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<SEC-DOCUMENT>0001178913-06-001402.txt : 20060727
<SEC-HEADER>0001178913-06-001402.hdr.sgml : 20060727
<ACCEPTANCE-DATETIME>20060727093231
ACCESSION NUMBER:		0001178913-06-001402
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20060727
FILED AS OF DATE:		20060727
DATE AS OF CHANGE:		20060727

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:		06983143

	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>zk62760.htm
<TEXT>
<HTML>
<HEAD>
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     <!-- Control Number: 62760                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    Nova Measuring Istruments Ltd                                    -->
     <!-- Project Name:   6-K                                                              -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>6-K</TITLE>
</HEAD>
<BODY>

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

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4>FORM 6-K </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Report
of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 <BR>
of 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>For July 27, 2006 </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Commission File No.
000-30668 </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="5"><U>NOVA MEASURING
INSTRUMENTS LTD.</U> </FONT> </H1>

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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate
by check mark whether the registrant files or will file <BR>
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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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation <BR>
S-T Rule 101(b)(1): ____ </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation <BR>S-T Rule 101(b)(7) ____ </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD ALIGN="CENTER"><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 <BR>
also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the <BR>
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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<TR VALIGN=TOP>
<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If
&#147;Yes&#148; is marked, indicate below the file number assigned to the <BR>
registrant in
connection with Rule 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 and incorporated by
reference the Registrant&#146;s Notice of Annual General Meeting of Shareholders and Proxy
Statement for its 2006 Annual General Meeting.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This report on Form 6-K is hereby
incorporated by reference into the registration statements on Form S-8 filed by Nova
Measuring Instruments, Ltd. filed with the Securities and Exchange Commission on the
following dates: September 13, 2000 (File No. 333-12546); March 5, 2002 (File No.
333-83734); December 24, 2002 (File No. 333-102193); March 24, 2003 (File No. 333-103981);
May 17, 2004 (three files, File Nos. 333-115554, 333-115555, and 333-115556); March 7,
2005 (File No. 333-123158); and December 29, 2005 (File No. 333-130745). </FONT></P>

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

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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
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized. </FONT></P>




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<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR><BR><BR><BR>July 27, 2006</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>Nova Measuring Instruments Ltd<BR>
(the "Registrant")<BR><BR>
<BR>By: /s/ Dror David<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Dror David<BR>Chief Financial Officer</FONT></TD>
</TR>
</TABLE>
<BR>


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


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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nova Measuring
Instruments Ltd. </FONT></H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tel: (972-8) 9387505 </FONT></H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weizmann Science Park,
Building 22, Einstein St., Ness Ziona, Israel </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>Notice of Annual
General Meeting of Shareholders </FONT></H1>

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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 August 31<SUP>st</SUP>, 2006 at
17:00 local time in Israel, at the Company offices, Weizmann Science Park, Building 22,
Einstein St., Ness Ziona, 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>Review
and discussion of the Company&#146;s restated audited financial                statements
for the year ended December 31, 2004. </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>Review
and discussion of the Company&#146;s audited financial statements for the
               year ended December 31, 2005. </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>3. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Election
of six directors to the Company&#146;s Board of Directors, none of                which
are to serve as an external director. </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>Election
of one external Director to the Company&#146;s Board of Directors. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Reappointment
of Brightman Almagor &amp; Co. as the independent public                accountants of
the Company for the year ending December 31, 2006 and authorizing                the
Audit Committee 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>6. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Approval
of the amendments to the Articles of Association of the Company, with
               respect to exemption from liability, insurance and indemnity, in order to
ensure                that the Articles comply with Amendment no. 3 to the Companies Law
1999. </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>7. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Approval
of the amended Letter of Indemnification to be given to directors and
               officers of the Company as may serve from time to time. </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>8. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Approval
of severance arrangements with Mr. Barry Cox following his resignation
               from the position of Chairman and member of the Board of Directors of the
               Company. </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>9. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Approval
of&nbsp;the agreement between the Company and Dr. Micha Brunstein, the
               Chairman of the Board of Directors of the Company. </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>10. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Approval
of employment terms of the CEO of the Company, Dr. Giora Dishon, for                the
period July 1, 2005 through June 30, 2006. </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>11. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Approval
of employment agreement between the Company and the CEO of the Company,
               Dr. Giora Dishon. </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">
<page>

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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>12. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Approval
of employment terms of the Chief Technology Officer of the Company, Dr.
               Moshe Finarov, for the period July 1, 2005 through June 30, 2006. </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>13. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Approval
of employment agreement between the Company and the Chief Technology
               Officer of the Company, Dr. Moshe Finarov. </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>14. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Approval
of the grant of options to the Company&#146;s directors and external
               directors. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Approval
of remuneration terms for directors and external directors. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Any
other matter which is brought, by law, before the Annual General Meeting. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>A
copy of the Company&#146;s restated audited financial statements for the year ended on
December 31, 2004 and a copy of the Company&#146;s audited financial statements for the
year ended on December 31, 2005 are being mailed with this notice and the enclosed Proxy
Statement on or about August 3, 2006 to shareholders of record on August 1, 2006.</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>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>July 27, 2006 </FONT></H1>


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

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Nova Measuring Instruments Ltd.
<BR>Weizmann Science Park
<BR>Building 22, Einstein St., Ness Ziona, Israel
<BR>Tel: 972-8-9387505
<BR>Fax: 972-8-940776</B> </FONT>
</P>

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<HR SIZE="1" NOSHADE WIDTH="20%" ALIGN="CENTER">

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Proxy Statement
<BR>For the Annual General Meeting of Shareholders
<BR>To be held on August 31, 2006 at 17:00 (Israel time)
<BR>At the Company's Registered Offices</B> </FONT>
</P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
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, Building 22, Einstein St., Ness Ziona, Israel,
on August 31, 2006 at 17:00 local time in Israel and at any adjournments thereof. </FONT></P>

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

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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 August 1, 2006, the record date fixed by the Company, are
entitled to attend the meeting and vote either in person or by proxy. As of June 30, 2006,
there was an aggregate of approximately 15,482,343 ordinary shares of the Company, par
value NIS 0.01 per share (&#147;Ordinary Shares&#148;), outstanding and entitled to vote. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Voting Procedures,
Revocation of Proxy </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to the alternative procedures set forth in the next paragraph, all shareholders who are
unable to attend the Shareholders Meeting in person are requested to complete, date and
sign the enclosed form of proxy and return it promptly in the pre-addressed envelope
provided. If your shares are held in &#147;street name&#148; (meaning in the name of a
bank, broker or other record holder), you must either direct the record holder of your
shares on how to vote your shares or obtain a legal proxy from the record holder to vote
the shares at the Shareholders Meeting on behalf of the record holder as well as a
statement from such record holder that it did not vote such shares. In order for these
shares to be counted, a duly executed proxy must be received by the Company&#146;s
Transfer Agent or by the Company, at its Registered Offices, no later than 48 hours prior
to the meeting, that is on or before August 29, 4:59 p.m., local time. Shares represented
by proxy received after such time will not be counted. Any such proxy may be revoked by
such holders at any time before it is exercised by: (i) delivering written revocation or a
later dated proxy to Mr. Dror David, Chief Financial Officer of the Company; or (ii)
attending the Shareholders Meeting and voting in person. </FONT></P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has named Dr. Giora Dishon and Mr. Dror David or each of them acting
independently, as proxy. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Alternatively,
all shareholders who are unable to attend the Meeting in person can complete, date and
sign the second part of the form of Hebrew Written Ballot available on the following
websites <U>www.magna.isa.gov.il</U>, <U>http://maya.tase.co.il</U> or at the
Company&#146;s offices (at the address in the beginning of this Notice) with respect to
Proposals No. 3 through No. 15 (in accordance with the Israeli Companies Regulations
(Proxy Forms and Opinion Notices) of 2005), at their earliest convenience. At your
request, the Company will provide you with a form of Hebrew Written Ballot without
consideration. In order for shares voted using the Hebrew Written Ballot<U> </U>to be
counted, a duly executed Hebrew Written Ballot must be received at the Company&#146;s
address listed above no later than 72 hours prior to the meeting, that is on or before
August 28, 4:59 p.m., local time. Shares represented by any Hebrew Written Ballot received
after such time shall not be counted. You may withdraw or cancel your Hebrew Written
Ballot no later than 24 hours before the Meeting by your written application to the
Company&#146;s offices, at Nova Measuring Instruments Ltd., P.O.B. 266, Rehovoth 76100,
Israel, for such withdrawal or cancellation, and providing proof of your identity to the
satisfaction of the Company&#146;s secretary or another employee appointed for that
purpose. In this event you may only vote your shares during the Meeting. (Hereafter, the
Hebrew Written Ballot and proxy shall be referred to, collectively, as the
&#147;proxy&#148;). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Record
holders of the Company&#146;s shares who vote their shares by proxy must also provide the
Company with a proof of the identity of the record holder (copy of their certificate of
incorporation or organization or formation, or good standing or similar certificate from
the jurisdiction in which the record holder is organized, copy of their identity card,
copy of their passport or other proof), as the case may be. Holders of the Company&#146;s
ordinary shares who hold their shares through a member of the Tel-Aviv Stock Exchange (the
Nominee Company of Hapoalim Bank Ltd.) and intend to vote their shares either in person or
by proxy must deliver to the Company an ownership certificate confirming their ownership
of the Company&#146;s ordinary shares on the record date, which certificate must be
approved by a recognized financial institution, as required by the Israeli Companies
Regulations (Proof of Ownership of Shares for Voting at General Meeting) of 2000, as
amended. Such certification of ownership may be received at a branch of a member of the
Tel-Aviv Stock Exchange, or by mail, as requested. A request to this effect shall be sent
in advance to a specific securities account. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to the Israeli Companies Regulations (Proxy Forms and Opinion Notices) of 2005, holders of
the Company&#146;s ordinary shares traded on the Tel Aviv Stock Exchange through a member
of the Stock Exchange are entitled to notification by email, free of charge, of the link
to the site with the text of the proxy statement and opinion notices, from the member of
the Stock Exchange through whom he or she holds his/her shares, unless he/she notified the
member of the Stock Exchange that he/she is not interested in receiving the web link, or
wishes instead to receive the proxy statement by regular mail, for consideration. The
aforementioned notice with respect to proxy statements shall apply also with respect to
opinion notices (described below under &#147;Shareholders&#146; Proposals, Opinion
Notices&#148;). </FONT></P>

