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<SEC-DOCUMENT>0001178913-04-001485.txt : 20041109
<SEC-HEADER>0001178913-04-001485.hdr.sgml : 20041109
<ACCEPTANCE-DATETIME>20041109091655
ACCESSION NUMBER:		0001178913-04-001485
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20041109
FILED AS OF DATE:		20041109
DATE AS OF CHANGE:		20041109

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			NOVA MEASURING INSTRUMENTS LTD
		CENTRAL INDEX KEY:			0001109345
		STANDARD INDUSTRIAL CLASSIFICATION:	OPTICAL INSTRUMENTS & LENSES [3827]
		IRS NUMBER:				000000000

	FILING VALUES:
		FORM TYPE:		6-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-30668
		FILM NUMBER:		041127562

	BUSINESS ADDRESS:	
		STREET 1:		PO BOX 266
		STREET 2:		011-972-8-938-7505
		CITY:			REHOVOT ISRAEL
		STATE:			L3
		ZIP:			76100
</SEC-HEADER>
<DOCUMENT>
<TYPE>6-K
<SEQUENCE>1
<FILENAME>zk41108.htm
<TEXT>
<HTML>
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     <!-- Control Number: 41108                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    Nova Measuring Istruments Ltd                                    -->
     <!-- Project Name:   6-K                                                              -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>6-K</TITLE>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4>FORM 6-K </FONT></H1>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><U><B>SECURITIES AND
EXCHANGE COMMISSION</B>  </U></FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Washington, D.C. 20549<BR>Report
of Foreign Private Issuer<BR>Pursuant to Rule 13a-16 or 15d-16 <BR>of the Securities
Exchange Act of <BR>1934</FONT></P>


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date of Report:
November 8, 2004 </FONT></P>

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<p ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="5"><B><U>NOVA MEASURING
INSTRUMENTS LTD.</U></B> </FONT></p>

<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Building 22 Weitzmann
Science Park, Rehovoth </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>P.O.B 266 </FONT></P>



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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Indicate by check mark whether the registrant files or will file annual reports under
cover Form 20-F or Form 40-F. </FONT></TD>
</TR>
</TABLE>
<BR>

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

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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Indicate by check mark whether the registrant by furnishing the information contained in
this Form is also thereby furnishing the information to the Commission pursuant to Rule
12g3-2(b) under the Securities Exchange Act of 1934. </FONT></TD>
</TR>
</TABLE>
<BR>

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

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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
If
&#147;Yes&#148; is marked, indicate below the file number assigned to the registrant in
connection withRule 12g3-2(b): N/A.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Attached hereto as Exhibit 99.1 and
incorporated by way of reference herein the Registrant&#146;s Notice of Annual General
Meeting of Shareholders and Proxy Statement. </FONT></P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to the requirements of the
<U>Securities Exchange Act of 1934</U>, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized. </FONT></P>

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<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Nova Measuring Instruments Ltd </B><BR>(the "Registrant")<BR>
<BR>BY: /S/ Chai Toren<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Chai Toren<BR>VP Finance and Operations</FONT></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date : November 8<SUP>th</SUP>,
2004 </FONT></P>

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

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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 99.1:  </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>
Notice of Annual Meeting of Shareholders and Proxy Statement.  </FONT></TD>
</TR>
</TABLE>
<BR>


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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>2
<FILENAME>exhibit_99-1.htm
<TEXT>
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     <!-- Control Number: 41108                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    Nova Measuring Istruments Ltd                                    -->
     <!-- Project Name:   6-K                                                              -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>6-K</TITLE>
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<P ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 99.1</B></U> </FONT> </P>

<P ALIGN="CENTER"><IMG SRC="nova.jpg"></P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Nova Measuring Instruments Ltd.<BR>Notice of Annual General Meeting of Shareholders</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;Notice
is hereby given that the Annual General Meeting of the Shareholders of Nova Measuring
Instruments Ltd. (the &#147;Company&#148;) will be held on November 30, 2004 at 17:00
local time in Israel, at the Company offices, Weizmann Science Park, P.O.B. 266, Rehovoth
76100, Israel. The Annual General Meeting of Shareholders is for the following purposes: </FONT></P>

