading does
not resume for the remainder of that day upon which the rights are traded on the Tel Aviv
Stock Exchange, an additional trading day for the rights will take place, and the last
day to exercise the rights will be accordingly extended. If on the day upon which the
rights are traded on the Tel Aviv Stock Exchange the trading of our ordinary shares is
halted, yet the cessation of trade continues for fewer than five consecutive trading
days, your instructions with respect to the rights delivered to your broker shall remain
in effect unless contrary instructions have been received by your broker from you. If the
trading of our ordinary shares on the day upon which the rights are traded on the Tel
Aviv Stock Exchange is halted for a period of more than five consecutive trading days,
all prior instructions received by your broker will be cancelled.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders
of unexercised rights following the Tel Aviv Stock Exchange rights trading day may
exercise them and subscribe for our ordinary shares by notifying their broker and
transferring the subscription payment. This notice must reach the broker by no later than
________________, 2006 at the time determined by the broker. If this notice is not
received on time, it will not be possible to exercise these rights. </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Tel Aviv Stock Exchange rules, Tel Aviv Stock Exchange members must submit to the Tel
Aviv Stock Exchange Clearing House a written rights exercise (subscription) notice on
behalf of all their clients wishing to exercise rights no later than 9:00 a.m. Israel
time (2:00 a.m., New York City time) on _____________________, 2006 . The rights of
holders of our ordinary shares through the nominee company of the Tel Aviv Stock Exchange
will expire if the brokers of these holders do not provide an exercise notice as
described above. The Tel Aviv Stock Exchange rules further require brokers to transfer,
on the same date, to the Tel Aviv Stock Exchange Clearing House the subscription payments
with respect to their clients&#146; exercised rights, and the Tel Aviv Stock Exchange
Clearing House thereafter will transfer these payments to us.  </FONT></P>

<p align=center>
<font size=2>31</font></p>
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<page>


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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nominee Holders </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you are a broker, a trustee or a depositary for securities that holds our ordinary shares
for the account of others as a nominee holder, you should notify the respective
beneficial owners of such shares as soon as possible of the issuance of the rights to
find out such beneficial owners&#146; intentions. You should obtain instructions from the
beneficial owner with respect to the rights, as set forth in the instructions we have
provided to you for your distribution to beneficial owners. If the beneficial owner so
instructs, you should complete the appropriate subscription certificates. A nominee
holder that holds shares for the account(s) of more than one beneficial owner may
exercise the number of rights to which all such beneficial owners in the aggregate
otherwise would have been entitled if they had been direct record holders of our ordinary
shares on the record date, so long as the nominee submits the appropriate subscription
certificates and certifications and proper payment to us. If you are a member of the Tel
Aviv Stock Exchange, you must comply with the rules of the Tel Aviv Stock Exchange with
respect to providing notices to and receiving instructions from your clients.  </FONT></P>


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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Procedures For DTC (The
Depository Trust Company) Participants&nbsp; </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
expect that your exercise of your subscription privilege with respect to rights may be
made through the facilities of DTC. If you exercise your subscription privilege with
respect to rights through DTC we refer to your rights as DTC Exercised Rights. Please call
the Information Agent, The Altman Group, at 800-330-5136 to obtain copies of the DTC
participant exercise form and the nominee holder certification. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Rights Agent and
Information Agent </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have appointed American Stock Transfer &amp; Trust Company as Rights Agent and The Altman
Group as the Information Agent for the rights offering.  </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
Information Agent&#146;s telephone number is 800-330-5136 and its facsimile number is
201-460-0050; Attention: Ms. Charlotte Brown, Executive Managing Director. We will pay
the fees and specified expenses of the Rights Agent and Information Agent.  </FONT></P>


<a name=zk111></a>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MATERIAL INCOME TAX
CONSIDERATIONS </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 is a summary of the material tax consequences in Israel and the United States to
individual and corporate residents of Israel and the United States resulting from the
distribution of the rights we are distributing, the purchase or sale of the rights, the
exercise of the rights and the sale of the ordinary shares issuable upon exercise of the
rights. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
the extent that the discussion is based on tax legislation that has not been subject to
judicial or administrative interpretation, we cannot assure you that the tax authorities
will accept the views expressed in this summary. This summary is not intended, and should
not be construed, as legal or professional tax advice and is not exhaustive of all
possible tax consequences that may be relevant to each person&#146;s decision to exercise
or sell the rights we are distributing, or the sale of our ordinary shares issued upon the
exercise of the rights. </FONT></P>

<p align=center>
<font size=2>32</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;Prospective
purchasers of our ordinary shares and other securities should consult their own tax
advisors as to the United States, Israel or other tax consequences of the purchase,
ownership and disposition of our securities, including, in particular, the effect of any
foreign, state or local taxes. </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Israeli Tax
Considerations </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 is a summary of the material Israeli tax consequences and certain Israeli government programs affecting 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;On
January 1, 2003 a comprehensive tax reform took effect in Israel. Pursuant to the reform,
resident companies are subject to Israeli tax on income accrued or derived in Israel or
abroad. In addition, the concept of &#147;controlled foreign corporation&#148; was
introduced according to which an Israeli company may become subject to Israeli taxes on
certain income of a non-Israeli subsidiary if the subsidiary&#146;s primary source of
income is passive income. The tax reform also substantially changes the taxation of
capital gains. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
July 25, 2005, the Israeli Parliament Knesset passed Amendment no. 147 to the Income Tax
Ordinance, which came into effect on January 1, 2006. The Amendment made considerable
changes the taxation of securities traded on a stock exchange. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Capital Gains Tax on
Sales of Ordinary Shares </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Israeli
law generally imposes a capital gains tax on the sale of any capital assets by residents
of Israel, as defined for Israeli tax purposes, and on the sale of assets located in
Israel, including shares in Israeli companies by both residents and non-residents of
Israel, unless a specific exemption is available or unless a tax treaty between Israel and
the shareholder&#146;s country of residence provides otherwise. In general, the
distribution of the rights we are distributing and the exercise of the rights into
ordinary shares will not be subject to Israeli tax. The law distinguishes between the real
gain and the inflationary surplus. The real gain is the excess of the total capital gain
over the inflationary surplus, computed on the basis of the increase in the Israel
consumer price index between the date of purchase and the date of sale. </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
of January 1, 2006, the tax rate applicable to capital gains derived from the sale of
shares, whether listed on a stock market or not, is 20% for Israeli individuals, unless
such shareholder claims a deduction for financing expenses in connection with such shares,
in which case the gain will generally be taxed at a rate of 25%. Additionally, if such
shareholder is considered a &#147;significant shareholder&#148; at any time during the
12-month period preceding such sale (i.e. such shareholder holds directly or indirectly,
including jointly with others, at least 10% of any means of control in the company), the
tax rate will be 25%. Israeli companies are subject to the corporate tax rate on capital
gains derived from the sale of shares, unless such companies were not subject to the
Adjustments Law (or certain regulations under Section 130A of the Tax Ordinance) at the
time of publication of the aforementioned amendment to the Tax Ordinance, in which case
the applicable tax rate is 25%. However, the different tax rates will not apply to dealers
in securities and shareholders who acquired their shares prior to an initial public
offering. </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
tax basis of shares acquired prior to January 1, 2003 will be determined in accordance
with the average closing share price in the three trading days preceding January 1, 2003.
However, a request may be made to the tax authorities to consider the actual adjusted cost
of the shares as the tax basis if it is higher than such average price. </FONT></P>