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

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Quorum and Required
Majority </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
least two shareholders, present in person or by proxy, and holding or representing, in the
aggregate, at least one-third (33.33%) of the issued and outstanding voting shares, will
constitute a quorum at the Shareholders Meeting. If no quorum is present within a half
hour after the time appointed for the holding of the Shareholders Meeting, the
Shareholders Meeting will stand adjourned to the same day in the following week at the
same time and place. If a quorum is not present within a half hour after the appointed
time at the adjourned meeting, the presence of any number of shareholders attending in
person or by proxy will constitute a quorum. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With
respect to Proposal No. 3, Proposal No. 5 and Proposals No. 7 through 15, the affirmative
vote of at least a majority of the votes of shareholders participating in the voting at
the Meeting in person or by proxy is required to constitute approval. </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
affirmative vote of at least a majority of the votes of shareholders participating in the
voting at the Meeting in person or by proxy is required to constitute approval of Proposal
No. 4, the Election of One External Director, provided, that (i) the majority vote must
include at least one third (1/3) of the total votes of shareholders which are not
&#147;controlling shareholders&#148; and that voted in person or by proxy in connection
with the proposal; or (ii) the total number of shares of the shareholders mentioned in
clause (i) above that are voted against the proposal does not exceed one percent (1%) of
the total voting rights in 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;Each
shareholder that delivers a signed proxy to the Company must indicate on the appropriate
place on the proxy whether or not that shareholder is a controlling shareholder in
connection with the approval of Proposal No. 4. The shares of Shareholders who do not so
indicate will not be counted among the votes with regard to such 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;Under
the Companies Law of 1999 (the &#147;Companies Law&#148;), &#147;control&#148; means:
&#147;the ability to direct the activity of a corporation, excluding an ability deriving
merely from holding an office of director or another office in the corporation, and a
person shall be presumed to control a corporation if he holds half or more of the means of
control of the corporation.&#148; &#147;Means of control&#148; of a corporation means: any
of the following: (i) the right to vote at a general meeting of a company or a
corresponding body of another corporation; or (ii) the right to appoint directors of the
corporation or its general manager&#148;. </FONT></P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
affirmative vote of at least seventy-five percent (75%) of the shares represented and
voted at the Shareholders Meeting in person or by proxy is required to constitute approval
of Proposal No. 6, Proposal to Approve the Amendments to the Articles of Association 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;If
a shareholder fails to vote by proxy or in person with regard to a specific proposal or if
a shareholder does not indicate whether or not he or she has a controlling interest in the
approval of Proposal No. 4, the shares represented by such proxy or owned by such
shareholder will be deemed not to have been cast for the purpose of the approval of such
proposal and, accordingly, the practical effect will be to reduce the number of
affirmative votes required to constitute approval of the proposal. Further, if a written
proxy is signed by a shareholder and returned without instructions, the ordinary shares
represented by the proxy will be deemed to have voted &#147;ABSTAIN&#148; with respect to
all of the proposals set forth herein. Broker &#147;non-votes&#148; will be considered
abstentions. Abstentions will be deemed as neither a vote &#147;FOR&#148; nor
&#147;AGAINST&#148; the proposal considered at the Shareholders&#146; Meeting, although
they will be counted in determining whether a quorum is present. </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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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
of the shareholders of the Company have the same voting rights. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shareholders&#146;
Proposals, Opinion Notices </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
Companies Law provides that with regard to those matters which may be voted upon via a
proxy card, the Board of Directors or any shareholder has the right to address the
Company&#146;s shareholders in writing, through the Company, in an attempt to influence
the manner in which the shareholders will vote with regard to any proposal (an<U>
</U>&#147;Opinion Notice&#148;). Regulations promulgated under the Companies Law provide
that any shareholder who desirers to send an Opinion Notice must do so no later than ten
(10) days after the record date. Accordingly, any Opinion Notice must be submitted to the
Company no later the August 11, 2006. The Company may respond to such opinion notice no
later than August 17, 2006. </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 will make all Opinion Notices which have been submitted in a timely manner
available to the public through one the following websites www.magna.isa.gov.il,
http://maya.tase.co.il or www.sec.gov. Copies of such Opinion Notices may also be obtained
for no charge at the Company&#146;s offices (at the address at the beginning of this Proxy
Statement). The Company will also send to each record holder a copy of each Opinion Notice
timely submitted to it no later than five (5) days after receiving such Opinion Notice.
The Company will be entitled to reimbursement from the shareholder who provided such
Opinion Notice for reasonable costs incurred in sending the Opinion Notice to the
shareholders provided that such fees shall not exceed NIS 200 (approximately $40), if the
requesting shareholder holds shares of the Company having a value of NIS 10,000 or more
(determined according to the closing price of each ordinary share on the day immediately
preceding the record date). </FONT></P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company will make all Opinion Notices which have been submitted in a timely manner
available to the public through one the following websites www.magna.isa.gov.il,
http://maya.tase.co.il or www.sec.gov. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Inspection of Proxy Cards </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One
or more holders of our Ordinary Shares representing five percent or more of the total
number of voting rights of the Company, and also one or more holders of such a percentage
of the voting rights not held by one with control of the Company, as control is defined in
accordance with section 268 of the Companies Law, shall be entitled to inspect proxy cards
in accordance with the provisions of Regulation 10 of the Israeli Companies Regulations
(Proxy Forms and Opinion Notices) 2005. </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 June 30, 2006, the total number of Ordinary Shares representing five percent of the
total number of voting rights of the Company is approximately 774,000 shares. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of June 30 the total number of Ordinary Shares representing five percent of all voting
rights of the Company not held by one with control of the Company is approximately 774,000
shares. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Expenses and Solicitation </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as described above with regard to Opinion Notices, 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 beneficial
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>

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

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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 identified below. In the aggregate, the
Company&#146;s directors and senior management beneficially owned as of June 30, 2006 13%
of the Company&#146;s outstanding Ordinary Shares, including shares held in trust under
Israeli tax law for the benefit of the shareholders and 738,150 Ordinary Shares subject to
options that are currently exercisable or exercisable within 60 days of June 30, 2006. </FONT></P>




<TABLE CELLPADDING=2 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Name</FONT><HR WIDTH=15% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Age</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH> </TH>
     <TH ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Position</FONT><HR WIDTH=15% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH> </TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH> </TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH> </TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH> </TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="30%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Giora Dishon</FONT></TD>
     <TD WIDTH="7%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>61&nbsp;</FONT></TD>
     <TD WIDTH="3%"> </TD>
     <TD WIDTH="60%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>President, Chief Executive Officer, Director and Co-Founder</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Moshe Finarov</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>54&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chief Technology Officer, Director and Co-Founder</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Micha Brunstein*</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>62&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chairman of the board</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Avi Kerbs *</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>59&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Joseph Ciechanover *</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>72&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Alon Dumanis *</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>56&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Lauri Hanover */**</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>46&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>External Director</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dan Falk *</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>61&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>External Director</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dror David *</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>37&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chief Financial Officer, Vice President of Resources</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gabi Seligsohn *</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Executive Vice President, Sales and Marketing</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>** External Director with financial
expertise. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Giora Dishon, President, Chief
Executive Officer and Co-Founder, and Moshe Finarov, Vice President, Director of
Technology, Director and Co-Founder, beneficially owned 963,042 (including shares held by
a trustee pursuant to Israeli tax laws) and 871,941 ordinary shares of the Company,
respectively, as of June 30, 2006. All other directors, external directors and senior
management each hold less than 1% of the Company&#146;s shares. </FONT></P>