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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>1.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To review
and discuss the Company&#146;s audited financial statements for the year ended on
December 31, 2003; </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>2.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To elect
seven directors to the Company&#146;s Board of Directors, none of which are to serve as
external directors; </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>3.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To
reappoint Brightman Almagor &amp; Co. as the independent auditors of the Company for the
year ending on December 31, 2004 and to authorize the Board of Directors to fix the
remuneration of the auditors; </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>4. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To add
to the Articles of Association a new Article 7 at the end of Chapter J as follows: </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&#147;Notwithstanding
Article 6 a to the Israeli Securities Regulations (Tender Offer), 2000 (the &#147;<B>Regulations</B>&#148;),
a Special Tender Offer, as such term is defined under the Regulations, shall not be
accepted by any Offeree, as such term is defined under the Regulations, unless the terms
of such Special Tender Offer states that the Acceptance Period, as such term is defined
under the Regulations, is not less than forty-five (45) days but not more than sixty (60)
days from the date of the specifications, as such term is defined under the Regulations,
on a day of trade.&#148; </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>5.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To transact
such other business as may properly come before the Annual General Meeting of
Shareholders or at any adjournment thereof. </FONT></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2></font></p>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shareholders of record as of the
close of business on October 24, 2004 (the &#147;Record Date&#148;) are entitled to notice
of and to vote at the Annual General Meeting of Shareholders. Beneficial owners who hold
their shares through members of the Tel Aviv Stock Exchange (&#147;TASE&#148;) may either
vote their shares in person at the Meeting by presenting a certificate signed by a member
of the TASE which complies with the Israeli Companies Regulations (Proof of Ownership for
Voting in General Meetings) &#150; 2000, as proof of ownership of the Shares or send such
certificate together with a duly executed proxy as described below. All shareholders are
cordially invited to attend the meeting in person. Shareholders who are unable to attend
the meeting in person are requested to complete, date and sign the enclosed form of proxy
and return it promptly in the preaddressed envelope provided. Envelopes will be postage
paid in the United States.<B> </B>Shareholders who attend the meeting may revoke their
proxies and vote their shares in person. </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>A copy of the Company&#146;s
audited financial statements for the year ended on December 31, 2003 is attached hereto,
and is being mailed with this notice and the enclosed Proxy Statement to shareholders of
record on the Record Date.</B> </FONT></P>