<p align=center>
<font size=2>33</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;Non-Israeli
residents are generally exempt from Israeli capital gains tax on any gains derived from
the sale of shares of Israeli companies publicly traded on a recognized stock exchange or
regulated market outside of Israel, provided that such capital gains are not derived from
a permanent establishment in Israel, that such shareholders are not subject to the
Inflationary Adjustment Law and that such shareholders did not acquire their shares prior
to the issuer&#146;s initial public offering. However, non-Israeli corporations will not
be entitled to such exemption, if an Israeli resident (i) has a controlling interest of
25% or more in such non-Israeli corporation, or (ii) is the beneficiary or is entitled to
25% or more of the revenues or profits of such non-Israeli corporation, whether directly
or indirectly. In the event that an exemption is not available, taxation of the
non-Israeli resident may be subject to the provisions of a tax treaty, if such treaty
exists between Israel and the applicable country. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
some instances where our shareholders may be subject to Israeli tax on the sale of their
ordinary shares, the payment of the consideration may be subject to the withholding of
Israeli tax at the source. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The US-Israel Tax Treaty </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the Convention Between the Government of the United States of America and the
Government of Israel with Respect to Taxes on Income, as amended (the &#147;United States-
Israel Tax Treaty&#148;), the sale, exchange or disposition of ordinary shares by a person
who qualifies as a resident of the United States within the meaning of the United
States-Israel Tax Treaty and who is entitled to claim the benefits afforded to such person
by the United States- Israel Tax Treaty (a &#147;Treaty United States Resident&#148;)
generally will not be subject to the Israeli capital gains tax unless such Treaty United
States Resident holds, directly or indirectly, shares representing 10% or more of the
Company&#146;s voting power during any part of the 12- month period preceding such sale,
exchange or disposition, subject to certain conditions. A sale, exchange or disposition of
ordinary shares by a Treaty United States Resident who holds, directly or indirectly,
shares representing 10% or more of the Company&#146;s voting power at any time during such
preceding 12-month period would be subject to such Israeli tax, to the extent applicable;
however, under the United States-Israel Tax Treaty, such Treaty United States Resident
would be permitted to claim a credit for such taxes against the United States federal
income tax imposed with respect to such sale, exchange or disposition, subject to the
limitations specified in the treaty. The United States-Israel Tax Treaty does not relate
to United States state or local taxes. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Taxation of Non-Resident
Holders of Ordinary Shares </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-residents
of Israel are subject to income tax on income accrued or derived from sources in Israel.
These sources of income include passive income such as dividends, royalties and interest,
as well as non-passive income from services rendered in Israel. On distributions of
dividends, other than bonus shares or stock dividends, by a publicly traded company,
income tax is withheld at the source at the rate of 20%; unless a different rate is
provided in a treaty between Israel and the shareholder&#146;s country of residence. Under
the U.S.-Israel Tax Treaty, the maximum tax on dividends paid to a holder of shares who is
a resident of the United States is 25% or 12.5% if such U.S. resident is a corporation
which holds, directly or indirectly, shares representing at least 10% or more of our
issued voting power during the part of the tax year which precedes the date of payment of
the dividend and during the whole of its prior tax year. However, under the U.S.-Israel
Tax Treaty and the Investments Law, dividends generated by an Approved Enterprise (or
Benefiting Enterprise) are taxed at the rate of 15%. </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>United States Tax
Considerations </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
discussion of material United States federal income tax considerations below (other than
statements as to whether we are a &#147;passive foreign investment company&#148; and
statements regarding our earnings and profits) is based on an opinion of U.S. tax counsel,
Phillips Nizer LLP. Subject to the limitations described in the next paragraph, the
following describes the material United States federal income tax consequences resulting
from the distribution to a &#147;U.S. Holder&#148; and related transactions by the U.S.
Holder, including the exercise or expiration of rights, and the disposition of rights or
ordinary shares. For purposes of this discussion, a U.S. Holder means (1) any U.S. person
who receives a distribution of rights pursuant to this rights offering and who holds such
rights or ordinary shares issued upon the exercise of the rights (&#147;Initial U.S.
Holder&#148;) and (2) any U.S. person other than an Initial U.S. Holder who acquires such
rights or ordinary shares issued upon exercise of such rights (&#147;Subsequent U.S.
Holder&#148;). For purposes of our discussion, a U.S. person is: </FONT></P>

<p align=center>
<font size=2>34</font></p>
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<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>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>            <FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a
citizen or resident of the United States;</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>            <FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a
corporation created or organized in the United States or under the laws of the United
States                   or any State;</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>            <FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>an
estate, the income of which is includable in gross income for U.S. federal income tax
                  purposes regardless of its source; or</FONT></TD>
</TR>
</TABLE>
<BR>

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<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>            <FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a
trust, if a court within the United States is able to exercise primary supervision over
the                   administration of the trust and one or more U.S. persons have the
authority to control all                   substantial decisions of the trust or if the
trust has validly elected to be treated as a U.S.                   person under
applicable Treasury regulations.</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
discussion is based on current provisions of the Internal Revenue Code of 1986, or the
Code, as amended, current and proposed Treasury regulations promulgated thereunder, and
administrative and judicial decisions as of the date hereof, all of which are subject to
change, possibly on a retroactive basis. This discussion is not a representation of, nor
does it address, all aspects of United States federal income taxation that may be relevant
to any particular U.S. Holder based on such U.S. Holder&#146;s individual circumstances.
In particular, this discussion considers only U.S. Holders that will own rights or
ordinary shares as capital assets at all relevant times and does not address the potential
application of the alternative minimum tax or U.S. federal income tax consequences to U.S.
Holders that are subject to special treatment, including U.S. Holders that: </FONT></P>

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<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>            <FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>are
broker-dealers or insurance companies;</FONT></TD>
</TR>
</TABLE>
<BR>

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<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>            <FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>have
elected mark-to-market accounting;</FONT></TD>
</TR>
</TABLE>
<BR>

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<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>            <FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>are
financial institutions or financial services entities;</FONT></TD>
</TR>
</TABLE>
<BR>

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<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>            <FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>hold
rights, debentures, or ordinary shares as part of a straddle, hedge or conversion
                  transaction with other investments;</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>            <FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>own
directly, indirectly or by attribution at least 10% of our voting power; or</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>            <FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>have
a functional currency that is not the U.S. dollar.</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;Additionally,
the discussion does not consider the tax treatment of persons who hold rights or ordinary
shares through a partnership or other pass-through entity or the possible application of
U.S. federal gift or estate tax. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Finally,
this discussion does not address any aspect of state, local or non-U.S. tax laws. </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>Distribution
of Rights.</B> </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Initial
U.S. Holders will not be required to recognize taxable income upon the distribution of
rights pursuant to the rights offering. </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>Basis
and Holding Period of Rights</B><I>.</I>&nbsp;&nbsp;&nbsp; &nbsp; </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
discussion under this subheading applies only to Initial U.S. Holders. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If, in
accordance with Section&nbsp;307 of the Code, the fair market value of the rights which we
distribute to a U.S. Holder is less than 15% of the fair market value of such U.S.
Holder&#146;s ordinary shares with respect to which such rights were distributed, such
U.S. Holder&#146;s basis in the rights distributed generally will be zero. A U.S. Holder
may elect, however, to allocate the basis of the U.S. Holder&#146;s ordinary shares
between such ordinary shares and the rights received in proportion to their relative fair
market values on the date of distribution. This election may be made pursuant to
Section&nbsp;307 of the Code and will be given effect only if the U.S. Holder exercises or
sells the rights. To make the election, a U.S. Holder must attach a statement to the U.S.
Holder&#146;s U.S. Federal income tax return for the taxable year in which the rights are
received. The election will be irrevocable once made. </FONT></P>

<p align=center>
<font size=2>35</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;If
the fair market value of the rights which we distribute to a U.S. Holder is 15% or more of
the fair market value of such U.S. Holder&#146;s ordinary shares with respect to which
such rights were distributed, such U.S. Holder will be required to allocate its basis
between such ordinary shares and such rights in proportion to their relative fair market
values. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
either case, a U.S. Holder&#146;s holding period for the rights that we distribute to such
U.S. Holder will include the holding period of such U.S. Holder&#146;s ordinary shares
with respect to which such rights were distributed. </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>Exercise
of Rights; Basis and Holding Period of Acquired Shares; Sale Exchange or Other Disposition
of Acquired Shares.&nbsp;</B>&nbsp;&nbsp; </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
discussion is qualified by the discussions below under the subheading &#147;Tax
Consequences if We Are a Passive Foreign Investment Company.&#148; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
U.S. Holder will not recognize gain or loss upon the exercise of the rights. A U.S.
Holder&#146;s basis in our ordinary shares acquired through exercise of the rights
generally will equal the sum of (i)&nbsp;the subscription price paid by such U.S. Holder
to acquire such ordinary shares and (ii)&nbsp;such U.S. Holder&#146;s basis in the rights
exercised. A U.S. Holder&#146;s holding period in our ordinary shares acquired will begin
on the day such U.S. Holder exercises the rights. </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 sale, exchange or other disposition of our ordinary shares acquired upon the exercise
of rights, a U.S. Holder generally will recognize gain or loss equal to the difference
between the amount realized and such U.S. Holder&#146;s basis in such ordinary shares.
Such gain or loss will be capital gain or loss and will be long-term capital gain or loss
if a U.S. Holder&#146;s holding period exceeds one year at the time of the sale, exchange
or other disposition. Long-term capital gains of certain non-corporate taxpayers generally
are taxed at lower rates than items of ordinary income. The deductibility of capital
losses is subject to limitations. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gains
and losses recognized by a U.S. Holder on a sale, exchange or other disposition of rights
or ordinary shares generally will have a U.S. source for foreign tax credit purposes. </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>Expiration
of Rights.</B> </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
an Initial U.S. Holder receives rights pursuant to the rights offering and allows the
rights to expire unexercised, then such U.S. Holder will not be permitted to recognize a
taxable loss. In addition, such U.S. Holder&#146;s basis in our ordinary shares will not
be affected by this rights offering and such U.S. Holder&#146;s decision to allow its
rights to expire and will remain the same as before the rights offering. </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>Sale,
Exchange or Other Disposition of Rights</B>. </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 sale, exchange or other disposition of rights, a U.S. holder generally will recognize
capital gain or loss equal to the difference between the amount realized and such U.S.
holder&#146;s basis in the rights. Such gain or loss will be long-term capital gain or
loss if a U.S. holder&#146;s holding period in the rights is more than one year on the
date of the sale, exchange or other disposition. Long-term capital gains generally are
taxed at lower rates than items of ordinary income. The deductibility of capital losses is
subject to limitations. </FONT></P>