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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the applicable NASDAQ Marketplace Rules, for a director to be considered independent, the
Board of Directors must affirmatively determine that the director does not have a
relationship which would interfere with the exercise of independent judgment in carrying
out the responsibilities of a director. The applicable NASDAQ Marketplace Rules also
provide that the following persons cannot be considered independent: (i) a person that is
an officer or employee of the Company or its subsidiaries; (ii) a director who is, or at
anytime during the past three years, was, employed by the Company or by any parent or
subsidiary of the Company; (iii) a director who accepted or has an immediate family member
who accepted any payments from the Company or any parent or a subsidiary of the Company in
excess of $60,000 during any period of 12 consecutive months within the three years
proceeding the determination of independence, other than the following: (A) compensation
for board or board committee service; (B) payments arising solely from investments in the
Company&#146;s securities; (C) compensation paid to any family member who is a
non-executive employee of the Company or a parent or subsidiary of the Company; (D)
benefits under a tax-qualified retirement plan, or non-discretionary compensation; or (E)
or loans permitted under Section 13(k) of the Securities Exchange Act of 1934, as amended;
(iv) a director who is an immediate family member of an individual who is, or at any time
during the past three years was, employed by the Company or by any parent or subsidiary of
the Company as an executive officer; (v) a director who is, or has an immediate family
member who is, a partner in, or a controlling shareholder or an executive officer of, any
organization to which the Company made, or from which the Company received, payments for
property or services in the current or any of the past three fiscal years that exceeded
five percent of the recipient&#146;s consolidated gross revenues for that year, or
$200,000, whichever is more, other than the following: (A) payments arising solely from
investments in the Company&#146;s securities; or (B) payments under nondiscretionary
charitable contribution matching programs; (vi) a director of the Company who is, or has
an immediate family who is, employed an executive officer of another entity where at any
time during the past three years any of the executive officers of the Company served on
the compensation committee of such other entity; or (vii) a director who is, or has a
immediate family member who is, a current partner of the company&#146;s outside auditor,
or was a partner or employee of the Company&#146;s outside auditor who worked on the
Company&#146;s audit at any time during any of the past three years. </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, in applying the above-reference standards, has affirmatively
determined that all directors other than Giora Dishon, Moshe Finarov and Avi Kerbs are an
&#147;independent&#148; director of the Company. Accordingly, a majority of the members of
the Company&#146;s Board of Directors have been determined to meet the applicable
standards for independence. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Code of Business Conduct
and Ethics </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 has adopted a written Code of Conduct that applies to all Company employees
including the Company&#146;s directors, Chief Executive Officer, Chief Financial Officer
and Chief Accounting Officer. This Code is intended to meet the definition of &#147;Code
of Ethics&#148; under applicable Securities and Exchange Commission rules. The Code
contains provisions relating to compliance with laws, regulations and Company policies,
conflicts of interest, inside trading, gifts, discrimination and harassment, business
information and records, confidentiality, political contributions, waivers of the Code,
reporting of illegal or unethical conduct and compliance procedures, among other things.
You may review the Company&#146;s Code of Conduct on the Company&#146;s website:
http:\\nova.co.il under &#147;about Nova&#148;. </FONT></P>

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

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Communicating with the
Board 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;Shareholders
wishing to communicate directly with the Board of Directors or an individual director may
do so in writing by directing correspondence to a director or directors at the address
appearing on the first page of this proxy statement. </FONT></P>

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<H1 ALIGN=LEFT><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>The Company&#146;s Board of Directors
has appointed 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;The<I>
Audit Committee</I> is comprised of three members. The members are Lauri Hanover, Dan Falk
and Joseph Ciechanover. The functions of the Audit committee according to Israeli Law are
to locate deficiencies in the business management of the Company, among other things, in
consultation with the Company&#146;s auditors and internal auditors and to suggest to the
Board of Directors 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 Brightman Almagor &amp; Co., an independent registered public
accounting firm and member firm of Deloitte Touche Tohmatsu. </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
members of the Audit Committee have been determined to meet the standards of independence
required of Audit Committee members by the applicable Securities and Exchange Commission
rules. The Board of Directors has determined that all of the members of the Audit
Committee are able to read and understand fundamental financial statements, including the
Company&#146;s balance sheet, income statement, and cash flow statement and that Lauri
Hanover is an &#147;audit committee financial expert&#148; within the meaning of
applicable Securities and Exchange Commission rules and has past employment experience in
finance or accounting, requisite professional certification in accounting, or other
comparable experience or background which results in his financial sophistication. </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
Audit Committee operates under a charter adopted by the Board of Directors. You may review
the Company&#146;s Audit Committee Charter on the Company&#146;s website:
http:\\nova.co.il under &#147;about Nova.&#148; Copies of the Charter can also be obtained
free of charge by contacting the Company at the address appearing on the first page of
this proxy statement, to the attention of the Chief Financial Officer. During fiscal 2005,
the Audit Committee met five times and acted one time by unanimous consent in writing. </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<I>
Compensation Committee </I>is comprised of Joseph Ciechanover, Lauri Hanover and Dan Falk.
The function of the Compensation Committee is described in the approved charter of the
committee, and includes determining the compensation of directors, senior management and
employees (subject to provisions regarding related party transactions). All members of the
Compensation Committee have been determined to meet the applicable standards for
independence. During fiscal 2005, the Compensation Committee met five times. </FONT></P>

<p align=center>
<font size=2>10</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The<I>
Investment Committee </I>is comprised of Lauri Hanover, Avi Kerbs, Dan Falk and Joseph
Ciechanover. The function of the investment committee is described in the approved charter
of the committee, and includes reviewing and determining the cash investment policy of the
cash reserves of the Company. During fiscal 2005, the Investment Committee met once. </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<I>
Nominating Committee </I>is comprised of Alon Dumanis, Dan Falk and Joseph Ciechanover.
The function of the nominating committee is described in the approved charter of the
committee, which you may review on the Company&#146;s website: http://nova.co.il under
&#147;about Nova&#148;. During fiscal 2005, the Nominating Committee met twice. </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
Committee&#146;s purposes are to identify individuals qualified to become members of the
Board and to make recommendations to the Board for director nominees to stand for election
at the annual meeting of shareholders, all in accordance with the Company&#146;s Articles
of Association, applicable laws, regulations of the Securities and Exchange Commission and
other governmental authorities, rules and standards. Under the charter, the decision on
the identity of nominees is to be made by the Board, with the actual election of directors
being made by shareholders at the Company&#146;s annual general meeting. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
accordance with the charter, in recommending a nominee for director, the committee
considers the nominee&#146;s integrity, skill, leadership ability, financial
sophistication, and capacity to help guide the Company, and such other considerations as
the Committee deems appropriate. Any director candidate shall, at a minimum, possess a
background that includes a solid education, extensive business, professional or academic
experience and the reputation, character, integrity, skills, judgment and temperament,
which have prepared him or her for dealing with the multi-faceted financial, business and
other issues that confront a board of directors of a corporation with the size,
complexity, reputation and success 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;The
<I>Strategic Committee </I>is comprised of Micha Brunstein, Avi Kerbs, Alon Dumanis, Dan
Falk and Giora Dishon. The function of the strategic committee is described in the
approved charter of the committee, and includes advising and recommending strategic and
long term plans and goals for the Company. During fiscal 2005, the Strategic Committee met
six times. </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
nomination of Naama Zeldis for election to the position of external director was
recommended by the Nominating Committee. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Committee Meetings and
Meetings of the Board 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;During
fiscal 2005, the Board of Directors held eight meetings and acted two times by unanimous
consent in writing. During fiscal 2005 all incumbent directors attended in person or by
conference call at least 75% of the total number of meetings of the Board of Directors and
meetings of the committees of the Board of Directors on which they served during their
incumbency. </FONT></P>

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


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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 2005 (including persons who served partial term)
was approximately $1,000,000, including approximately $224,000, which was set aside for
pension and retirement benefits and including amounts expended by the Company for
automobiles made available to the Company&#146;s executive officers and $100,000 for
executives&#146; retirement payments. </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
total amount paid or payable to the directors, including external directors (excluding Dr.
Giora Dishon (CEO) and Dr. Moshe Finarov (CTO)), for 2005 was $114,000. In 2004, this
amount was $105,000 and in 2003 it 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;External
directors of the Company receive remuneration comprised of: an annual payment in the
amount of NIS 30,708 (approximately $6,840) and an additional per meeting payment of NIS
1,143 (approximately $255). </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 served as chairperson of our board of directors. Under the agreement, Mr. Cox was
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. Mr. Cox has resigned from the Board effective April 28, 2006. On June 19, 2006
(following the recommendations of the Compensation Committee and the Audit Committee), the
Board of directors approved the severance arrangements with Mr. Barry Cox continuing
payment of his compensation through the end of 2006 in a total amount of $25,000. These
payments have not yet been approved by our shareholders. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 (approximately
$9,800) for the period February 1, 2003 through July 31, 2003 and increased to 50,000 NIS
(approximately $11,120) starting on August 1, 2003 and (ii) that the monthly gross salary
of Dr. Finarov shall be increased to 40,000 NIS (approximately $8,900) for the period
February 1, 2003 through July 31, 2003 and increased to 44,000 NIS (approximately $9,800)
starting on August 1, 2003. These changes in the terms of compensation for Drs. Dishon and
Finarov were approved by our 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
November 1, 2005, the Company&#146;s Audit Committee and on November 2, 2005 the
Company&#146;s Board of Directors resolved (i) that the monthly gross salary of Dr. Dishon
shall be increased to 57,000 NIS (approximately $12,000) starting on July 1, 2005 and (ii)
that the monthly gross salary of Dr. Finarov shall be increased to 53,000 NIS
(approximately $11,500) starting on July 1, 2005. During June, 2006 the Company&#146;s
Compensation Committee, Audit Committee and Board of Directors approved further increases
in the above mentioned salaries as well as additional options grants, as detailed in the
Items below. These changes in the terms of compensation for Dr. Dishon and Dr. Finarov
have not yet been approved by the shareholders. </FONT></P>

<p align=center>
<font size=2>12</font></p>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
June, 2006, Dr. Micha Brunstein was named as the Chairman of the Board of Directors of the
Company. Following the recommendations of the Compensation Committee and the Audit
Committee, the Board of Directors resolved that for his services as Chairman, Dr.
Brunstein will be entitled to gross annual compensation of $110,000 and to a grant of
150,000 options from the Company&#146;s Option Plan 8, as detailed in Item 7 below. These
payments have not yet been approved by our shareholders<B>.</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
November 10, 2004, the Company&#146;s Board of Directors and the Company&#146;s Audit
Committee, in each case after all of directors and external directors gave notification of
their personal interest in such resolutions, approved the issuance of options to directors
as set forth below. </FONT></P>