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

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Giora Dishon, Director,
President and CEO of the Company </FONT></H1>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>November 8, 2004 </FONT></H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nova Measuring
Instrument Ltd. <BR>Weizmann Science Park </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>P.O.B. 266, Rehovoth
76100, Israel <BR>Tel: 972-8-9387505 </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>Fax: 972-8-940776 </FONT></H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Proxy Statement <BR>For the
Annual General Meeting of Shareholders </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>To be held on November
30, 2004 at 17:00 </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>At the Company&#146;s
Registered Offices </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
Proxy Statement is furnished in connection with the solicitation of proxies by the Board
of Directors of Nova Measuring Instruments Ltd. (the &#147;Company&#148;) for use at the
Annual General Meeting of Shareholders (&#147;Shareholders Meeting&#148;) to be held at
the Company offices, Weizmann Science Park, P.O.B. 266, Rehovoth 76100, Israel, on
November 30, 2004 at 17:00 local time in Israel and at any adjournments thereof. <B>All
proxies will be voted in accordance with the shareholders&#146; instructions, and if no
choice is specified, the enclosed proxy card (or any signed and dated copy thereof) will
be voted in favor of the matters set forth in the accompanying Notice of Meeting.</B> Any
proxy may be revoked by a shareholder at any time before it is exercised by: (i)
delivering written revocation or a later dated proxy to Mr. Chai Toren, Chief Financial
Officer of the Company; or (ii) attending the Shareholders Meeting and voting in person. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Only
shareholders of record as of the close of business on October 24, 2004, the record date
fixed by the Company, will be entitled to vote at the Shareholders Meeting and at any
adjournments thereof. As of October 24, 2004, there were an aggregate of approximately
15,300,000 shares of common stock, par value NIS 0.01 per share, of the Company (the
&#147;Ordinary Shares&#148;) outstanding and entitled to vote. Each Ordinary Share is
entitled to one vote. </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 named Dr. Giora Dishon and Chai Toren, and each of them
acting individually, as proxy. All properly executed proxies returned in time to be
counted at the Shareholders Meeting will be voted as stated below under &#147;Voting
Procedures.&#148; Any shareholder giving proxy has a right to withhold authority to vote
for any individual nominee to the Board of Directors (as described in Item 2 herein below)
on the proxy card for that purpose and marking the appropriate &#147;FOR ALL EXCEPT&#148;
box on the proxy card. </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 knows of no matter other than those set forth below and in the
accompanying Notice of Annual General Meeting of Shareholders to be presented at the
Shareholders Meeting. If any other matter upon which a vote may properly be taken should
be presented at the Shareholders Meeting, Ordinary Shares represented by all proxies
received by the Board of Directors will be voted with respect thereto in accordance with
the judgment of the persons named as proxy. </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Beneficial Ownership
of Securities by Certain Persons </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table shows the number of ordinary shares beneficially owned by persons known by
us to own beneficially more than five percent of the Company&#146;s ordinary shares, as of
June 30, 2004. </FONT></P>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN="3" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Name</FONT><HR WIDTH=95% SIZE=1 COLOR=#808080 NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Number of Ordinary<BR>
Shares Beneficially<BR>
Owned*</FONT><HR WIDTH=95% SIZE=1 COLOR=#808080 NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Percentage of Ordinary<BR>
Shares<BR>
Beneficially Owned<BR>
</FONT><HR WIDTH=95% SIZE=1 COLOR=#808080 NOSHADE></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>
     <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=64% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Clal Electronics Industries Ltd (1)</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=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,823,584</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18.5</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Inventech Investments Co  Ltd</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>1,165,221</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>7.6</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Teuza - A Fairchild Technology Venture Ltd</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>1,661,327</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>10.9</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Austin W  Marxe &amp; David Greenhouse (2)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,094,277</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>13.8</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tamir Fishman Ventures II, L L C (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>894,600</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>5.9</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shai Saul (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>894,600</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>5.9</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Michael Elias (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>901,850</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>5.9</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tamir Fishman &amp; Co  Ltd (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>899,700</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>5.9</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Eldad Tamir (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>899,700</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>5.9</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Danny Fishman (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>899,700</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>5.9</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Capital Group International, Inc, and 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></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;International, Inc (4)</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>774,800</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>5.1</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Giora Dishon (5)</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>766,282</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>5.0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</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></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Unless
specifically stated otherwise, the information provided hereinabove is based upon
information contained in filings made by the named person with the U.S. Securities and
Exchange Commission (&#147;SEC&#148;) pursuant to Regulation 13D-G. </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>(1) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