<p align=center>
<font size=2>36</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Tax
Consequences if We Are a Passive Foreign Investment Company</B> </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
foreign corporation generally will be treated as a &#147;passive foreign investment
company&#148; (&#147;PFIC&#148;) if, after applying certain &#147;look-through&#148;
rules, either (i) 75% or more of its gross income is passive income or (ii) 50% or more of
the average value of its assets is attributable to assets that produce or are held to
produce passive income. Passive income for this purpose generally includes dividends,
interest, rents, royalties and gains from securities and commodities transactions. The
look-through rules require a foreign corporation that owns at least 25% by value, of the
stock of another corporation to treat a proportionate amount of assets and income as held
or received directly by the foreign corporation. </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 has not made the analysis necessary to determine whether or not it is currently a
PFIC or whether it has ever been a PFIC. However, the Company does not believe that it was
a PFIC in 2006. However, there can be no assurance that the Company is not, has never been
or will not in the future be a PFIC. If the Company were to be treated as a PFIC, any gain
recognized by a U.S. Holder upon the sale (or certain other dispositions) of ordinary
shares (or the receipt of certain distributions) generally would be treated as ordinary
income, and a U.S. Holder may be required, in certain circumstances, to pay an interest
charge together with tax calculated at maximum rates on certain &#147;excess
distributions,&#148; including any gain on the sale or certain dispositions of ordinary
shares. In order to avoid this tax consequence, a U.S. Holder (i) may be permitted to make
a &#147;qualified electing fund&#148; election, in which case, in lieu of such treatment,
such holder would be required to include in its taxable income certain undistributed
amounts of the Company&#146;s income or (ii) may elect to mark-to-market the ordinary
shares and recognize ordinary income (or possible ordinary loss) each year with respect to
such investment and on the sale or other disposition of the ordinary shares. Additionally,
if the Company is deemed to be a PFIC, a U.S. Holder who acquires ordinary shares in the
Company from a decedent will be denied the normally available step-up in tax basis to fair
market value for the ordinary shares at the date of the death and instead will have a tax
basis equal to the decedent&#146;s tax basis if lower than fair market value. Neither the
Company nor its advisors have the duty to or will undertake to inform U.S. Holders of
changes in circumstances that would cause the Company to become a PFIC. U.S. Holders
should consult their own tax advisors concerning the status of the Company as a PFIC at
any point in time after the date of this Prospectus. The Company does not currently intend
to take the action necessary for a U.S. Holder to make a &#147;qualified electing
fund&#148; election in the event the Company is determined to be a PFIC. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dividends Paid on the
Ordinary Shares </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Distributions
paid on ordinary shares (including any Israeli taxes withheld) to a U.S. Holder will be
treated as ordinary dividend income for United States federal income tax purposes to the
extent of the Company&#146;s current and accumulated earnings and profits (as computed for
U.S. federal income tax purposes). Such dividends, which will be treated as foreign source
income for U.S. foreign tax credit purposes, generally will not qualify for the
dividends-received deduction available to corporations. Distributions in excess of such
earnings and profits will be applied against and will reduce the shareholder&#146;s tax
basis in the ordinary shares and, to the extent in excess of such tax basis, will be
treated as gain from a sale or exchange of such ordinary shares. The amount of the
distribution will equal the US Dollar value of the distribution, calculated by reference
to the exchange rate in effect on the date the distribution is received (or otherwise made
available to the U.S. Holders), regardless of whether a payment in Israeli currency is
actually converted to US Dollars at that time. U.S. Holders should consult their own tax
advisors concerning the treatment of foreign currency gain or loss, if any, on any Israeli
currency received which is converted into US Dollars subsequent to receipt. </FONT></P>

<p align=center>
<font size=2>37</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Qualified
dividend income received by an individual (as well as certain trusts and estates) U.S.
Holder for taxable years beginning before January 1, 2009 are taxed at reduced rates of
either 5 or 15 percent, depending upon the amount of such shareholder&#146;s taxable
income. If a non-corporate U.S. Holder does not hold ordinary shares for more than 60 days
during the 120 day period beginning 60 days before an ex-dividend date, dividends received
on ordinary shares are not eligible for reduced rates. Dividends received from a foreign
corporation that was a passive foreign investment company (as further discussed above) in
either the taxable year of the distribution or the preceding taxable year are not
qualified dividend income. Qualified dividend income includes dividends received from a
&#147;qualified foreign corporation.&#148; A &#147;qualified foreign corporation&#148;
includes a foreign corporation whose shares are readily tradable on an established
securities market in the United States as well as a foreign corporation that is entitled
to the benefits of a comprehensive income tax treaty with the United States which includes
an exchange of information program. Israel and the United States are parties to a
comprehensive income tax treaty which includes an exchange of information program. The
United States Treasury Department will periodically issue guidance regarding which income
tax treaties will be satisfactory for treating a corporation as a &#147;qualified foreign
corporation&#148;. In the event ordinary shares should not be readily tradable on an
established securities market in the United States, non-corporate U.S. Holders should
consult their own tax advisors as to whether any distributions paid on ordinary shares
will be taxed for United States federal income tax purposes at reduced tax rates. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Credit for Israeli Taxes
Withheld </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to certain conditions and limitations, any Israeli tax withheld or paid with respect to
dividends on the ordinary shares generally will be eligible for credit against a U.S.
Holder&#146;s United States federal income tax liability at such U.S. Holder&#146;s
election. The Code provides limitations on the amount of foreign tax credits that a U.S.
Holder may claim, including extensive separate computation rules under which foreign tax
credits allowable with respect to specific categories of income cannot exceed the United
States federal income taxes otherwise payable with respect to each such category of
income. Dividends with respect to the ordinary shares generally will be classified as
foreign source &#147;passive income&#148; for the purpose of computing a U.S.
Holder&#146;s foreign tax credit limitations for U.S. foreign tax credit purposes. The
availability of the Israeli withholding tax as a foreign tax credit will also be subject
to certain restrictions on the use of such credits, including a prohibition on the use of
the credit to reduce liability for the United States individual and corporate minimum
taxes by more than 90%. Alternatively, U.S. Holders that do not elect to claim a foreign
tax credit may instead claim a deduction for Israeli income tax withheld or paid, but only
for a year in which these U.S. Holders elect to do so for all foreign income taxes. The
rules relating to foreign tax credits are complex, and you should consult your tax advisor
to determine whether and if you would be entitled to this credit. </FONT></P>



<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tax Consequences for
Non-U.S. Holders of Ordinary Shares </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Except as described in
&#147;Information Reporting and Back-up Withholding&#148; below, a non-U.S. holder of
ordinary shares will not be subject to U.S. federal income or withholding tax on the
payment of dividends on, and the proceeds from the disposition of, ordinary shares,
unless: </FONT></P>

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<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>      <FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
item is effectively connected with the conduct by the non-U.S. holder of a trade or
business in             the United States and:</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>            (i) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>in
the case of a resident of a country which has a treaty with the United States, the item
is                   attributable to a permanent establishment; or </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>            (ii) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>in
the case of an individual, the item is attributable to a fixed place of business in the
                  United States; </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>      <FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
non-U.S. holder is an individual who holds the ordinary shares as a capital asset and is
present             in the United States for 183 days or more in the taxable year of the
disposition and does not qualify             for an exemption; or</FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>38</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>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>      <FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
non-U.S. holder is subject to tax under the provisions of U.S. tax law applicable to U.S.
            expatriates.</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Information Reporting
and Back up Withholding. </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A non-corporate U.S. Holder may,
under certain circumstances, be subject to information reporting requirements and
&#147;backup withholding&#148; at a 30% rate on cash payments in the United States of
dividends on, and the proceeds of disposition of, ordinary shares. Backup withholding will
apply only if a U.S. Holder: (a) fails to furnish its social security or other taxpayer
identification number (&#147;TIN&#148;) within a reasonable time after the request
therefore; (b) furnishes an incorrect TIN; (c) is notified by the IRS that it has failed
properly to report payments of interest and dividends; or (d) under certain circumstances,
fails to certify, under penalty of perjury, that it has furnished a correct TIN and has
not been notified by the IRS that it is subject to backup withholding for failure to
report interest and dividend payments. U.S. Holders should consult their tax advisors
regarding their qualification for exemption, if applicable. The amount of backup
withholding from a payment to a U.S. Holder generally will be allowed as a credit against
such U.S. Holder&#146;s federal income tax liability and may entitle such U.S. Holder to a
refund, provided that the required information is furnished to the IRS. </FONT></P>