<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="600" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Name of directors</FONT></TH>
     <TH ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Position</FONT></TH>
     <TH ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1># of options</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="37%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Giora Dishon</FONT></TD>
     <TD WIDTH="53%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director, CEO &amp; President</FONT></TD>
     <TD WIDTH="10%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>70,000&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>Director &amp; CTO</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>60,000&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Barry Cox</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Former Chairman of the board</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,000&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>Director</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,000&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <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>Director</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,000&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>Director</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,000&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <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>Director</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,000&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>External Director</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,000&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <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>Former External Director</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,000&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;The
options were granted in December 2004 subject to shareholder approval, which was given on
September 29, 2005. The options are subject to the terms and conditions of the
Company&#146;s Option Plan 7B. Subject to any permitted acceleration of vesting, 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 $3.40 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;On
July 30, 2005, the Company&#146;s Audit Committee (in which all directors, including both
external directors, notified the Company of their personal interest in the approval of
said resolution) and the Company&#146;s Board of Directors (in which all directors,
including both external directors, have notified the Company of their personal interest in
the approval of said resolution), approved the grant of options to directors as set forth
below: </FONT></P>

<p align=center>
<font size=2>13</font></p>
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<page>



<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="600" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Name of directors</FONT></TH>
     <TH ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Position</FONT></TH>
     <TH ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1># of options</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="37%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Giora Dishon</FONT></TD>
     <TD WIDTH="53%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director, CEO &amp; President</FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>63,000&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>Director &amp; CTO</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>54,000&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Barry Cox</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Former Chairman of the board</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,000&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>Director</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,000&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <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>Director</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,000&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>Director</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,000&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <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>Director</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,000&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>External Director</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,000&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <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>Former External Director</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,000&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 September 29, 2005. The grant of the above
options is subject to the terms and conditions of the Company&#146;s Option Plan 7C.
Subject to any permitted acceleration of vesting, 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 will be the fair market value of the
Company&#146;s shares on the date of grant, unless otherwise determined by the Board of
Directors. The grant of the above options is subject to receipt of a letter of consent
from the Israeli Securities Authority, receipt of a letter of consent from the Tel-Aviv
Stock Exchange and the effectiveness of a Registration Statement on Form S-8 with respect
to the ordinary shares underlying the options. </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 31, 2005, the Company&#146;s Board of Directors (in which all directors, including
both external directors, notified the Company of their personal interest in the approval
of said resolution) and the Company&#146;s Audit Committee (in which all directors,
including both external directors, notified the Company of their personal interest in the
approval of said resolution), approved the recommendation of the Company&#146;s
Compensation Committee to approve a plan to accelerate the vesting of certain options
outstanding as of December 29, 2005 as described below: </FONT></P>

<p align=center>
<font size=2>14</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Last Name</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>First Name</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Grant Date</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Exercise Price $</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Granted</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Unvested</B> </FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Vested &amp; Exercisable</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="20%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dumanis</FONT></TD>
     <TD WIDTH="10%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Alon</FONT></TD>
     <TD WIDTH="20%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mar-04-Dec-04</FONT></TD>
     <TD WIDTH="16%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.4-5.15</FONT></TD>
     <TD WIDTH="12%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20,000&nbsp;</FONT></TD>
     <TD WIDTH="12%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>16,864&nbsp;</B> </FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,136&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Brunsten</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Micha</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mar-04-Dec-04</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.4-5.15</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20,000&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>16,864&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,136&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Ciechanover</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Joseph</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Feb-03-Dec-04</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.06-5.15</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>30,000&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>21,864&nbsp;</B> </FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,136&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Hanover</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Lauri</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Feb-03-Dec-04</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.06-5.15</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>30,000&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>21,864&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,136&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Kerbs</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Avi</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Feb-03-Dec-04</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.06-5.15</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>30,000&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>21,864&nbsp;</B> </FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,136&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Holland</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Karey</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Feb-03-Dec-04</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.06-5.15</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>30,000&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>21,864&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,136&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cox</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Barry</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>May-03-Dec-04</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.68-3.4</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>60,000&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>26,667&nbsp;</B> </FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33,333&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dishon</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Giora</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Feb-03-Dec-04</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.06-5.15</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>195,000&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>144,682&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>50,318&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Finarov</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Moshe</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Feb-03-Dec-04</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.06-5.15</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>165,000&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>122,818&nbsp;</B> </FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>42,182&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;The
acceleration of the options under Plans 6, 7A and 7B was approved by the shareholders on
September 29, 2005. As a result, the options identified above vested and became fully
exercisable on December 29, 2005. </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 29, 2005, the Shareholders of the Company approved the extension of the period
in which Dr. Holland may exercise her options, to a period of 180 days from the date of
termination of Dr. Holland&#146;s tenure as a director and external director. </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Options Held by
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
following table sets forth information regarding options held by our directors and
officers as of June 30, 2006 updated to June 30, 2006. </FONT></P>




<TABLE CELLPADDING=2 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Name</FONT><HR WIDTH=20% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Ordinary Shares<BR>
Underlying Options</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Expiration Dates</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Exercise Prices<BR>
($/share)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="40%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Giora Dishon (1)</FONT></TD>
     <TD WIDTH="20%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>318,000&nbsp;</FONT></TD>
     <TD WIDTH="20%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2007-2012</FONT></TD>
     <TD WIDTH="20%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.06-7.37</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Moshe Finarov (1)</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>279,000&nbsp;</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2007-2012</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.06-7.37</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8 directors and officers as a group (1)</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>356,200&nbsp;</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006-2013</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.79-7.37</FONT></TD></TR>
</TABLE>
<BR>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1)  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All
such options are currently exercisable. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2)  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
vesting period of each option is between one and four years from the date
                    of grant according to the applicable option plan. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>15</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><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>RESTATED FINANCIAL STATEMENTS FOR THE YEAR ENDED<BR> DECEMBER 31, 2004 </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 has restated its financial statements for the year ended December 31, 2004 and
filed those restated financial statements with its Amended Annual Report on form 20-F/A on
June 12, 2006. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
copy of the Company&#146;s restated financial statements for the year ended on December
31, 2004 is attached as Appendix A to this Proxy Statement 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 REVIEW
AND DISCUSSION OF THE COMPANY&#146;S </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2005 </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 December 31,
2005 was mailed with this Proxy Statement to shareholders of record on the Record Date,
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. 3</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 eight members
of the Board of Directors. Of the eight current directors, two, Dan Falk and Lauri
Hanover, were already elected to serve as external directors as required under the
Companies Law. Ms. Lauri Hanover was elected in 2000 and was reelected in 2003. Mr. Dan
Falk was elected in 2005. 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. Ms. Lauri
Hanover&#146;s tenure as external director will terminate on the 31<SUP>st</SUP> of
August, 2006. 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 or any applicable law. A director who is appointed
by the Company&#146;s Board of Directors shall serve until the conclusion of the next
General Meeting of Shareholders or on a date on which the Board of Directors decides to
terminate his tenure, whichever is earlier. </FONT></P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&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 until the date of the next annual general
meeting, provided however that in the event that the general meeting does not elect at
least the minimum number of directors required under the Articles of Association of the
Company, then the outgoing Board of Directors shall continue its tenure until the general
meeting elects at least such minimum number of 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;The
following paragraphs provide certain relevant information concerning each director
nominee, including past and present principal occupation: </FONT></P>




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Nominee</FONT><HR WIDTH=20% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Age</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Position</FONT><HR WIDTH=20% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="30%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Giora Dishon</FONT></TD>
     <TD WIDTH="7%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>61&nbsp;</FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="60%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>President, Chief Executive Officer, Director and Co-Founder</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Moshe Finarov</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>54&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>Chief Technology Officer, Director and Co-Founder</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Micha Brunstein</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>62&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>Chairman of the board</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Avi Kerbs</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>59&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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Joseph Ciechanover</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>72&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></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Alon Dumanis</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>56&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></TR>
</TABLE>
<BR>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Dr.
          Giora Dishon, I.D. number </I>005087358,<I> </I>is a co-founder of Nova and has
          served as President and Chief Executive Officer since Nova&#146;s formation in
          1993. 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 the Managing Director at AVX Israel Ltd., a manufacturer of electronic
          devices. Dr. Dishon holds a B.Sc. in Chemistry, a MSc. and a Ph.D. in Materials
          Science from the Hebrew University in Jerusalem. Dr. Dishon is a member of the
          Strategic Committee. Dr. Dishon is an Israeli citizen, was born on December 1944
          and his address is 3 Mishol Ozard St., Jerusalem, Israel. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Dr. Moshe Finarov, I. D. number </I>303626725,<I> </I>is a co-founder of Nova
          Measuring Instruments and a member of the Board of Directors. He has served as
          Chief Technology Officer and VP Technology since Nova&#146;s formation in 1993.
          From 1989 to 1993 he served as Senior Physicist at Orbotech Ltd. and from 1974
          to 1988 he was employed at PULSAR and ENIMS Scientific Research Institutes in
          Moscow. Dr. Finarov holds a Ph.D in Semiconductor Physics and M.Sc in
          Microelectronics from Moscow Steel &amp; Alloys Institute. He is named on
          approximately 30 US patents and published approximately 40 papers. Dr. Finarov
          is an Israeli citizen, was born on October 1952 and his address is 16 Ainstein
          St., Rehovoth, Israel. </FONT></P>