following information is contained in Schedule 13D (Amendment No. 2) filed
                    on December 18, 2003 by, among others, Clal Electronics Industries
Ltd.: each of                     Clal Electronics Industries Ltd., Clal Industries and
Investments Ltd., IDB                     Development Corporation Ltd., IDB Holding
Corporation Ltd., Nochi Dankner                     (Chairman of Clal Industries), Shelly
Dankner-Bergman (Director of Clal                     Industries), Avraham Livnet and
Ruth Manor reported having shared voting and                     dispositive control over
2,823,584 Ordinary Shares. In November and December                     2003, this group
sold approximately 255,000 of the Company&#146;s Ordinary                     Shares. </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>(2) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As
reported on the Schedule 13G (Amendment 3) filed by Messrs. Marxe and
                    Greenhouse on March 17, 2004, the amount indicated includes 477,178
shares held                     by Special Situations Cayman Fund, L.P., 70,831 Ordinary
Shares held by Special                     Situations Technology Fund, L.P., 356,969
Ordinary Shares owned by Special                     Situations Technology Fund II, L.P.
and 1,189,299 Ordinary Shares held by                     Special Situations Fund III,
L.P. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px">
<HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<P STYLE="page-break-after:always"></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>(3) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
following information is contained in a Schedule 13G (Amendment No. 1) filed
                    by, among others, Tamir Fishman Ventures II, L.L.C. (&#147;TFV&#148;),
on                     February 13, 2004: (a) Five limited partnerships and a corporation
directly                     beneficially own, in the aggregate, 894,600 Ordinary Shares;
(b) TFV                     beneficially owns 894,600 Ordinary Shares as the sole general
partner of the                     five limited partnerships and by virtue of its
management rights with respect to                     a corporation ; (c) Shai Saul, is a
managing member of TFV; (d) Michael Elias is                     a managing member of TFV
and reports having sole voting and dispositive power                     over an
additional 7,250 Ordinary Shares; (d) Tamir Fishman &amp; Co. Ltd is a
                    managing member of TFV and reports directly owning 5,100 additional
Ordinary                     Shares; (e) Eldad Tamir and Danny Fishman are each
Co-President and Co-CEO of                     Tamir Fishman &amp; Co. Ltd. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&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>As
reported in Schedule 13G filed by Capital Group International, Inc.                     (&#147;CGII&#148;)
and Capital International Inc., on February 13, 2004, Capital
                    International Inc. is deemed to beneficially own 774,800 Ordinary
Shares and                     CGII may be deemed to beneficially own 774,800 Ordinary
Shares, but does not                     have investment or voting power over such
securities. </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>(5) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Includes
Ordinary Shares held in trust under Israeli tax law for the benefit of
                    the named shareholder and options to purchase 68,341 Ordinary Shares,
which are                     exercisable within 60 days of July 1,&nbsp;2004. Dr. Dishon
supplied to the                     Company information about his beneficial ownership. </FONT></TD>
</TR>
</TABLE>
<BR>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Directors and Senior
Management </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
Company&#146;s directors and senior management are as follows: </FONT></P>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN="3" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Name</FONT><HR WIDTH=95% SIZE=1 COLOR=#808080 NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Age</FONT><HR WIDTH=95% SIZE=1 COLOR=#808080 NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Position</FONT><HR WIDTH=95% SIZE=1 COLOR=#808080 NOSHADE></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>
     <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=21% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Barry Cox *</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=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>64</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=69% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chairman of the Board of Directors</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% 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>Giora Dishon</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>59</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>President, Chief Executive Officer, Director and Co-Founder</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>Moshe Finarov **</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>52</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>Vice President, Chief Technology Officer, Director and Co-Founder</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>Chai Toren *</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</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>Vice President, Chief Financial Officer</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>Gad Yaron *</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>53</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>Vice President, Chief Operational Officer</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>Ronen Frish *</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>47</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>Vice President, Sales and Marketing</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>Micha Brunstein*</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>60</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>Director</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>Avi Kerbs *</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>57</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>Director</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>Joseph Ciechanover *</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>71</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>Director</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>Alon Dumanis *</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>61</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>Director</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>Lauri Hanover</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>44</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>External Director</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>Karrey Holland</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</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>External Director</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>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>* Each one of these persons
beneficially owns less than one percent of the Company&#146;s Ordinary Shares. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>** Dr. Finarov owns 4.65% of the
Company&#146;s outstanding Ordinary Shares. </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">
<P STYLE="page-break-after:always"></P>