<a name=zk112></a>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>DESCRIPTION OF
ORDINARY SHARES </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 is a summary description of our Ordinary Shares under our Articles of
Association. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Dividend and Liquidation Rights.
</I> All holders of paid-up Ordinary Shares of the Company have an equal right to
participate in a distribution of (i) dividends, whether by cash or by bonus shares; (ii)
Company assets; and (iii) the Company&#146;s surplus assets upon winding up, all pro rata
to the nominal value of the shares held by them. </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
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 authorized share capital. </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&#146;s Board of Directors is the organ authorized to decide upon the distribution
of dividends or bonus shares. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Voting, Shareholders&#146;
Meetings, Notices and Resolutions. </I> Holders of paid-up Ordinary Shares have one vote
for each share held on all matters submitted to a vote of shareholders. Such voting rights
may be affected in the future by the grant of any special voting rights to the holders of
a class of shares with preferential rights. </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
quorum required for a general meeting of shareholders (whether annual or special) consists
of at least two shareholders present in person or by proxy/voting instrument and holding,
or representing, at least 33?% of the voting rights of the issued share capital. A meeting
adjourned for lack of quorum shall be postponed by one week, to the same day, time and
place, or to a later time if stated in the invitation to the meeting or in the notice of
the meeting. The quorum for the commencement of the adjourned meeting shall be any number
of participants. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless
otherwise determined by the Israeli Companies Law of 1999 or the Company&#146;s Articles
of Association, a resolution requires approval by the holders of a majority of the shares
represented at the meeting, in person or by proxy, and voting thereon. </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
Companies Law requires that certain transactions, actions and arrangements be approved by
shareholders, including (i) arrangements with a director as to the terms of his office and
compensation and arrangements for insurance, exemption and indemnity of directors; (ii)
certain Extraordinary Transactions (as defined in the Companies Law) of the Company with
its controlling shareholders or any Extraordinary Transaction in which a controlling
shareholder has a personal interest; (iii) certain private placements; and (iv) any action
or Extraordinary Transaction in which the majority of the members of the Board of
Directors have a personal interest. </FONT></P>

<p align=center>
<font size=2>39</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;Each
shareholder of record is entitled to receive at least a 21 day prior notice of
shareholders&#146; meetings. The accidental omission to give notice of a meeting to any
member, or the non receipt of notice sent to such member, shall not invalidate the
proceedings at such meeting. For purposes of determining the shareholders entitled to
notice and to vote, the Board of Directors may fix a record date subject to the provisions
of the law. Currently, Israeli law provides that the record date not be any earlier than
40 days prior to the meeting. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Transfer of Shares. </I> Fully
paid Ordinary Shares may be transferred freely. The transfer of Ordinary Shares not fully
paid up requires the approval of the Board of Directors. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Modification of Class Rights. </I>
Subject to the provisions of any law, the rights attached to any class (unless otherwise
provided by the terms of issue of such class), such as voting, rights to dividends and the
like, may be altered after a resolution is passed by the Company, with the approval of a
resolution passed by a majority of the voting power present by person or proxy and voting
hereon at a general meeting of the holders of the shares of such class, or the written
agreement of all the class holders. The rights vested in the holders of shares of a
particular class that were issued with special rights shall not be deemed to have been
altered by the creation or issue of further shares ranking equally with them, unless
otherwise provided in such shares&#146; issue terms. </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Election of Directors</I>. The
Company&#146;s directors are elected by the shareholders at a shareholders&#146; meeting.
The Ordinary Shares do not have cumulative voting rights in the election of directors. The
holders of Ordinary Shares conferring more than 50% of the voting power present by person
or by proxy at the shareholders&#146; meeting, have the power to elect the directors. The
directors elected shall hold office until the next annual meeting, or sooner if they cease
to hold office pursuant to the provisions of the Company&#146;s Articles. In addition, the
Board of Directors may appoint a director (to fill a vacancy or otherwise) between
shareholder meetings, and such appointment shall be valid until the next annual meeting or
until such appointee ceases to hold office pursuant to the provisions of the
Company&#146;s Articles. In compliance with the Companies Law, the Company has two
external directors. The external directors are also appointed by the shareholders and
their term of office is three years. </FONT></P>

<a name=zk113></a>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>UNDERTAKING TO REFRAIN
FROM ACTIONS<BR>NOT DISCLOSED IN THIS PROSPECTUS </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By
signing this prospectus, we and our directors undertake as follows:  </FONT></P>


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<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>(a) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>not
to take any action which is not disclosed in the prospectus concerning this rights
offering and distributing or dispersing of the securities offered hereunder to the
public, not to grant to purchasers of these securities rights which are not referred to
in the prospectus; </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>(b) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>not
to enter into any agreement with any third party that to the best of our knowledge has
entered into arrangements which conflict with sub-paragraph (a); and </FONT></TD>
</TR>
</TABLE>
<BR>

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<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>(c) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>to
inform the Israel Securities Authority if we become aware of any arrangement with a third
party, which conflicts with sub-paragraph (a). </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>40</font></p>
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<page>

<a name=zk114></a>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>LEGAL MATTERS </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
validity of the securities offered in this prospectus will be passed upon for us by Amit,
Pollak, Matalon &amp; Co., our Israeli counsel. Certain matters set forth herein under
&#147;Material Tax Considerations &#150; United States Tax Considerations&#148; will be
passed upon for us by Phillips Nizer LLP, our US counsel. </FONT></P>

<a name=zk115></a>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>EXPERTS </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
consolidated financial statements, included in our Annual Report on Form 20-F for the year
ended December 31, 2005, as amended, have been audited by Kost Forer Gabbay &amp;
Kasierer, independent registered public accounting firm and a member of Ernst &amp; Young
Global as set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated statements are incorporated herein by reference in reliance
upon such report given on the authority of such firm as experts in auditing and
accounting. </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
consolidated financial statements of our consolidated subsidiary Odem Electronic
Technologies 1992 Ltd., for the year ended December 31, 2004, as amended have been audited
by Kesselman &amp; Kesselman, independent registered public accounting firm and a member
of PricewaterhouseCoopers, as set forth in their report thereon included in our Annual
Report on Form 20-F for the year ended December 31, 2005, as amended and incorporated
herein by reference. </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
value attributed to our holdings in Surf Communication Systems Ltd., as of September 30,
2005, was supported by an external valuation prepared by Variance Economic Consulting Ltd. </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
value attributed to our holdings in Qualmax Inc., as of December 31, 2005, was supported
by an external valuation prepared by Melnik Oded Business Advisory Ltd. </FONT></P>

<a name=zk116></a>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>WHERE YOU CAN FIND
MORE INFORMATION </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have filed with the SEC a registration statement on Form F-3 under the Securities Act of
1933, with respect to the securities offered by this prospectus. However, as is permitted
by the rules and regulations of the SEC, this prospectus, which is part of our
registration statement on Form F-3, omits certain non-material information, exhibits,
schedules and undertakings set forth in the registration statement. For further
information about us, and the securities offered by this prospectus, please refer to the
registration statement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are subject to the reporting requirements of the Securities Exchange Act of 1934, as
amended, or the Exchange Act, that are applicable to a foreign private issuer. In
accordance with the Exchange Act, we file reports, including annual reports on Form 20-F
by June 30 of each year. We also furnish to the SEC under cover of Form 6-K material
information required to be made public in Israel, filed with and made public by any stock
exchange or distributed by us to our 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;The
registration statement on Form F-3 of which this prospectus forms a part, including the
exhibits and schedules thereto, and reports and other information filed by us with the SEC
may be inspected without charge and copied at prescribed rates at the SEC&#146;s Public
Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Copies of this material are
also available by mail from the Public Reference Section of the SEC, at 100 F. Street,
N.E., Washington D.C. 20549, at prescribed rates. The public may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains an Internet site that contains reports, proxy and information statements, and
other information regarding issuers, such as us, that file electronically with the SEC
(http://www.sec.gov). </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
a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing
the furnishing and content of proxy statements to shareholders and our officers, directors
and principal shareholders are exempt from the &#147;short-swing profits&#148; reporting
and liability provisions contained in Section 16 of the Exchange Act and related Exchange
Act rules. </FONT></P>

<p align=center>
<font size=2>41</font></p>
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<page>

<a name=zk117></a>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE </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
SEC allows us to &#147;incorporate by reference&#148; the information we file with or
submit to it, which means that we can disclose important information to you by referring
to those documents. The information incorporated by reference is considered to be part of
this prospectus, and later information filed with or submitted to the SEC will update and
supersede this information. We incorporate by reference into this prospectus the documents
listed below: </FONT></P>

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<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>(a) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our
annual report on Form 20-F for the fiscal year ended December 31, 2005,           filed
with the SEC on June 28, 2006 and the amendments to such annual report,           filed
with the SEC on September 7, 2006, on October 30, 2006 and on November 30,           2006
(SEC File No. 001-14184); </FONT></TD>
</TR>
</TABLE>
<BR>

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<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>(b) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
description of our ordinary shares contained in our registration statement           on
Form 8-A filed with the SEC on April 1, 1996, as amended by the description           of
our ordinary shares contained in a Form 6-K filed with the SEC on August 22,
          2006; and </FONT></TD>
</TR>
</TABLE>
<BR>