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

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Dr.
          Micha Brunstein, I.D. number 001206283</I>, was elected as director of Nova
          during November 2003 by the other members of the board of directors, and
          thereafter by annual shareholders meetings. Effective of June 19, 2006, Dr.
          Micha Brunstein was named as the chairman of the Board of Directors of Nova.
          During the years 1990 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 a board member of Ham-let Ltd., a company whose
          stock is traded in the Tel Aviv Stock Exchange, and as the chairman of Valor
          Computerized Systems Ltd., whose stock is traded in the Frankfurt Stock Exchange
          and as Chairman of two privately held companies. 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. Dr. Brunstein is a member
          of the Strategic Committee. Dr. Brunstein is an Israeli citizen, was born on
          September 1943 and his address is 18 Barkay Shmuel St., Tel Aviv, Israel. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Mr.
          Avi Kerbs, I.D. number 006702435,</I> has served as a director of Nova since
          1993. He serves as the president and chief executive officer of Teuza Management
          &amp; Development Ltd., the management company of Teuza-A Fairchild Technology
          Venture Ltd., a venture capital Company and has served in this capacity since
          1991. Teuza-A Fairchild Technology Venture Ltd. is a major shareholder of Nova.
          He serves as a director of most of the companies comprising the investment
          portfolio of the Teuza Fund. Mr. Kerbs holds a B.Sc. in Industrial Engineering
          and Management and a M.Sc. in Management, both from the Technion, Israel&#146;s
          Institute of Technology. Mr. Kerbs serves as a member of the Technion&#146;s
          Board of Governors and as a member of the Haifa University Board of Governors
          and the Chairman of the Scientific Academic Club of the Haifa University. Mr.
          Kerbs was originally appointed to our board of directors by Teuza. Mr. Kerbs was
          originally appointed to our board of directors by Teuza. Mr. Kerbs is a member
          of the Strategic Committee and the Investment Committee. Mr. Kerbs<I> </I>is an
          Israeli citizen, was born on April 1947 and his address is 100 Harav Kook St.,
          Kiryat Motskin, Israel. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Mr.
          Joseph Ciechanover, I.D. number 5991468,</I> has served as a director of Nova
          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 holding approximately 2% of Nova&#146;s outstanding shares,
          and served as chairman of the board of El-Al Israel Airlines from 1995 until
          2001. He served as a chairman of Israel Discount Bank from 1986-1993 and the
          president and a member of the board of directors of PEC Israel Economic
          Corporation, a diversified investment company which merged later into Discount
          Investment Corp. Since 1995, Mr. Ciechanover has been a member of the board of
          directors of United Retail Group, Inc. and serves on the audit compensation
          committees. United Retail Group, Inc.&#145;s stock is publicly traded in the
          United States. Mr. 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. Mr. Ciechanover is a member of the
          Compensation Committee, the Audit Committee the Nominating Committee and the
          Investment Committee. Mr. Ciechanover is an Israeli citizen, was born on October
          1933 and his address is 12 Amirim St., Savion, Israel. </FONT></P>

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

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Dr.
          Alon Dumanis, I.D. number 050001619,</I> has served as a director of Nova since
          2002. Dr. Dumanis is the Chief Executive Officer of Docor International
          Management, a Dutch investment company, subsidiary of The Van-Leer Group
          Foundation. Dr. Dumanis serves either as Chairman or as a member of the Board of
          Directors of various companies. Dr. Dumanis is a member of the Board of
          Directors of Tadiran Communications and formerly, a member of the Board of
          Directors at El Al Israel Airlines (TASE-LY) and Board of Directors of Inventech
          Investments Co. Ltd. (TASE-IVTC), a major shareholder. 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. Dr. Dumanis is a member of the Nominating
          Committee. Dr. Dumanis<I> </I>is an Israeli citizen, was born on May 1950 and
          his address is 80 Avital St., Reut, Israel. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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
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;For
each individual nominee to the Board of Directors (as described in this Item 3) the vote
shall be made separately. The following resolutions electing directors is proposed for
consideration by the shareholders: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>RESOLVED,
to elect Micha Brunstein, Joseph Ciechanover, Avi Kerbs, Giora Dishon, Moshe Finarov and
Alon Dumanis as Directors to serve until the date of the subsequent annual general
meeting.</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors recommends that the shareholders vote &#147;FOR&#148; the election of
said nominees to the Company&#146;s Board of Directors, none of which are to serve as an
external director. </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>ITEM NO. 4</U> </FONT> </H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ELECTION OF ONE
EXTERNAL DIRECTOR </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 eight members
of the Board of Directors. Of the eight current directors, two, Dan Falk and Lauri
Hanover, were already elected to serve as external directors as required under the
Companies Law. </FONT></P>

<p align=center>
<font size=2>19</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ms.
          Lauri Hanover was elected in 2000 and was reelected in 2003. Mr. Dan Falk was
          elected in 2005. 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.           Ms. Lauri Hanover tenure as external director shall terminate on 31<SUP>st</SUP>          of
August, 2006.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the nominee for the position of external director, Naama Zeldis, is elected, she will
serve for a term of three years which may be renewed for only one additional three year
term. External directors may resign or may be removed from office according to applicable
law. According to the Companies Law no shareholders meeting shall deliberate over the
election of an external director unless the nominee has provided the company with a
declaration stating that he or she fulfills all required terms for his or her nomination
as an external director of the company. Such declaration was provided by Naama Zeldis,
,the nominee for external director, and is available for review at the Company&#146;s
registered office. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Companies Law requires that an Israeli public company have at least two external directors
at least one of which must have accounting and financial expertise and the other of which
must have certain professional qualifications. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Regulations
adopted pursuant to the Companies Law provide that a director with accounting and
financial expertise is a director that due to his education, experience and skills has
high expertise and understanding in business-accounting matters and financial statements
in a way that enables him to deeply understand the financial statements of the company and
to facilitate discussion with respect to the way the financial data should be presented.
The assessment of the accounting and financial expertise of a director shall be made by
the board of directors, who shall take into consideration, among other things, the
education, experience and knowledge of the director in the following subjects: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accounting
matters and audit accounting matters, which are typical of the sector                in
which the company works and of companies with the same size and complexity as
               the company;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
duties and obligations of the auditing accountant; and  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Preparing
financial statements and their approval according to applicable law,
               including securities law.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
regulations also provide that a director with professional qualifications is a director
who meets one of the following conditions: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A
holder of an academic degree in one of the following: economics, business
               administration, accounting, law, or public administration;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A
holder of another academic degree or otherwise a graduate of higher education
               in a major field of business of the company or in another field which is
               relevant to the role;  </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>20</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>He
has experience of at least five years in one of the following, or that he has
               cumulative experience of at least five years in two or more of the
following:  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
a senior position in the business management of a corporation which has a
               significant scope of business;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
a senior public position or in a senior role in the public service; or  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c) </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
a senior position in the major fields of business of the company.  </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;According
to the Companies Law, the Board of directors of a public company must establish the
minimum number of board members that are to have accounting and financial expertise
considering, among other things, the nature of the company, its size, the scope and
complexity of its operations and the number of directors stated in the Articles of
Association of the company. When adopting such a resolution (that sets the minimum number
of board members that are to have accounting and financial expertise) the company must
also appoint such 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
April 2006, the Board of Directors resolved that the minimum number of board members that
need to have accounting and financial expertise, including the external director with
accounting and financial expertise, is one (1). </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 has evaluated the capabilities of Mr. Dan Falk and Ms. Naama Zeldis and
has determined and stated that each has accounting and financial expertise as described in
the regulations promulgated pursuant to the Companies Law, and that, therefore, the
requirement of the minimum number of board members that need to have accounting and
financial expertise, as set by the Board of Directors, has been met. </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 paragraph provides certain relevant information concerning each external
director nominee, including past and present principal occupation: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<I>Ms.
            Naama Zeldis, I.D. number </I>57783771, has served as Chief Financial Officer
          of Netafim Ltd. since December 2005. During 2001 to 2005 Ms. Zeldis served as
          Chief Financial Officer of EDS Israel. Prior to this Ms. Zeldis served as Chief
          Financial Officer of Radguard and Director of Finance of RAD Data
          Communications. Between 1990 and 1992, she served as an Economic Advisor in
          Economic Models. Ms. Zeldis has a Bachelor&#146;s Degree in Economics and a
          Master&#146;s Degree in Business Administration, majoring in Financing, from
the           Hebrew University of Jerusalem and a Bachelor&#146;s Degree in Accounting
from           the Tel-Aviv University. Ms. Zeldis is an Israeli citizen, was born on
April           1943 and her address is 4 mavo Hahavazelet St. Yahud, Israel. As stated
above           Ms. Zeldis holds accounting<B></B>and financial expertise.  </FONT></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2>21</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>RESOLVED:
to elect Naama Zeldis as External Director to serve for a period of three years.</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors recommends that the shareholders vote &#147;FOR&#148; the election of
said nominee to the Company&#146;s Board of Directors, to serve as an external director. </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>ITEM NO. 5</U> </FONT> </H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PROPOSAL TO APPOINT THE </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>INDEPENDENT PUBLIC
ACCOUNTANTS OF THE COMPANY </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
Board of Directors has selected Brightman Almagor &amp; Co., an independent registered
public accounting firm and member firm of Deloitte Touche Tohmatsu as the independent
registered public accountant firm for the Company for the year ending on December 31,
2006. The Board of Directors believes that the selection of Brightman Almagor &amp; Co. 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, 2005. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information
on fees paid to the Company&#146;s independent public accountants may be found in the
Company&#146;s Annual Report on Form 20-F filed with the Securities and Exchange
Commission. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Representatives
of Brightman Almagor &amp; Co. are expected to be present at the Shareholders Meeting, and
will have the opportunity to make a statement if they desire to do so. The representatives
are also expected to be available to respond to appropriate questions. </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
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. as the independent registered public accounting
firm of the Company for the year ending December 31, 2006, and to authorize the Audit
Committee to fix the remuneration of such auditors in accordance with the volume and
nature of their services.</B> </FONT></P>