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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Compensation of
Directors and Senior Management </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
aggregate direct remuneration paid or payable to all 13 persons who served in the capacity
of director or executive officer during 2003 was approximately $900,000, including
approximately $250,000, which was set aside for pension and retirement benefits, and
amounts expended by the Company for automobiles made available to the Company&#146;s
officers. </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
Israeli law, the maximum amount payable to external directors is: an annual payment in an
amount of ranging from NIS 26,000 to 42,245 and an additional per meeting payment ranging
from NIS 915 to NIS 1,625. However, for an Israeli company with shares traded on an
exchange outside of Israel that is subject to laws imposing upon the external directors
demands exceeding the demands imposed upon external directors by Israeli law, then the
maximum amount payable to the external directors is NIS 100,000 per annum and NIS 3,000
per meeting. The Company has approved the terms of remuneration to the Company&#146;s
external directors according to which each external director shall receive remuneration
comprised of: an annual payment in the amount of NIS 34,122 (approximately $7,600) and an
additional per meeting payment of NIS 1,270 (approximately $300). These amounts are within
the range of payments to external directors permitted under Israeli law Israeli Law and,
therefore, the Company is not required to obtain shareholder approval with respect to the
remuneration paid to the external directors. </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
November 7, 2001, the Company&#146;s shareholders approved payment of remuneration to the
Company&#146;s directors, in the same amounts as mentioned above for the external
directors. The total amount paid or payable to the directors, including external
directors, for 2004 is $105,000. In 2003, this amount was $122,000. </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 5, 2002, the Company&#146;s Board of Directors and the Company&#146;s Audit
Committee approved the issuance of options to directors according to the following: </FONT></P>



<TABLE CELLPADDING=3 CELLSPACING=0 BORDER=0 WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN="3" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Name of directors</FONT><HR WIDTH=95% SIZE=1 COLOR=#808080 NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Position</FONT><HR WIDTH=95% SIZE=1 COLOR=#808080 NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1># of options</FONT><HR WIDTH=95% SIZE=1 COLOR=#808080 NOSHADE></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>
     <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=27% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Giora Dishon</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=55% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director, CEO &amp; President</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=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>60,000</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>Moshe Finarov</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>Director &amp; CTO</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>50,000</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>Meir Shannie</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>Former Director (resigned June, 2003)</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>Avi Kerbs</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>Director</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>Joseph Ciechanover</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>Director</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>
</TABLE>
<BR>

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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
grants were approved by the shareholders on October 31, 2002. The options were granted
during 2003 and are subject to the terms and conditions of the Company&#146;s Option Plan
6. The options vest over a period of between one and three years and their term may not
exceed seven years from the date of grant. The exercise price of these options is $2.06
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;As
of May 15, 2003, we entered into an agreement with Mr. Barry L. Cox according to which Mr.
Cox serves as chairperson of our board of directors. Under the agreement, Mr. Cox is
entitled to gross annual compensation of $50,000 as well as a one-time grant of an option
to purchase up to 50,000 ordinary shares of the Company, at the fair market value of the
shares at the time of grant. The option vests during a three-year period so that a third
of the entire amount granted to Mr. Cox shall be exercisable upon each anniversary of the
grant. The terms of this agreement were approved by the Company&#146;s shareholders on
September 1, 2003. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
May 15, 2003, the Company&#146;s Board of Directors and Audit Committee resolved (i) that
the monthly gross salary of Dr. Dishon shall be increased to 44,000 NIS for the period
February 1, 2003 through July 31, 2003 and increased to 50,000 NIS starting on August 1,
2003 and (ii) that the monthly gross salary of Dr. Finarov shall be increased to 40,000
NIS for the period February 1, 2003 through July 31, 2003 and increased to 44,000 NIS
starting on August 1, 2003. These changes in the terms of compensation for Dr. Dishon and
Dr. Finarov were approved by the Company&#146;s shareholders on September 1, 2003. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
July 1, 2003, and on July 10, 2003 the Company&#146;s Audit Committee and Board of
Directors, respectively, resolved to grant each of Lauri Hanover and Karrey Holland, the
Company&#146;s external directors, options to purchase up to 10,000 Ordinary Shares under
the terms of Option Plan 6, the same terms under which all other directors were granted
options. Option Plan 6 was approved by the Company&#146;s shareholders on October 31, 2002
and the issuance of the options to the Company&#146;s external directors was approved by
the Company&#146;s shareholders on September 1, 2003. Options were granted and are subject
to the same exercise price ($2.06 per share) and other terms under which all other
directors were granted with the options under Option Plan 6. </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 30, 2004, the Company&#146;s Board of Directors and the Company&#146;s Audit
Committee approved the issuance of options to directors according to the following: </FONT></P>