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<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>(c) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our
current reports on Form 6-K filed with the SEC on August 22, 2006,           September 7,
2006, September 27, 2006, October 4, 2006, October 19, 2006,           October 30, 2006
and November 20, 2006. </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
addition, all subsequent annual reports on Form 20-F filed prior to the termination of
this offering and any reports on Form 6-K subsequently submitted to the SEC or portions
thereof that we specifically identify in such forms as being incorporated by reference
into the registration statement of which this prospectus forms a part, shall be considered
to be incorporated into this prospectus by reference and shall be considered a part of
this prospectus from the date of filing or submission of such documents. </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
you read the above documents, you may find inconsistencies in information from one
document to another. If you find inconsistencies between the documents and this
prospectus, you should rely on the statements made in the most recent document. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
will deliver to each person (including any beneficial owner) to whom this prospectus has
been delivered a copy of any or all of the information that has been incorporated by
reference into this prospectus but not delivered with this prospectus. We will provide
this information upon written or oral request, and at no cost to the requester. Requests
should be directed to: </FONT></P>


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     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <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>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <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>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <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>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <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>
     <TH WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD  ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD  ALIGN=LEFT colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B.O.S. Better Online Solutions Ltd.</FONT></TD>
</TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Beit Rabin, Teradyon Industrial Park</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Misgav 20179, Israel</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>Tel.:</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(+972) 4-990-7555</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>Fax:</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(+972) 4-999-0334</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>Attn.:</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nehemia Kaufman, CFO</FONT></TD></TR>
</TABLE>
<BR>

<p align=center>
<font size=2>42</font></p>
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<page>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ENFORCEABILITY OF
CIVIL LIABILITIES </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have been informed by our legal counsel in Israel, Amit, Pollak, Matalon &amp; Co., that
there is doubt concerning the enforceability of civil liabilities under the Securities Act
and the Exchange Act in original actions instituted in Israel. However, subject to
specified time limitations, Israeli courts may enforce a United States final executory
judgment in a civil matter, including a monetary or compensatory judgment in a non-civil
matter, obtained after due process before a court of competent jurisdiction according to
the laws of the state in which the judgment is given and the rules of private
international law currently prevailing in Israel. The rules of private international law
currently prevailing in Israel do not prohibit the enforcement of a judgment by Israeli
courts provided that: </FONT></P>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <FONT size="2" face="Wingdings 2">&#151;</font>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
judgment is enforceable in the state in which it was given;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <FONT size="2" face="Wingdings 2">&#151;</font>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>adequate
service of process has been effected and the defendant has had a reasonable opportunity
to                 present his arguments and evidence;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <FONT size="2" face="Wingdings 2">&#151;</font>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
judgment and the enforcement of the judgment are not contrary to the law, public policy,
security                 or sovereignty of the State of Israel;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <FONT size="2" face="Wingdings 2">&#151;</font>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
judgment was not obtained by fraud and does not conflict with any other valid judgment in
the                 same matter between the same parties; and</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>an
action between the same parties in the same matter is not pending in any Israeli court at
the time the lawsuit is instituted in the foreign court. </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;We
have appointed Corporation Service Company<B> </B>as our agent to receive service of
process in any action against us in any competent court of the United States arising out
of this offering or any purchase or sale of securities in connection with this offering. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
a foreign judgment is enforced by an Israeli court, it generally will be payable in
Israeli currency, which can then be converted into non-Israeli currency and transferred
out of Israel. The usual practice in an action before an Israeli court to recover an
amount in a non-Israeli currency is for the Israeli court to issue a judgment for the
equivalent amount in Israeli currency at the rate of exchange in force on the date of the
judgment, but the judgment debtor may make payment in foreign currency. Pending
collection, the amount of the judgment of an Israeli court stated in Israeli currency
ordinarily will be linked to the Israeli consumer price index plus interest at an annual
statutory rate set by Israeli regulations prevailing at the time. Judgment creditors must
bear the risk of unfavorable exchange rates. </FONT></P>

<a name=zk119></a>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>THE ISRAEL SECURITIES
AUTHORITY EXEMPTION </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
prospectus has been prepared based on the requirements of the Securities Act and in
accordance with the requirements of the Securities and Exchange Commission for
Registration Statements on Form F-3. This prospectus, as will be filed and published in
Israel, is identical to the Registration Statement on Form F-3 filed with and declared
effective by, the United States Securities and Exchange Commission (File
No.333-____________) on __________.  </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
35(29) of the Israeli Securities Law authorizes the Israel Securities Authority to grant
an exemption from the application of the Securities Regulations (Prospectus Details,
Format and Form), 1969, to companies whose shares are dually listed on the Tel Aviv Stock
Exchange and certain foreign stock exchanges, that offer their securities to the public
in Israel under a prospectus. Based on the aforesaid, we received such an exemption in
connection with the offering under this prospectus.  </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
Tel Aviv Stock Exchange on _________ and NASDAQ on ___________ approved the listing of
the rights and ordinary shares issuable upon exercise of the rights for trade for only
one day on both the NASDAQ Global Market and the Tel Aviv Stock Exchange. Nothing in
these approvals should be interpreted as a verification of the information contained
herein, an approval of the accuracy or completeness of such information or an expression
of any view as to the quality of the securities we are distributing.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
obtained all the approvals and permits required under applicable law for the distribution
of the rights and for the publication of this prospectus. The rights are not being
distributed in any jurisdiction where the offer is not permitted.  </FONT></P>

<p align=center>
<font size=2>43</font></p>
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<page>

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<p ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S BETTER ONLINE
SOLUTIONS LTD. </B><BR>DISTRIBUTION OF RIGHTS TO PURCHASE ORDINARY SHARES </FONT> </p>


<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="100%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>PROSPECTUS</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="CENTER"><HR SIZE="1" NOSHADE WIDTH="100%" ALIGN="CENTER"></TD></TR>
</TABLE>
<BR>

<p align=center>
<font size=2>44</font></p>
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<page>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART II<BR>INFORMATION NOT REQUIRED IN PROSPECTUS </FONT></H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 8.
INDEMNIFICATION 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;Consistent
with the provisions of the Israeli Companies Law, 1999 (the &#147;Companies Law&#148;),
the amended Articles of the Registrant include provisions permitting the Registrant to
procure insurance coverage for its &#147;office holders&#148;, exempt them from certain
liabilities and indemnify them, to the maximum extent permitted by law. An &#147;office
holder&#148; is defined in the Companies Law and the Articles as a director, managing
director, chief business manager, executive vice president, vice president, other manager
reporting directly to the managing director and any other person assuming the
responsibilities of any of the foregoing positions without regard to such person&#146;s
title. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;INSURANCE </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Companies Law, a company may obtain insurance for any of its office holders for: (i) a
breach of his duty of care to the company or to another person; (ii) a breach of his duty
of loyalty to the company provided that the office holder acted in good faith and had
reasonable cause to assume that his act would not prejudice the company&#146;s interests;
or (iii) a financial liability imposed upon him in favor of another person concerning an
act preformed by him in his capacity as an office holder. </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
Registrant has obtained directors&#146; and officers&#146; liability insurance covering
its officers and directors and those of its subsidiaries. </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 </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
Companies Law provides that a company may indemnify an office holder against: (i) a
financial liability imposed on him in favor of another person by any judgment concerning
an act preformed in his capacity as an office holder; (ii) reasonable litigation expenses,
including attorneys&#146; fees, expended by the office holder or charged to him by a court
relating to an act preformed in his capacity as an office holder in connection with: (a)
proceedings the company institutes against him or instituted on its behalf or by another
person; (b) a criminal charge from which he was acquitted; (c) a criminal charge in which
he was convicted for a criminal offence that does not require proof of criminal intent;
and (d) an investigation or a proceeding instituted against him by an authority competent
to administrate such an investigation or proceeding that ended without the filing of an
indictment against the office holder, either without any financial obligation imposed on
the office holder in lieu of criminal proceedings; or with financial obligation imposed on
him in lieu of criminal proceedings, in a crime which does not require proof of criminal
intent. The Articles of the Registrant authorize the Registrant to indemnify its office
holders to the fullest extent permitted under the law. The Companies Law also authorizes a
company to undertake in advance to indemnify an office holder with respect to the events
specified above, provided that, with respect to indemnification under sub-section (i)
above, the undertaking: (a) is limited to events which the board of directors determines
can be anticipated, based on the activity of the Company at the time the undertaking is
given; (b) is limited in amount or criteria determined by the board of directors to be
reasonable for the circumstances; and (c) specifies the abovementioned events, amounts or
criteria. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have entered into indemnification agreements with our directors and some officers
providing for indemnification under certain circumstances for acts and omissions which may
not be covered (or not be covered in full) by any directors&#146; and officers&#146;
liability insurance. Such indemnification agreement is attached as exhibit 4.1 to our
Annual Report on Form 20-F filed with the Securities and Exchange Commission on June 28,
2006. </FONT></P>