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

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

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>ITEM NO. 6</U> </FONT> </H1>


<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>PROPOSAL TO APPROVE THE AMENDMENTS TO THE
<BR>ARTICLES OF ASSOCIATION OF THE COMPANY, WITH RESPECT
<BR>TO EXEMPTION FROM LIABILITY, INSURANCE AND INDEMNITY,
<BR>IN ORDER TO ENSURE THAT THE ARTICLES COMPLY WITH
<BR>AMENDMENT NO. 3 TO THE COMPANIES LAW 1999</B> </FONT>
</P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
March 2005, an amendment to the Companies Law entered into force, amended, among other
things, the provisions of the Companies Law regarding the grant of insurance, indemnity
and exemption to directors and officers. Such provision, among other things, alter the
scope of permissible indemnifications, and the events for which the Company may undertake,
in advance, to indemnify its directors and 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;The
Companies Law provides for specific language to be included a company&#146;s articles of
association and letter of indemnification as a condition for such documents to comply with
its provisions. Without such language, the company cannot offer insurance, indemnification
and exemption for liability of directors and 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;Chapter
F of the Company&#146;s Articles of Association deals with directors&#146; and
officers&#146; exemption, indemnification and liability insurance. The proposed amendments
to Chapter F are being introduced for the purpose of compliance with the provision of the
Companies Law as amended, and common corporate practice in Israel with respect to
indemnification and exemption of liability of directors and 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;Below
are the proposed amendments to Chapter F 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;1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Article
8.2 Instead of:  </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<I>To
indemnify an officer of the Company for a debt or expense specified in this </I><I>Article
8.2 below, which was imposed on him as a result of an act which he performed in his </I><I>capacity
as an officer:</I>&quot; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shall
be as follows:  </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Indemnify
an officer of the Company for an obligation or expense specified in this Article 8.2.1
below, which was imposed on him or which he spent as a result of an act which he
performed in his capacity as an officer:&quot; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Article
8.2.1, that states  </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;A
monetary debt imposed on him for the benefit of another person under a judgment,
including a compromise settlement judgment or an arbitrator&#146;s decision which was
approved by a court.&#148; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shall
become Article 8.2.1(a). </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Add
new Article 8.2.1(b) as follows:  </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Reasonable
litigation expenses, including attorney&#146;s fees, which the officer incurred due to an
investigation or procedure conducted against him by an authority authorized to conduct
such an investigation or procedure, provided that such an investigation or procedure
concluded without the filing of an indictment against the officer and without imposition
of a monetary liability in lieu of criminal proceedings, or that such an investigation or
procedure concluded without the filing of an indictment against the officer but the
officer is imposed with a monetary liability in lieu of criminal proceedings that the
offense in question does not require proof of <I>mens rea</I>. In this Section-&#147;the
conclusion of a procedure without the filing of indictment in an issue in which a
criminal investigation began and &#147;monetary liability in lieu of criminal proceedings&#148;-
as their meaning in Section 260(A)(1a) to the Companies Law.&#148; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Replace
Article 8.2.2, that states  </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Reasonable
litigation expenses, including attorneys&#146; fees, which the officer incurred or </I><I>for
which he was obligated by a court, in a proceeding instituted against him by the Company
or in </I><I>its name or by another person, or in a criminal indictment of which he is
acquitted, or in a </I><I>criminal charge of which he is convicted provided that the
offense or offenses in which he is </I><I>convicted require mens rea of negligence or
strict liability.&#148;</I> </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;with
Article 8.2.1(c) as follows:  </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Reasonable
litigation expenses, including attorney&#146;s fees, which the officer incurred or for
which he was obligated by a court, in a proceeding filed by the Company or in its name or
by another person against him, or in criminal proceedings of which he was acquitted, or
in criminal proceedings in which he was convicted, provided that the offense in which he
was convicted does not require proof of <I>mens rea</I>.&#148; </FONT>
</TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>24</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Replace
Article 8.2.3, that states:  </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;To
obligate in advance to indemnify an officer, provided that the obligation shall be </I><I>limited
to the types of events which, in the view of the Board of Directors, may be foreseen at
the </I><I>time the obligation to indemnify is undertaken, and in an amount determined by
the Board of </I><I>Directors which shall be reasonable in the circumstances.&#148;</I> </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;with
the following new Article 8.2.2:  </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;The
Company may obligate in advance to indemnify an officer, as follows:  </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
(a)
            as specified in Article 8.2.1(a), <U>provided</U> <U>however</U>, that the
          obligation shall be limited to the events which, according to the Board of
          Directors&#146; opinion, are foreseen in light of the Company&#146;s actual
          activities at the time of granting the obligation to indemnify, and to an
amount           or criteria that the Board of Directors deems reasonable under the
          circumstances, and that in the obligation to indemnify the events which,
          according to the Board of Directors&#146; opinion are foreseen in light of the
          Company&#146;s actual activities at the time of granting the obligation to
          indemnify, and the amount or criteria that the Board of Directors deems
          reasonable under the circumstances shall be specified.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
(b)
            as specified in Article 8.2.1(b) and in Article 8.2.1(c).&#148; </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;6. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Replace
Article 8.2.4, that states  </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Without
derogating from the provisions of Article 8.2.3 above, to indemnify an officer </I><I>after
the occurrence of an event which is to be indemnified.&#148;</I> </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;with
the following Article 8.2.3:  </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;The
Company may indemnify an officer, as specified in Articles 8.2.1(a), 8.2.1(b) and
8.2.1(c) after the occurrence of such event which is to be indemnified.&#148; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;7. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Existing
Article 8.3, that states  </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;The
Company may exempt an officer in advance from his liability, in part or in whole, </I><I>for
damages resulting from breach of the officer&#146;s duty of care with respect to the
Company.&#148;</I> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shall
become Article 8.3(a). </FONT>
</TD>
</TR>
</TABLE>
<BR>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;8. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New
8.3(b) shall be added as follows:  </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Notwithstanding
Article 8.3(a) above, the Company may not exempt a Director in advance from his liability
toward the Company due to the breach of duty of care in the event of a distribution, as
defined in the Companies Law.&#148; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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

<!-- MARKER FORMAT-SHEET="Para Indent Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Attached
as Appendix B to this Proxy Statement is a marked copy of Articles 8.2 and 8.3 of the
Company&#146;s Articles of Association showing the proposed changes.  </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>RESOLVED:
To approve the Suggested Amendments to Chapter F of the Articles of Association of
the Company.</B> </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors recommends that the shareholders vote &#147;FOR&#148; the approval of
the Suggested Amendments to Chapter F of the Articles of Association of the Company </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>ITEM NO.7</U> </FONT> </H1>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>PROPOSAL
TO APPROVE THE AMENDED LETTER OF <BR>INDEMNIFICATION TO BE GIVEN TO DIRECTORS AND OFFICERS</B> </FONT> <BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>OF THE COMPANY AS MAY
SERVE FROM TIME TO TIME</B> </FONT> </p>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
described in Item No. 6, in March 2005, the Companies Law was amended to include certain
provisions relating to the indemnification and exemption from liability of directors and
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;As
a result of the amendment and the proposed amendment to the Company&#146;s Articles of
Association as described in Item No. 6, it is proposed to revise Letter of Indemnification
under which the Company undertakes to provide indemnification to the Company&#146;s
officers and directors to be consistent with the amendment to the Companies Law and with
common corporate practice in Israel with respect to indemnification and exemption of
liability of directors and officers. The following paragraphs describe the material terms
of the Letter of Indemnification. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Scope of Indemnification</U>: The
director or officer in question (the &#147;Indemnitee&#148;) will be indemnified for the
following costs and expenses: </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i)&nbsp;&nbsp;&nbsp;&nbsp;
          any monetary obligation imposed on the Indemnitee in favor of another person
          under a judgment, including a compromise settlement judgment or an
          arbitrator&#146;s decision which was approved by court; provided however that
          such indemnification shall be given only in respect of the events detailed in
          Annex A of the letter which according to the Board of Directors&#146; opinion,
          are foreseen in light of the Company&#146;s actual activities, and which shall
          not exceed the greater of (i) 30% of the Company&#146;s shareholders equity,
          according to the most recent Company consolidated financial statements prior to
          the date of the indemnification payment; or (ii) $10,000,000. </FONT></P>

<p align=center>
<font size=2>26</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ii)&nbsp;&nbsp;&nbsp;&nbsp;
          reasonable litigation expenses, including attorney&#146;s fees, which the
          Indemnitee incurred due to an investigation or procedure conducted against him
          by an authority authorized to conduct such an investigation or procedure,
          provided that such an investigation or procedure concluded without the filing of
          an indictment against the officer and without imposition of a monetary liability
          in lieu of criminal proceedings, or that such an investigation or procedure
          concluded without the filing of an indictment against the Indemnitee but a
          monetary liability in lieu of criminal proceedings is imposed and the offense in
          question does not require proof of mens rea; and </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iii)&nbsp;&nbsp;&nbsp;&nbsp;
          reasonable litigation expenses, including attorney&#146;s fees, which the
          Indemnitee incurred or for which he was obligated by a court, in a proceeding
          filed by the Company or in its name or by another person against him, or in
          criminal proceedings of which he was acquitted, or in criminal proceedings in
          which he was convicted, provided that the offense in question does not require
          proof of mens rea. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Limitation on
Indemnification:</U> </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
aggregate indemnification amount that the Company will pay to all Indemnitees under all
the indemnification letters that shall be issued by the Company shall not exceed the
greater of (i) 30% of the Company&#146;s shareholders equity, according to the most recent
Company consolidated financial statements prior to the date of the indemnification
payment; or (ii) $10,000,000. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nothing
in the Indemnification Letters prevents the Company from providing additional
indemnification to the Company&#146;s officers and directors, provided, however, any such
indemnification may be limited by applicable law or subject to shareholder approval. </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
full text of the amended Letter of Indemnification is attached to this Proxy Statement as
Appendix C. The information provided above with respect to the material terms of the
Letter of Indemnification is qualified in its entirety by reference to Appendix C, which
is the instrument the shareholders are requested to approve. </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
Letter of Indemnification will not be effective if the proposed related amendments to the
Company&#146;s Articles of Association in Item 6 of this Proxy Statement are not approved. </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>RESOLVED:
To approve the Letter of Indemnification to be given to directors and officers of the
Company as may serve from time to time</B> </FONT> </P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors recommends that the shareholders vote &#147;FOR&#148; the approval of
the Letter of Indemnification. </FONT></P>