<TABLE CELLPADDING=3 CELLSPACING=0 BORDER=0 WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN="3" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Name of directors</FONT><HR WIDTH=95% SIZE=1 COLOR=#808080 NOSHADE></TH>
     <TH COLSPAN="3" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Position</FONT><HR WIDTH=95% SIZE=1 COLOR=#808080 NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Number of<BR>
options</FONT><HR WIDTH=95% SIZE=1 COLOR=#808080 NOSHADE></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>
     <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=33% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Giora Dishon</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=45% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director, CEO &amp; President</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>65,000</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>Moshe Finarov</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>Director &amp; CTO</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>55,000</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>Micha Brunstein</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>Director</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>Avi Kerbs</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>Director</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>Joseph Ciechanover</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>Director</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>Alon Dumanis</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>Director</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>Lauri Hanover</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>Director</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>Karey Holland</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>Director</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>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
grants were approved by the shareholders on March 31, 2004. The options were granted in
March 2004 and are subject to the terms and conditions of the Company&#146;s Option Plan
7A. The options vest over a period of between one and four years and their term may not
exceed seven years from the date of grant. The exercise price of these options is $5.15
per share. </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Board of
Directors&#146; Committees </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
Company&#146;s Board of Directors has established the following committees: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>The
Audit Committee</U> is comprised of three members, as required under Israeli law. The
members are Lauri Hanover, Karey Holland and Joseph Chiechanover. The functions of the
audit committee according to Israeli Law are to locate deficiencies in the business
management of the Company in consultation with the Company&#146;s auditors and to suggest
the measures to be taken regarding such deficiencies. The Audit Committee is also
responsible for approving related party transactions. In addition, the Audit Committee is
responsible for the approval of all audit and non-audit services provided to the Company
by Deloitte &amp; Touche. The Company&#146;s Board of Directors has determined that Lauri
Hanover qualifies as an audit committee financial expert. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>The
Compensation Committee</U> is comprised of Karey Holland, Avi Kerbs and Lauri Hanover.
The function of the Compensation Committee is to recommend the compensation of
Company&#146;s directors, senior management and employees (subject to provisions regarding
related party transactions). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>The
Investment Committee</U> is comprised of Lauri Hanover and Alon Dumanis. The Company
intends to appoint another member of the Investment Committee. The function of the
Investment Committee is to review and recommend the cash investment policy for the cash
reserves of the Company. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>The
Strategic Committee</U> is comprised of Giora Dishon, Avi kerbs, Barry Cox and Micha
Brunstein. The function of the Strategic Committee is to recommend and develop strategic
and long-term plans and goals for the Company </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>ITEM NO. 1</U> </FONT> </H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PROPOSAL FOR REVIEW
AND DISCUSSION OF THE COMPANY&#146;S<BR> FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
2003 </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
copy of the Company&#146;s audited financial statements for the year ended on December 31,
2003 is attached hereto and will be presented to the shareholders at the Shareholders
Meeting for review. </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>ITEM NO. 2</U> </FONT> </H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PROPOSAL FOR ELECTION
OF DIRECTORS </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
Articles of Association of the Company provide that the Board of Directors shall consist
of no fewer than five and no more than nine directors. Presently there are nine members of
the Board of Directors. Of the nine current directors, two were elected to serve as
external directors as required under the Israeli Companies Law &#151; 1999 (the
&#147;Companies Law&#148;). Pursuant to the Companies Law, external directors serve for a
term of three years and may be reelected to only one additional three-year term. Directors
of the Company who are not elected to serve as external directors under the Companies Law
become directors when they are elected by the shareholders of the Company and serve as
directors until the conclusion of the next Annual General Meeting of Shareholders, unless
the office is earlier vacated under any relevant provision of the Company&#146;s Articles
of Association. A director who is appointed by the Company&#146;s Board of Directors to
fill a vacancy on the Board of Directors serves until the conclusion of the next General
Meeting of Shareholders at which directors are elected. </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
the persons named below as nominees are current members of the Company&#146;s Board of
Directors. If elected, the nominees will serve for a period of one year or until their
respective successors are duly elected and shall qualify, as the case may be, unless the
office is earlier vacated under any relevant provision of the Company&#146;s Articles of
Association. </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
the absence of instructions to the contrary, the persons named in the enclosed proxy will
vote the Ordinary Shares represented thereby &#147;For&#148; the election of the nominees
listed below. If any of such nominees is unable to serve, the persons named in the proxy
will vote the Ordinary Shares for the election of such other nominees as the
Company&#146;s Board of Directors may propose. The nominees have advised that they will
serve as directors if re-elected. </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
following table and paragraphs provide certain relevant information concerning each
director and external director nominee, including the nominee&#146;s past and present
principal occupation: </FONT></P>