<p align=center>
<font size=2>45</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;EXEMPTION </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Companies Law, an Israeli company may not exempt an office holder from liability for a
breach of his duty of loyalty, but may exempt in advance an office holder from his
liability to the company, in whole or in part, for a breach of his duty of care, provided
that in no event shall the office holder be exempt from any liability for damages caused
as a result of a breach of his duty of care to the company in the event of a
&#147;distribution&#148; (as defined in the Companies Law). The Articles authorize the
Registrant to exempt any office holder from liability to the Registrant to the extent
permitted by law. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Both
the Companies Law and the Articles provide that the Registrant may not exempt or indemnify
an office holder nor enter into an insurance contract which would provide coverage for
liability incurred as a result of any of the following: (a) a breach by the office holder
of his duty of loyalty (however, the Registrant may insure and indemnify against such
breach if the office holder acted in good faith and had a reasonable basis to assume that
the act would not harm the Registrant); (b) a breach by the office holder of his duty of
care if the breach was done intentionally or recklessly, unless made in negligence only;
(c) any act done with the intent to derive an illegal personal benefit; or (d) any fine or
monetary penalty levied against the office holder. </FONT></P>

<p align=center>
<font size=2>46</font></p>
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<page>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 9. EXHIBITS </FONT></H1>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH="9%" ALIGN="CENTER"> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Exhibit No.</B></FONT><HR WIDTH="95%" SIZE="1" COLOR="BLACK" NOSHADE ALIGN="LEFT"> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH="88%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Description</B> </FONT> <HR WIDTH="95%" SIZE="1" COLOR="BLACK" NOSHADE ALIGN="LEFT"></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.1*  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Articles
of Association </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.1**  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form
of Rights Agent Agreement with Form of Rights Certificate Attached </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.2***  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form
of Share Certificate. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.1  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Opinion
of Amit,  Pollak,  Matalon &amp; Co.,  Israeli  counsel for B.O.S Better Online  Solutions
                        Ltd., as to the validity of the ordinary shares. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.1  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Opinion
of US Counsel </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23.1  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent
of Amit, Pollak, Matalon &amp; Co. (included in Exhibit 5.1).    <BR>                     Consent
of US Counsel (included in Exhibit 8.1) </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23.2  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent
of Kost Forer Gabbay &amp; Kasierer, a Member Firm of Ernst &amp; Young Global. </FONT></TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23.3  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent
of Kesselman &amp; Kesselman, a member of PricewaterhouseCoopers International Limited. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23.4  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent
of Variance Economic Consulting Ltd. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23.5  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent
of Melnik Oded Business Advisory Ltd. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24.1  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Power
of Attorney (included on signature page). </FONT></TD>
</TR>
</TABLE>
<BR>


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<HR SIZE=1 NOSHADE WIDTH=15% ALIGN=LEFT><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>*  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Incorporated
by reference to Exhibit 1.2 of the Company&#146;s Annual Report on Form 20-F filed with
the SEC on June 28, 2006 </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>**  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To
be filed by amendment. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>***  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Previously
filed with the SEC on November 24, 2003 as Exhibit 4.1 to the Company&#146;s Registration
Statement on Form S-8, SEC File Number 333-110696, and incorporated herein by reference. </FONT></TD>
</TR>
</TABLE>
<BR>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 10. UNDERTAKINGS </FONT></H1>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          The undersigned registrant hereby undertakes: </FONT></P>

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<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>(1) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To
file, during any period in which offers or sales are being made, a
          post-effective amendment to this registration statement: </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD ALIGN=LEFT WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To
include any prospectus required by Section 10(a)(3) of the Securities Act of
          1933;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD ALIGN=LEFT WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To
reflect in the prospectus any facts or events arising after the effective           date
of the registration statement (or the most recent post- effective amendment
          thereof) which, individually or in the aggregate, represent a fundamental
change           in the information set forth in the registration statement.
Notwithstanding the           foregoing, any increase or decrease in volume of securities
offered (if the           total dollar value of securities offered would not exceed that
which was           registered) and any deviation from the low or high end of the
estimated maximum           offering range may be reflected in the form of prospectus
filed with the           Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume           and price represent no more than a 20% change in the maximum
aggregate offering           price set forth in the &#147;Calculation of Registration Fee&#148; table
in the           effective registration statement;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD ALIGN=LEFT WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To
include any material information with respect to the plan of distribution           not
previously disclosed in the registration statement or any material change to
          such information in the registration statement;  </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>47</font></p>
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<page>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<I>provided,
however,</I> that Paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not
apply if the registration statement is on Form S-3 or Form F-3 and the information
required to be included in a post-effective amendment by those paragraphs is contained in
reports filed with or furnished to the Commission by the registrant pursuant to section
13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement, or is contained in a form of prospectus filed
pursuant to Rule 424(b) that is part of the registration statement. </FONT></TD>
</TR>
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<BR>

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<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>(2) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>That,
for the purpose of determining any liability under the Securities Act of           1933,
each such post-effective amendment shall be deemed to be a new           registration
statement relating to the securities offered therein, and the           offering of such
securities at that time shall be deemed to be the initial bona           fide offering
thereof. </FONT></TD>
</TR>
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<BR>

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<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>(3) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To
remove from registration by means of a post-effective amendment any of the
          securities being registered which remain unsold at the termination of the
          offering. </FONT></TD>
</TR>
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<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>(4) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To
file a post-effective amendment to the registration statement to include any
          financial statements required by Item 8.A of Form 20-F at the start of any
          delayed offering or throughout a continuous offering. Financial statements and
          information otherwise required by Section 10(a)(3) of the Act need not be
          furnished, provided that the registrant includes in the prospectus, by means of
          a post-effective amendment, financial statements required pursuant to this
          paragraph (a)(4) and other information necessary to ensure that all other
          information in the prospectus is at least as current as the date of those
          financial statements. Notwithstanding the foregoing, with respect to
          registration statements on Form F-3, a post-effective amendment need not be
          filed to include financial statements and information required by Section
          10(a)(3) of the Act Item 8.A of Form 20-F if such financial statements and
          information are contained in periodic reports filed with or furnished to the
          Commission by the registrant pursuant to Section 13 or Section l5(d) of the
          Securities Exchange Act of 1934 that are incorporated by reference in the Form
          F-3. </FONT></TD>
</TR>
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<BR>

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<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>(5) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>That,
for the purpose of determining liability under the Securities Act of 1933           to
any purchaser: </FONT></TD>
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<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> (i) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If
the registrant is relying on Rule 430B (Sec 230.430B of this chapter):  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A. </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Each
prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be           deemed
to be part of the registration statement as of the date the filed           prospectus
was deemed part of and included in the registration statement; and  </FONT></TD>
</TR>
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<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B. </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or           (b)(7)
as part of a registration statement in reliance on Rule 430B relating to           an
offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of
          providing the information required by section 10(a) of the Securities Act of
          1933 shall be deemed to be part of and included in the registration statement
as           of the earlier of the date such form of prospectus is first used after
          effectiveness or the date of the first contract of sale of securities in the
          offering described in the prospectus. As provided in Rule 430B, for liability
          purposes of the issuer and any person that is at that date an underwriter, such
          date shall be deemed to be a new effective date of the registration statement
          relating to the securities in the registration statement to which that
          prospectus relates, and the offering of such securities at that time shall be
          deemed to be the initial bona fide offering thereof. Provided, however, that no
          statement made in a registration statement or prospectus that is part of the
          registration statement or made in a document incorporated or deemed
incorporated           by reference into the registration statement or prospectus that is
part of the           registration statement will, as to a purchaser with a time of
contract of sale           prior to such effective date, supersede or modify any
statement that was made in           the registration statement or prospectus that was
part of the registration           statement or made in any such document immediately
prior to such effective date;           or  </FONT></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2>48</font></p>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
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<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>(ii) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If
the registrant is subject to Rule 430C, each prospectus filed pursuant to           Rule
424(b) as part of a registration statement relating to an offering, other           than
registration statements relying on Rule 430B or other than prospectuses           filed
in reliance on Rule 430A, shall be deemed to be part of and included in           the
registration statement as of the date it is first used after effectiveness.
          Provided, however, that no statement made in a registration statement or
          prospectus that is part of the registration statement or made in a document
          incorporated or deemed incorporated by reference into the registration
statement           or prospectus that is part of the registration statement will, as to
a purchaser           with a time of contract of sale prior to such first use, supersede
or modify any           statement that was made in the registration statement or
prospectus that was           part of the registration statement or made in any such
document immediately           prior to such date of first use.  </FONT></TD>
</TR>
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<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>(6) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>That,
for the purpose of determining liability of the registrant under the           Securities
Act of 1933 to any purchaser in the initial distribution of the           securities: The
undersigned registrant undertakes that in a primary offering of           securities of
the undersigned registrant pursuant to this registration           statement, regardless
of the underwriting method used to sell the securities to           the purchaser, if the
securities are offered or sold to such purchaser by means           of any of the
following communications, the undersigned registrant will be a           seller to the
purchaser and will be considered to offer or sell such securities           to such
purchaser: </FONT></TD>
</TR>
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<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>(i) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Any
preliminary prospectus or prospectus of the undersigned registrant relating           to
the offering required to be filed pursuant to Rule 424;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<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>(ii) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Any
free writing prospectus relating to the offering prepared by or on behalf           of
the undersigned registrant or used or referred to by the undersigned
          registrant;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<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>(iii) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
portion of any other free writing prospectus relating to the offering
          containing material information about the undersigned registrant or its
          securities provided by or on behalf of the undersigned registrant; and  </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>49</font></p>
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<page>