<p align=center>
<font size=2>27</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>ITEM NO.8</U> </FONT> </H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PROPOSAL TO APPROVE
SEVERANCE ARRANGEMENTS WITH MR. <BR>BARRY COX FOLLOWING HIS RESIGNATION FROM THE POSITION  OF<BR>
CHAIRMAN AND MEMBER OF THE BOARD OF DIRECTORS OF THE <BR>COMPANY </FONT></H1>

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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, the Company has entered into an agreement with Mr. Barry L. Cox according
to which Mr. Cox served as chairperson of our board of directors. Under the agreement, Mr.
Cox was 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. Mr. Cox has resigned from the Board effective April 28, 2006. On June 19,
2006 (following the recommendations of the Compensation Committee and the Audit
Committee), the Board of directors approved the severance arrangements with Mr. Barry Cox
continuing payment of his compensation through the end of 2006 in a total amount of
$25,000. These payments are subject to approval by the shareholders. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>RESOLVED:
To approve the proposed severance arrangements with Mr. Barry Cox.</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors recommends that the shareholders vote &#147;FOR&#148; the approval of
suggested severance arrangements. </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. 9</U> </FONT> </H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PROPOSAL TO APPROVE
THE AGREEMENT BETWEEN THE <BR>COMPANY AND DR. MICHA BRUNSTEIN, THE CHAIRMAN OF <BR>THE BOARD OF
DIRECTORS OF THE COMPANY </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
June, 2006, Dr. Micha Brunstein was named as the chairman of the Board of Directors of the
Company. Following the recommendations of the Compensation Committee and the Audit
Committee, the Board of Directors resolved that Dr. Brunstein will be entitled to the
following terms and conditions: </FONT></P>

<p align=center>
<font size=2>28</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Annual Fee and Options</U>. Dr.
Brunstein shall be entitled to receive a gross annual fee of $110,000 payable monthly in
NIS. Dr. Brunstein will be granted options to purchase up to 150,000 Ordinary Shares of
the of the Company, subject to the terms of Option Plan 8. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Acceleration of Vesting
Schedule:</U> In the event of (i) a proposed sale of all or substantially all of the
assets of the Company; or (ii) a proposed merger of the Company with or into another
corporation or entity, following which the Company&#146;s shareholders will hold less than
50% of the shares of the surviving entity; or (iii) a proposal to purchase the
Company&#146;s shares so that following such purchase the purchaser will hold 50% or more
of the Company&#146;s Shares, provided that the purchaser is not numbered among the
Company&#146;s institutional investors at the date of the execution of the purchase
agreement (hereinafter, in each case: an &#147;Acceleration Event&#148;), the vesting
process of said 150,000 options shall be accelerated so that at the date of completion and
perfection of an Acceleration Event all said 150,000 options, to the extent not then
vested, shall vest and become exercisable, provided, however, that: a) Dr. Brunstein is
serving as the Chairman on such date; b) as a result of the Acceleration Event he is
compelled to vacate his position. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Confidentiality, Non-Compete and
Non-Solicitation</U>: Dr. Brunstein shall be subject to customary confidentiality, non-
compete and non-solicitation undertakings. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Term and Termination</U>: The term
of engagement shall commence as of June 19, 2006 and continue for an unlimited period,
unless terminated as a result of any of the following: i) Dr Brunstein is unable to
perform his duties as Chairman of the Board of the Company for whatever reason; ii) the
General Meeting of the Company decides not to reelect him as a director; iii) the Board of
Directors of the Company decides to terminate his appointment; all subject to, and in
accordance with any applicable law and/or the Articles of Association of the Company. Upon
termination, Dr. Brunstein shall be entitled to a one-time fee of $27,500. </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
full text of Dr. Brunstein&#146;s Agreement with the Company is attached to this Proxy
Statement as Appendix D. The above description is qualified in its entirety be reference
to the agreement attached as Appendix D, which is the document that the shareholders are
being requested to approve. </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 approve the agreement with Dr. Micha Brunstein, attached as Appendix D</B>. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors recommends that the shareholders vote &#147;FOR&#148; the approval
of the agreement with Dr. Micha Brunstein, attached as Appendix D. </FONT></P>

<p align=center>
<font size=2>29</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>ITEM NO. 10</U> </FONT> </H1>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>PROPOSAL TO APPROVE THE EMPLOYMENT TERMS OF THE CEO OF
<BR>THE COMPANY, DR. GIORA DISHON, FOR THE PERIOD
<BR>JULY 1, 2005 THROUGH JUNE 30, 2006</B> </FONT>
</P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
May 15, 2003, the Company&#146;s Board of Directors and Audit Committee resolved that the
monthly gross salary of Dr. Dishon shall be increased to 44,000 NIS (approximately $9,800)
for the period February 1, 2003 through July 31, 2003 and increased to 50,000 NIS
(approximately $11,120) starting on August 1, 2003. These changes in the terms of
compensation for Dr. Dishon were approved by our 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
November 1, 2005, the Company&#146;s Audit Committee and on November 2, 2005 the
Company&#146;s Board of Directors resolved that the monthly gross salary of Dr. Dishon
shall be increased to 57,000 NIS (approximately $12,000) starting on July 1, 2005. </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 resolution is proposed for consideration by the shareholders: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>RESOLVED:
To approve the terms of employment of Dr. Giora Dishon for the period of July 1, 2005
through June 30, 2006.</B> </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors recommends that the shareholders vote &#147;FOR&#148; the approval
of<B> </B>the terms of employment of Dr. Giora Dishon for the period of July 1, 2005
through June 30, 2006. </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. 11</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 APPROVE
THE EMPLOYMENT AGREEMENT<BR> BETWEEN THE COMPANY AND THE CEO OF THE COMPANY,</FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2> DR. GIORA
DISHON </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
May 15, 2003, the Company&#146;s Board of Directors and Audit Committee resolved that the
monthly gross salary of Dr. Dishon shall be increased to 44,000 NIS (approximately $9,800)
for the period February 1, 2003 through July 31, 2003 and increased to 50,000 NIS
(approximately $11,120) starting on August 1, 2003. These changes in the terms of
compensation for Dr. Dishon were approved by our shareholders on September 1, 2003. </FONT></P>

<p align=center>
<font size=2>30</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
November 1, 2005, the Company&#146;s Audit Committee and on November 2, 2005 the
Company&#146;s Board of Directors resolved that the monthly gross salary of Dr. Dishon
shall be increased to 57,000 NIS (approximately $12,000) starting on July 1, 2005. </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;During
June, 2006 the Company&#146;s Audit Committee and the Company&#146;s Board of Directors
approved further increases in the salary of Dr. Dishon, as well as the grant of additional
options. These changes in the terms of compensation for Dr. Dishon are set forth in a
written employment agreement with Dr. Dishon and are subject to approval by our
shareholders. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following
the recommendations of the Compensation Committee and the Audit Committee, the Board of
Directors resolved to approve an addendum to the employment agreement between the Company
and Dr. Dishon which includes the following material terms: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U>Salary
and Options</U>: Dr. Dishon will be paid a gross monthly salary of $15,000 payable in NIS
and will be granted options to purchase up to 100,000 Ordinary Shares under the terms and
conditions of Stock Option Plan No. 8. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U>Acceleration
of Vesting Schedule:</U> In the event of: (i) a proposed sale of all or substantially all
of the assets of the Company; or (ii) a proposed merger of the Company with or into
another corporation or entity, following which the Company&#146;s shareholders will hold
less than 50% of the shares of the surviving entity; or (iii) a proposal to purchase the
Company&#146;s shares so that, following such purchase, the purchaser will hold 50% or
more of the Company&#146;s Shares, provided that the purchaser is not numbered among the
Company&#146;s institutional investors at the date of the execution of the purchase
agreement (hereinafter, in each case: an &#147;Acceleration Event&#148;), the vesting
process of said 100,000 options shall be accelerated so that at the date of completion
and perfection of an Acceleration Event all said 100,000 options, to the extent not then
vested, shall vest and become exercisable, provided, however, that: a) Dr. Dishon is an
employee of the Company on such date; b) as a result of the Acceleration Event he is
compelled to vacate his position. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U>Term
and Termination</U>: The agreement shall come into effect as of July 1, 2006. In the
event of the appointment by the Company of a new CEO to the Company, the Company
undertakes to employ Dr Dishon in another suitable position within the Company, for a
period of two years from the date of such appointment (the &#147;<B>Minimum Period</B>&#148;).
Before the expiry of the Minimum Period, the Board of Directors of the Company may decide
to terminate Dr Dishon&#146;s employment in the Company, upon provision of prior written
notice. In this event, Dr Dishon shall be entitled to receive salary payments, including
all terms, rights and conditions, to which he was entitled during his employment in the
Company, until the completion of said Minimum Period. In the event that during such
Minimum Period, Dr Dishon concludes that he is unable to serve the Company as required,
following the CEO appointment, he shall be entitled to give one year prior written notice
to the Company of his decision to terminate his employment in the Company. In this case
the terms referred to above shall continue for one year from the date of such notice but
not beyond the end of the Minimum Period. Notwithstanding anything to the contrary in the
Stock Option Plan, the options of Dr Dishon shall continue to vest during the Minimum
Period. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>31</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
addendum to the employment agreement with Dr. Giora Dishon is attached to this Proxy
Statement as Appendix E. The above description is qualified in its entirety by reference
to the employment agreement which the shareholders are being requested to approve. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following resolution is proposed
for consideration by the shareholders: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>RESOLVED:
To approve the agreement with Dr. Giora Dishon, attached as Appendix E.</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors recommends that the shareholders vote &#147;FOR&#148; the approval
of<B> </B>of<B> </B>the agreement with Dr. Giora Dishon, attached as Appendix E<B>.</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>ITEM NO. 12</U> </FONT> </H1>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>PROPOSAL TO APPROVE THE EMPLOYMENT TERMS OF THE CHIEF
<BR>TECHNOLOGY OFFICER OF THE COMPANY, DR. MOSHE FINAROV, FOR
<BR>THE PERIOD JULY 1, 2005 THROUGH JUNE 30, 2006</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;On
May 15, 2003, the Company&#146;s Board of Directors and Audit Committee resolved that the
monthly gross salary of Dr. Finarov shall be increased to 40,000 NIS (approximately
$8,900) for the period February 1, 2003 through July 31, 2003 and increased to 44,000 NIS
(approximately $9,800) starting on August 1, 2003. These changes in the terms of
compensation for Dr. Finarov were approved by our 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
November 1, 2005, the Company&#146;s Audit Committee and on November 2, 2005 the
Company&#146;s Board of Directors resolved that the monthly gross salary of Dr. Finarov
shall be increased to 53,000 NIS (approximately $11,500) starting on July 1, 2005. </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 resolution is proposed for consideration by the shareholders: </FONT></P>