<TABLE CELLPADDING="3" CELLSPACING="0" WIDTH="600">
<TR VALIGN=Bottom>
     <TH COLSPAN="3" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>NOMINEE</FONT><HR WIDTH=95% SIZE=1 COLOR=#808080 NOSHADE></TH>
     <TH COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>AGE</FONT><HR WIDTH=95% SIZE=1 COLOR=#808080 NOSHADE></TH>
     <TH COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>POSITION</FONT><HR WIDTH=95% SIZE=1 COLOR=#808080 NOSHADE></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>
     <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="54%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Barry L. Cox</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="7%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="4%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>64</FONT></TD>
        <TD WIDTH="8%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="23%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD>
     <TD WIDTH="1%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="CENTER"><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>Joseph Ciechanover</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="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>71</FONT></TD>
        <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Avi Kerbs</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="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>57</FONT></TD>
        <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dr. Alon Dumanis</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="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>61</FONT></TD>
        <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dr. Giora Dishon</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="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>59</FONT></TD>
        <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dr. Moshe Finarov</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="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>52</FONT></TD>
        <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Micha Brunstein</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="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>60</FONT></TD>
        <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>
<BR>

<p align=center>
<font size=2></font></p>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Barry
L. Cox </I>has<I> </I>served as chairman of the Board of Directors of the Company since
May 15, 2003. During the years 2001 and 2002 Mr. Cox served as chairman of the board of
directors of MorphICs Technology Inc. and from 1998 to 2000, he served as chairman of the
board of directors of Quantum Effect Devices Inc. Mr. Cox also served as chief executive
officer of Weitek Corporation from 1993 to 1995, and before that filled various roles in
Intel Corporation, the last of which was president of Intel Europe. Mr. Cox hold a B.S. in
engineering from the U.S. Air Force Academy and an MBA from Boston University. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Joseph
Ciechanover</I> served as a director of the Company from October 1996 until December 1998
and again from February 2000 until the present. He is the founder and president of the
Challenge Fund-Etgar L.P., a venture capital firm, and he served as chairman of the board
of directors of El-Al Israel Airlines from 1995 until 2001. He served as a member of the
advisory committee of the Bank of Israel from 1980 to 1994 and as the president and a
member of the board of directors of PEC Israel Economic Corporation, a diversified
investment company. Dr. Ciechanover holds a law degree from the Hebrew University in
Jerusalem, an L.L.M. from the University of California at Berkeley and a Ph.D. in
philosophy from Boston University. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Mr.
          Avi Kerbs</I> has served as a director of the Company since 1993. He serves as
          president and chief executive officer of Teuza Management and Development Ltd.,
          the management company of Teuza-A Fairchild Technology Venture Ltd., a venture
          capital company and had done so since 1991. He has served as a director of most
          of the companies comprising the investment portfolio of the Teuza Fund. Mr.
          Kerbs is also a director of&nbsp;DSS Inc., the shares of which are currently
          traded on the NASDAQ Smallcap market, and two other Israeli companies.&nbsp;Mr.
          Kerbs holds a B.Sc. in Industrial Engineering and Management and an M.Sc. in
          Management, both from the Technion in Haifa-the Technology Institute of Israel.
          Mr. Kerbs was originally appointed to our board of directors by Teuza.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Dr.
          Giora Dishon </I>is a co-founder of the Company and has served as President and
          Chief Executive Officer since the Company&#146;s formation in 1993. Dr. Dishon
          has been a director of the Company since 2002. From 1989 to 1993 he served as
          thin film and flat panel display product line manager at Orbot Systems and
          Orbotech Ltd., a manufacturer of automated optical inspection equipment. From
          1986 to 1988 he was a visiting scientist at the Microelectronics Center of
North           Carolina, and from 1982 to 1986 he served as managing director of AVX
Israel           Ltd., a manufacturer of electronic devices. Dr. Dishon holds a B.Sc. in
          chemistry, an M.Sc. and a Ph.D. in materials science from the Hebrew University
          in Jerusalem.  </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">
<P STYLE="page-break-after:always"></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Dr.
          Moshe Finarov </I>is a co-founder of the Company, a current member of the Board
          of Directors and has served as Chief Technology Officer since the Company&#146;s
          formation in 1993. From 1989 to 1993 he served as senior physicist at Orbotech
          and from 1978 to 1988 he was employed at the ENIMS and PULSAR Institutes of
          Research in Moscow. Dr. Finarov holds a Ph.D. in semiconductor physics from
          Moscow University.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Dr.
          Alon Dumanis</I>, serves as chief executive officer of Docor International
          Management, a Dutch venture capital subsidiary of The Van-Leer group
Foundation.           Dr. Dumanis serves as member of various companies&#146; boards of
directors,           including El Al Israel Airlines, Inventech and others. Previously,
Dr. Dumanis           was the Head of the material command in the Israel Air Force with
the rank of           Brigadier General. Dr. Dumanis currently serves as chairperson and
member of           several national steering committees and is the author of many papers
published           locally and internationally in a number of subject areas, including
technology           and management. Dr. Dumanis holds a Ph.D. in Aerospace Engineering
from Purdue           University in the United States.  </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;<I>Dr.
          Micha Brunstein</I> was elected as director of Nova during November 2003 by the
          other members of the board of directors. During the years 1983 to 1999, Dr.
          Brunstein served as a Managing Director of Applied Materials Israel Ltd. Prior
          to that, Dr, Brunstein served as President of Opal Inc. and as a Director of
New           Business development in Optrotech Ltd. At present, Dr. Brunstein serves as
the           chairman and board member of several Israeli companies, as well as the
Israel           Association of Electronics Industries and the Israel-US chamber of
Commerce and           Industry. Dr. Brunstein holds B.Sc. in Mathematics and Physics
from the Hebrew           University, Jerusalem, and M.Sc. and Ph.D. degrees in Physics
from the Tel Aviv           University.  </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
following resolutions electing directors is proposed for consideration by the
shareholders: </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;<B>RESOLVED</B>,
<B>to elect Barry Cox, Joseph Ciechanover, Micha Brunstein, Avi Kerbs, Giora Dishon, Moshe
Finarov and Alon Dumanis as Directors to serve for a period of one year or until their
respective successors are duly elected and shall qualify</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
Board of Directors expresses no recommendation as to the vote on the above resolutions. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>ITEM NO. 3</U> </FONT> </H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PROPOSAL TO APPOINT THE<BR>INDEPENDENT
PUBLIC ACCOUNTANTS OF THE COMPANY </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
Board of Directors has selected the accounting firm of Brightman Almagor &amp; Co. as the
independent certified public accountants of the Company for the year ending on December
31, 2004. The Board of Directors believes that the selection of Brightman Almagor &amp; Co