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<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>(iv) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Any
other communication that is an offer in the offering made by the           undersigned
registrant to the purchaser.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<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>(b) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
undersigned registrant hereby undertakes that, for purposes of determining
               any liability under the Securities Act of 1933, each filing of the
               registrant&#146;s annual report pursuant to Section 13(a) or Section 15(d)
of                the Securities Exchange Act of 1934 (and, where applicable, each filing
of an                employee benefit plan&#146;s annual report pursuant to Section l5(d)
of the                Securities Exchange Act of 1934) that is incorporated by reference
in the                registration statement shall be deemed to be a new registration
statement                relating to the securities offered therein, and the offering of
such securities                at that time shall be deemed to be the initial bona fide
offering thereof. </FONT></TD>
</TR>
</TABLE>
<BR>

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<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>(c) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Insofar
as indemnification for liabilities arising under the Securities Act of
               1933 may be permitted to the directors, officers and controlling persons
of the                registrant pursuant to the provisions described under &#147;Item 8.
               Indemnification of Directors and Officers&#148; above, or otherwise, the
               registrant has been advised that in the opinion of the Securities and
Exchange                Commission such indemnification is against public policy as
expressed in the Act                and is, therefore, unenforceable. In the event that a
claim for indemnification                against such liabilities (other than the payment
by the registrant of expenses                incurred or paid by a director, officer or
controlling person of the registrant                in the successful defense of any
action, suit or proceeding) is asserted by such                director, officer or
controlling person in connection with the securities being                registered, the
registrant will, unless in the opinion of our counsel the matter                has been
settled by controlling precedent, submit to a court of appropriate
               jurisdiction the question whether such indemnification by it is against
public                policy as expressed in the Act and will be governed by the final
adjudication of                such issue. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>50</font></p>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SIGNATURES </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to the requirements of the
Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form F-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Misgav, in the State of Israel, on December 11, 2006. </FONT></P>


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<TD ALIGN="Center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>B.O.S. Better Online Solutions Ltd.</B><BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR><BR>&nbsp;</FONT></TD>
</TR>
</TABLE>



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<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=34%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>By:</B> /s/ Shmuel Koren<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Shmuel Koren<BR>President and Chief<BR>
Executive Officer </FONT></TD>
<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Nehemia Kaufman<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Nehemia Kaufman<BR>Chief Financial<BR>
Officer</FONT></TD>
</TR>
</TABLE>
<BR>




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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>POWER OF ATTORNEY </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>KNOW ALL PERSONS BY THESE PRESENTS,
that each individual whose signature appears below constitutes and appoints Shmuel Koren
and Nehemia Kaufman, and each of them, his or her true and lawful attorneys-in-fact and
agents with full power of substitution and re-substitution, for him or her and in his or
her name, place and stead, in any and all capacities, to (i) act on, sign and file with
the Securities and Exchange Commission any and all amendments (including post-effective
amendments) to this Registration Statement, together with all schedules and exhibits
thereto, and any subsequent registration statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, together with all schedules and exhibits thereto, (ii)
act on, sign and file such certificates, instruments, agreements and other documents as
may be necessary or appropriate in connection therewith, (iii) act on, sign and file any
supplement to any prospectus filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended, and (iv) take any and all actions which may be necessary or appropriate
to be done, as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them,
or their or his or her substitutes, may lawfully do or cause to be done by virtue hereof. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to the requirements of the
Securities Act of 1933, as amended, this Registration Statement has been signed by the
following persons in the capacities and on the dates indicated: </FONT></P>




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<TD WIDTH="25%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>Signature</U></B> </FONT> </TD>
<TD WIDTH="55%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>Title</U></B> </FONT> </TD>
<TD WIDTH="20%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>Date</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>


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<TD WIDTH="25%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Edouard Cukierman<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>Mr. Edouard Cukierman</FONT></TD>
<TD WIDTH="55%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chairman of the Board of Directors</FONT></TD>
<TD WIDTH="20%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 11, 2006</FONT></TD>
</TR>
</TABLE>
<BR>



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<TD WIDTH="25%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Shmuel Koren<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>Mr. Shmuel Koren</FONT></TD>
<TD WIDTH="55%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>President and Chief Executive Officer<BR>(Principal Executive Officer)</FONT></TD>
<TD WIDTH="20%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 11, 2006</FONT></TD>
</TR>
</TABLE>
<BR>


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<TD WIDTH="25%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Nehemia Kaufman<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>Mr. Nehemia Kaufman</FONT></TD>
<TD WIDTH="55%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chief Financial Officer<BR>(Principal Financial and Accounting Officer)</FONT></TD>
<TD WIDTH="20%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 11, 2006</FONT></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2>51</font></p>
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<page>


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<TD WIDTH="25%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>Mr. Adiv Baruch</FONT></TD>
<TD WIDTH="55%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD>
<TD WIDTH="20%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
</TR>
</TABLE>
<BR>



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<TD WIDTH="25%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>Mr. Joel Adler</FONT></TD>
<TD WIDTH="55%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD>
<TD WIDTH="20%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
</TR>
</TABLE>
<BR>



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<TD WIDTH="25%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Ronen Zavlik<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>Mr. Ronen Zavlik</FONT></TD>
<TD WIDTH="55%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD>
<TD WIDTH="20%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 5, 2006</FONT></TD>
</TR>
</TABLE>
<BR>


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<TR VALIGN=TOP>
<TD WIDTH="25%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Jean-Marc Bally<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>Mr. Jean-Marc Bally</FONT></TD>
<TD WIDTH="55%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD>
<TD WIDTH="20%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 11, 2006</FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH="25%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Andrea Mandel-Mantello<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>Mr. Andrea Mandel-Mantello</FONT></TD>
<TD WIDTH="55%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD>
<TD WIDTH="20%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 11, 2006</FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH="25%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Avishai Gluck<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>Mr. Avishai Gluck</FONT></TD>
<TD WIDTH="55%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD>
<TD WIDTH="20%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 11, 2006</FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH="25%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Yael Ilan<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>Dr. Yael Ilan</FONT></TD>
<TD WIDTH="55%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD>
<TD WIDTH="20%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 11, 2006</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH="25%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Adi Raveh<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>Prof. Adi Raveh</FONT></TD>
<TD WIDTH="55%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD>
<TD WIDTH="20%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 4, 2006</FONT></TD>
</TR>
</TABLE>
<BR><BR>

<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Authorized Representative in the U.S.:</B><BR><BR>Corporation Service Company
<BR><BR><B>By: </B>/s/ John H. Pelletier<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
John H. Pelletier<BR>Assistant Secretary<BR>December 11, 2006 </FONT> </TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>52</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
</body>
</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-5.1
<SEQUENCE>2
<FILENAME>exhibit_5-1.htm
<TEXT>
<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        \\Backup\office\EDGAR Filing\BOS better online solutions Ltd\63200\a63200.eep -->
     <!-- Control Number: 63200                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    BOS better online solutions Ltd                                  -->
     <!-- Project Name:   F-3                                                              -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>F-3</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="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 5.1</B></U> </FONT> </P>


<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="15%"><IMG SRC="apm.jpg"></TD>
     <TD WIDTH="85%"><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>Amit, Pollak, Matalon &amp; Co.</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Advocates and Notary</FONT></TD></TR>
</TABLE>
<BR>




<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 11, 2006 </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B.O.S Better Online
Solutions Ltd. <BR>Beit Rabin, Teradyon Industrial Park <BR>Misgav, 20179, Israel </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have acted as Israeli counsel to
B.O.S Better Online Solutions Ltd. (the &#147;Company&#148;), an Israeli corporation, in
connection with the Prospectus (the &#147;Prospectus&#148;) and Registration Statement on
Form F-3 (the &#147;Registration Statement&#148;) filed by the Company with the Securities
and Exchange Commission on the date hereof. The Registration Statement and Prospectus
relate to the issuance and sale of ordinary shares of the Company, nominal value NIS 4.00
per share (the &#147;Ordinary Shares&#148;) that are issuable upon exercise of
transferable share purchase rights that are being distributed by the Company to its
shareholders (the &#147;Rights&#148;). </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In so acting, we have examined such
corporate documents and have made such investigation of matters of fact and law as we have
deemed relevant and necessary as a basis for the opinion hereinafter set forth. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In such examination, we have assumed
the genuineness of all signatures, the legal capacity of natural persons, the authenticity
of all documents submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies and the
authenticity of the originals of such latter documents. As to all questions of fact
material to this opinion, we have relied, without independent investigation, upon
statements and certificates or comparable documents of officers and representatives of the
Company and upon certificates of public officials. We have considered such questions of
Israeli law as we have deemed necessary for the purpose of rendering this opinion. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are members of the Bar of the
State of Israel and, in rendering our opinion, we do not pass (expressly or by
implication) on the laws of any jurisdiction other than the State of Israel. Our opinion
relates only to Israeli laws. In addition, we render no opinion in relation to any
representation made or given in the Prospectus and Registration Statement. </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>


<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="15%"><IMG SRC="apm.jpg"></TD>
     <TD WIDTH="85%"><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>Amit, Pollak, Matalon &amp; Co.</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Advocates and Notary</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>Based upon such examination and
investigation, and upon the assumption that there will be no material changes in the
documents examined and the matters investigated, we are of the opinion that: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i)
          the Rights, if and when issued in accordance with the Prospectus, will be duly
          authorized and legally issued; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ii)
          the Rights, upon issuance in accordance with the Prospectus shall constitute
          binding obligations of the Company under the laws of the State of Israel. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iii)
          the Ordinary Shares, if and when issued in accordance with the terms of the
          Rights and the Prospectus, will be duly authorized, legally issued, fully paid
          and nonassesable. </FONT></P>



<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This opinion is furnished to you
solely in connection with the Prospectus and Registration Statement and is not to be used,
circulated, quoted or otherwise referred to for any other purpose without our express
prior written permission. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We hereby consent to the filing of
this opinion with the Securities and Exchange Commission as Exhibit 5.1 to the Registration
Statement and to the reference to our firm under the captions &#147;Legal Matters&#148;
and &#147;Enforceability of Civil Liabilities&#148; in the related Prospectus. The
issuance of such consent does not concede that we are an &#147;expert&#148; for the
purposes of the Securities Act of 1933, as amended. </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>Very truly yours,<BR><BR>
<BR>/s/ Amit, Pollak, Matalon &amp; Co.<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Amit, Pollak, Matalon &amp; Co.</FONT></TD>
</TR>
</TABLE>
<BR>

<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">
</body>
</html>



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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-8.1
<SEQUENCE>4
<FILENAME>exhibit_8-1.htm
<TEXT>
<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        \\Backup\office\EDGAR Filing\BOS better online solutions Ltd\63200\a63200.eep -->
     <!-- Control Number: 63200                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    BOS better online solutions Ltd                                  -->
     <!-- Project Name:   F-3                                                              -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>F-3</TITLE>
</HEAD>
<BODY>

<!-- MARKER FORMAT-SHEET="Scotch Rule Top-TNR" FSL="Workstation" -->
<HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE STYLE="margin-top: -5px">
<HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE STYLE="margin-top: -10px">


<!-- MARKER FORMAT-SHEET="Head Right-TNR" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 8.1</B></U> </FONT> </P>


<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PHILLIPS NIZER LLP
<BR>661 Fifth Avenue
<BR>New York, NY 10103
</FONT></P>

<!-- MARKER FORMAT-SHEET="Head Right-TNR" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 11, 2006 </FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B.O.S Better Online Solutions Ltd.
<BR>100 BOS Road
<BR>Teradyon  20179
<BR>Israel
</FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-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>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Re: </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Registration
Statement on Form F-3</U> </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>Ladies and Gentlemen: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have acted as special counsel to B.O.S Better Online Solutions Ltd., an Israeli
corporation (the &#147;Company&#148;) in connection with the registration and offering
(the &#147;Offering&#148;) pursuant to the Company&#146;s Registration Statement on Form
F-3 (the &#147;Registration Statement&#148;) of ordinary shares (the &#147;Shares&#148;) of the Company, nominal value NIS 4.00 per share (the &#147;Ordinary Shares&#148;) that
are issuable upon exercise of transferable share purchase rights that are being
distributed by the Company to its shareholders. In connection therewith, we have
participated in the preparation of the discussion (the &#147;Discussion&#148;) set forth
under the caption &#147;United States Tax Considerations&#148; in the prospectus included
in the Registration Statement (the &#147;Prospectus&#148;). Capitalized terms used and not
otherwise defined herein are used as defined in the Prospectus. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Discussion, subject to the qualifications stated therein, constitutes our opinion as to
the material United States federal income tax consequences for United States purchasers of
Shares pursuant to the Offering as of the date set forth above. We assume no obligation to
update this opinion. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
hereby consent to the filing of this opinion as an exhibit to the Registration Statement
and to the use of our name in the Discussion. The issuance of such consent does not
concede that we are an &#147;expert&#148; for the purposes of the Securities Act of 1933. </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>Very truly yours,<BR><BR>PHILLIPS NIZER LLP<BR>
<BR>By: /s/ Brian Brodrick <BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Brian Brodrick, Partner</FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2></font></p>
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>5
<FILENAME>exhibit_23-2.htm
<TEXT>
<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        \\Backup\office\EDGAR Filing\BOS better online solutions Ltd\63200\a63200.eep -->
     <!-- Control Number: 63200                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    BOS better online solutions Ltd                                  -->
     <!-- Project Name:   F-3                                                              -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>F-3</TITLE>
</HEAD>
<BODY>

<!-- MARKER FORMAT-SHEET="Scotch Rule Top-TNR" FSL="Workstation" -->
<HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE STYLE="margin-top: -5px">
<HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE STYLE="margin-top: -10px">


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<P ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 23.2</B></U> </FONT> </P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent of Independent
Registered Public Accounting Firm </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We consent to the reference to our
firm under the caption &#147;Experts&#148; in the Registration Statement on Form F-3 and
related prospectus of B.O.S. Better Online Solutions Ltd. (&#147;BOS&#148;) for the
issuance and sale of ordinary shares of the Company, nominal value NIS 4.00 per share that
are issuable upon exercise of transferable share purchase rights that are being
distributed by the Company to its shareholders, and to the incorporation by reference
therein of our report dated March 27, 2006, with respect to the consolidated financial
statements of BOS included in its Annual Report on Form 20-F/A, for the year ended
December 31, 2005, filed with the Securities and Exchange Commission. </FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 11, 2006
<BR>Tel-Aviv, Israel
</FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>/s/ Kost Forer Gabbay &amp; Kasierer
</U><BR>Kost Forer Gabbay &amp; Kasierer
<BR>A Member of Ernst &amp; Young Global </FONT>
</P>

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<TYPE>EX-23.3
<SEQUENCE>6
<FILENAME>exhibit_23-3.htm
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     <!-- Control Number: 63200                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    BOS better online solutions Ltd                                  -->
     <!-- Project Name:   F-3                                                              -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>F-3</TITLE>
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<P ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 23.3</B></U> </FONT> </P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONSENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We hereby consent to the
incorporation by reference in the Registration Statement on Form F-3 and related
prospectus of B.O.S. Better Online Solutions Ltd. (&#147;BOS&#148;) of our report dated
March 25, 2006 relating to the financial statements of Odem Electronic Technologies 1992
Ltd. that appear in BOS&#146;s Annual Report on Form 20-F/A, for the year ended December
31, 2005, filed with the Securities and Exchange Commission on September 7, 2006. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We also consent to the references to
us under the heading &#147;Experts&#148; in such Registration Statement. </FONT></P>

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<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR><BR>Jerusalem, Israel<BR>December 4, 2006</FONT></TD>
<TD WIDTH=60%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Kesselman &amp; Kesselman<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Kesselman &amp; Kesselman<BR>Certified Public Accountants (Israel)<BR>A member of PricewaterhouseCoopers <BR>International Limited</FONT></TD>
</TR>
</TABLE>
<BR>


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<DOCUMENT>
<TYPE>EX-23.4
<SEQUENCE>7
<FILENAME>exhibit_23-4.htm
<TEXT>
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     <!-- Control Number: 63200                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    BOS better online solutions Ltd                                  -->
     <!-- Project Name:   F-3                                                              -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>F-3</TITLE>
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<P ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 23.4</B></U> </FONT> </P>

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<P ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December
4, 2006 </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent of Expert </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We consent to the reference to our
firm under the caption &#147;Experts&#148; in the Registration Statement on Form F-3 and
related prospectus of B.O.S. Better Online Solutions Ltd. for the registration of
transferable rights, exercisable to purchase ordinary shares of the Company, nominal value
NIS 4.00 per share. </FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Variance Economic Consulting Ltd.
<BR>
<BR>By: <U>/s/ Variance Economic Consulting Ltd.
</U><BR>Name: Ram Levy
<BR>Title: Manager </FONT>
</P>


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<DOCUMENT>
<TYPE>EX-23.5
<SEQUENCE>8
<FILENAME>exhibit_23-5.htm
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     <!-- Control Number: 63200                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    BOS better online solutions Ltd                                  -->
     <!-- Project Name:   F-3                                                              -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>F-3</TITLE>
</HEAD>
<BODY>

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<P ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 23.5</B></U> </FONT> </P>

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<P ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 4, 2006 </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent of Expert </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We consent to the reference to our
firm under the caption &#147;Experts&#148; in the Registration Statement on Form F-3 and
related prospectus of B.O.S. Better Online Solutions Ltd. for the registration of
transferable rights, exercisable to purchase ordinary shares of the Company, nominal value
NIS 4.00 per share. </FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Melnik Oded Business Advisory Ltd.
<BR>
<BR>By <U>/s/ Melnik Oded Business Advisory Ltd.
</U><BR>Name: Oded Melnik
<BR>Title: Managing Director </FONT>
</P>

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