as independent public accountants is appropriate and in the best interests of the Company
and its shareholders. Brightman Almagor &amp; Co has audited the Company&#146;s books and
accounts and performed other accounting services for the Company since 1994. Brightman
Almagor &amp; Co. performed the Company&#146;s annual audit for the fiscal year ended
December 31, 2003. </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">
<P STYLE="page-break-after:always"></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
shareholders of the Company are requested to adopt the following resolution: </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>RESOLVED,
to appoint Brightman Almagor &amp; Co</B>.<B> as the independent auditors of the Company
for the year ending December 31, 2004, and to authorize the Board of Directors to fix the
remuneration of such auditors in accordance with the volume and nature of their services.</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
Board of Directors recommends that the shareholders vote &#147;FOR&#148; the ratification
of Brightman Almagor &amp; Co.&#145;s selection as the independent public accountants of
the Company. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>ITEM NO. 4</U> </FONT> </H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PROPOSAL TO AMEND THE
ARTICLES OF ASSOCIATION OF THE COMPANY </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Background: </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;Section
328(a) of the Companies Law states that any purchase which will result in the purchaser
becoming: (a) an owner of a controlling stake (i.e. shares which provide 25% or more of
the total voting rights in the General Meeting), unless there is another shareholder
holding a controlling stake; or (b) a holder of more than 45% of the Company&#146;s voting
rights, unless there is a shareholder holding more than 50% of the Company&#146;s voting
rights, may only be made through a tender offer regulated under the provisions of the
Companies Law ( a &#147;<B>Special Tender Offer</B>&#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;Section
329 of the Companies Law provides that a company&#146;s board of directors is required to
provide its opinion regarding the adequacy of the offer, or in the event that is refrains
from doing so, to provide reasons for its abstention. </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;Section
330(b) of the companies Law allows an officer to negotiate with the purchaser over the
terms of the offer or with third parties for the purpose of putting forward a competing
tender offer. </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;Sections
331(a) and (b) of the Companies Law provides that a Special Tender Offer shall be
addressed to <I>all of the shareholders. </I>The shareholders will be entitled to accept
or reject the offer. An offer will not be approved unless a majority of the shares held by
shareholders who either accepted or rejected the offer have supported it. </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
331(d) of the Companies Law determines that in the event that the majority of the
shareholders approve the Special Tender Offer, the shareholders who have objected to the
offer, or failed to either accept or reject the offer, shall nevertheless be entitled to
accept the offer and sell their shares. </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;According
to Article 6 to the Israeli Securities Regulations (Tender Offer), 2000, the Acceptance
Period for a Special Tender Offer shall be of not less than 21 days and not more than 60
days. </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">
<P STYLE="page-break-after:always"></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;As
stated above, the Companies Law allows the Company officers to negotiate with the
potential purchaser or with third parties for the purpose of putting together a competing
offer. </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;However,
the minimum Acceptance Period defined under Israeli Law (i.e 21 days) may be insufficient
to put together such a competing offer or to negotiate with the purchaser over the terms. </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;Therefore,
it is proposed to determine a longer Acceptance Period time period in which the officers
will be allowed to put together a competing offer or negotiate with the purchaser over the
terms of the Special Tender Offer. </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
shareholders are requested to resolve as follows: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>RESOLVED, To add to the Articles
of Association a new Article 7 at the end of Chapter J, as follows:</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;<B>&#147;Notwithstanding
Article 6 of the Israeli Securities Regulations (Tender Offer), 2000 (the
&#147;Regulations&#148;), a Special Tender Offer, as such term is defined under the
Regulations, shall not be accepted by any Offeree, as such term is defined under the
Regulations, unless the terms of such Special Tender Offer states that the Acceptance
Period, as such term is defined under the Regulations, is not less than forty-five (45)
days, but not more than sixty (60) days from the date of the Specifications, as such term
is defined under the Regulations, on a day of trade.&#148;</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
Board of Directors recommends that the shareholders vote &#147;FOR&#148; the proposal to
amend the Articles of Association of the Company. </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;<b>Voting
Procedures</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
presence, in person or by their representative or by proxy, of at least two shareholders,
who hold in the aggregate at least one third (33.33%) of the Company&#146;s outstanding
Ordinary Shares entitled to vote at the Annual General Meeting is necessary to establish a
quorum for the transaction of business. Ordinary Shares represented by proxies pursuant to
which votes have been withheld from any nominee for director, or which contain one or more
abstentions or broker &#147;non-votes,&#148; are counted as present for purposes of
determining the presence or absence of a quorum for the Shareholders Meeting. A
&#147;non-vote&#148; occurs when a broker or other nominee holding shares for the
beneficial owner votes on one proposal, but does not vote on another proposal because the
broker does not have discretionary voting power and has not received instructions from the
beneficial owner. </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;Approval
of each proposal, other than with respect to the amendment to the Company&#146;s Articles
of Association, requires an affirmative vote of a majority of the Ordinary Shares present,
in person or represented by proxy, and voted on that matter. Approval to amend the
Company&#146;s Articles of Association requires an affirmative vote of at least seventy
five per cent (75%) of the Ordinary Shares present, in person or represented by proxy, and
voted on that matter. </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">
<P STYLE="page-break-after:always"></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;Abstentions,
as well as broker &#147;non-votes&#148; are not considered to have been voted for a matter
and have the practical effect of reducing the number of affirmative votes required to
achieve the majority for the approval of such matter by reducing the total number of
Ordinary Shares from which the majority is calculated. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Expenses and Solicitation</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;All
costs of solicitation of proxies will be borne by the Company. In addition to
solicitations by mail, certain of the Company&#146;s directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone, telegraph
and personal interviews. Brokers, custodians and fiduciaries will be requested to forward
proxy soliciting material to the owners of stock held in their names, and the Company will
reimburse them for their reasonable out-of-pocket costs. Solicitation by directors,
officers and employees of the Company may also be made of some stockholders in person or
by mail, telephone or telegraph following the original solicitation. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Annual Report on Form 20-F </B> </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company will provide without charge to each person solicited by this Proxy Statement, on
the written request of such person, a copy of the Company&#146;s Annual Report on Form
20-F, including financial statements and schedules thereto, as filed with the United
States Securities an Exchange Commission for its most recent fiscal year. Such written
request should be directed to Chai Toren, Chief Financial Officer at the address of the
Company set forth on the first page of this Proxy Statement. </FONT></P>


<p align=center>
<font size=2></font></p>
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`
end

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