<p align=center>
<font size=2>32</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>RESOLVED:
To approve the terms of employment of Dr. Moshe Finarov for the period of July 1, 2005
through June 30, 2006.</B> </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors recommends that the shareholders vote &#147;FOR&#148; the approval
of<B> </B>the terms of employment of Dr. Moshe Finarov for the period of July 1,
2005 - through June 30, 2006. <U></U> </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. 13</U> </FONT> </H1>

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<P ALIGN="CENTER">
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>PROPOSAL TO APPROVE THE EMPLOYMENT AGREEMENT BETWEEN<BR>THE COMPANY AND THE CHIEF TECHNOLOGY OFFICER
OF THE</B> </FONT> <BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>COMPANY, DR. MOSHE
FINAROV</B> </FONT> </p>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
May 15, 2003, the Company&#146;s Board of Directors and Audit Committee resolved that the
monthly gross salary of Dr. Finarov shall be increased to 40,000 NIS (approximately
$8,900) for the period February 1, 2003 through July 31, 2003 and increased to 44,000 NIS
(approximately $9,800) starting on August 1, 2003. These changes in the terms of
compensation for Dr. Finarov were approved by our 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
November 1, 2005, the Company&#146;s Audit Committee and on November 2, 2005 the
Company&#146;s Board of Directors resolved that the monthly gross salary of Dr. Finarov
shall be increased to 53,000 NIS (approximately $11,500) starting on July 1, 2005. During
June, 2006 the Company&#146;s Audit Committee and the salary of Dr. Finarov Company&#146;s
Board of Directors have approved further increases in the as well the grant of additional
options. These changes in the terms of compensation for Dr. Finarov are set forth in a
written employment agreement with Dr. Finarov and are subject to approval by our
shareholders. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following
the recommendations of the Compensation Committee and the Audit Committee, the Board of
Directors resolved to approve an addendum to the employment agreement with Dr. Finarov
which includes the following material terms: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U>Salary
and Options</U>: Dr. Finarov will be paid a gross monthly salary of $14,000 payable in
NIS and will be granted options to purchase up to 100,000 Ordinary Shares under the terms
and conditions of Stock Option Plan No. 8. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>33</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U>Acceleration
of Vesting Schedule:</U> In the event of: (i) a proposed sale of all or substantially all
of the assets of the Company; or (ii) a proposed merger of the Company with or into
another corporation or entity, following which the Company&#146;s shareholders will hold
less than 50% of the shares of the surviving entity; or (iii) a proposal to purchase the
Company&#146;s shares so that, following such purchase the purchaser will hold 50% or
more of the Company&#146;s Shares, provided that the purchaser is not numbered among the
Company&#146;s institutional investors at the date of the execution of the purchase
agreement (hereinafter, in each case: an &#147;Acceleration Event&#148;), the vesting
process of said 100,000 options shall be accelerated so that at the date of completion
and perfection of an Acceleration Event all said 100,000 options, to the extent not then
vested, shall vest and become exercisable, provided, however, that: a) Dr. Finarov is an
employee of the Company on such date; b) as a result of the Acceleration Event he is
compelled to vacate his position. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U>Term
and Termination</U>: The agreement comes into effect as of July 1, 2006. In the event of
the appointment by the Company of a new CEO to the Company, the Company undertakes to
employ Dr Finarov in a position of Chief Technical Officer or as Senior Technology
Consultant, for a period of two years from the date of the execution of Dr Finarov&#146;s
employment agreement (the &#147;<B>Minimum </B><B>Period</B>&#148;). Before the expiry of
the Minimum Period, the Board of Directors of the Company may decide to terminate Dr
Finarov&#146;s employment in the Company, upon provision of prior written notice. In this
event, Dr Finarov shall be entitled to receive salary payments, including all terms,
rights and conditions, to which he was entitled during his employment in the Company,
until the completion of said Minimum Period. In the event that during such Minimum
Period, Dr Finarov concludes that he is unable to serve the Company as required,
following the CEO appointment, he shall be entitled to give one year prior written notice
to the Company of his decision to terminate his employment in the Company. In this case
the terms referred to above shall continue for one year from the date of such notice but
not beyond the end of the Minimum Period. Notwithstanding anything to the contrary in the
Stock Option Plan, the options of Dr Finarov shall continue to vest during the Minimum
Period. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
addendum to the employment agreement with Dr. Moshe Finarov is attached to this Proxy
Statement as Appendix F. The above description is qualified in its entirety by reference
to the employment agreement which is the document that the shareholders are being
requested to approve. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>RESOLVED:
To approve the agreement with Dr. Moshe Finarov, attached as Appendix F.</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors recommends that the shareholders vote &#147;FOR&#148; the approval
of<B> </B>the agreement with Dr. Moshe Finarov, attached as Appendix F<B>.</B> </FONT></P>

<p align=center>
<font size=2>34</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>ITEM NO. 14</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 GRANT
OPTIONS TO THE COMPANY&#146;S DIRECTORS AND <BR>EXTERNAL DIRECTORS </FONT></H1>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According
to the Israeli Companies Law, the terms of compensation of members of the Board of
Directors require approval of the Audit Committee, the Board of Directors and shareholders
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;As
to compensation in stock, according to the Regulations issued pursuant to the Companies
Law, the Company is entitled to grant the external directors, in addition to the cash
compensation described above, options to purchase Company&#146;s shares provided that such
grant is made within the framework of a stock incentive plan applicable to all other
directors in the Company and further provided that the amount of shares granted or
purchasable under the terms of such option shall be no less than the minimum amount of
shares purchasable by any other director and shall not exceed the average amount of shares
purchasable by all directors. According to the Companies Law, the transactions set forth
in this paragraph, are subject to the approval of the following corporate organs: (i) the
Company&#146;s Audit Committee; (ii) the Company&#146;s Board of Directors; and (iii) the
Company&#146;s shareholders. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
July 19, 2006, the Company&#146;s Audit Committee (in which all directors, including both
external directors, notified the Company of their personal interest in the approval of
said resolution) and the Company&#146;s Board of Directors (in which all directors,
including both external directors, have notified the Company of their personal interest in
the approval of said resolution), approved the grant of options to directors as set forth
below: </FONT></P>




<TABLE CELLPADDING="2" CELLSPACING="0" WIDTH="600" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Name of Directors</FONT></TH>
     <TH ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Position</FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1># of options</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="40%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Avi Kerbs</FONT></TD>
     <TD WIDTH="50%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,000&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>Director</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,000&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <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>Director</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,000&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dan Falk*</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>External Director</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,000&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Naama Zeldis (upon her election)</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nominee for election as External Director</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,000&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;*
9,000 additional options are granted to Mr. Dan Falk since he was elected as an external
director on September 29, 2005, but no options were granted to him with respect to 2005.
The Annual Shareholders meeting that was held on September 29, 2005 approved granting
9,000 options to each of the other directors listed above who served on the Board of
Directors of the Company. </FONT></P>

<p align=center>
<font size=2>35</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- 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
grant of the above options is subject to the terms and conditions of the Company&#146;s
Option Plan 8. Subject to any permitted acceleration of vesting, 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 will be the fair market value of the
Company&#146;s shares at the time such options are granted, unless otherwise determined by
the Board of 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;For
each individual director or nominee to the Board of Directors, the vote for the approval
of the grant of options, as described above, shall be made separately.<U></U> </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 resolution is proposed for consideration by the shareholders: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>RESOLVED,
to approve the grant of options to certain Directors of the Company as set forth in this Item No. 14.</B> </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors recommends that the shareholders vote &#147;FOR&#148; the approval
of<B> </B>the grant of options to certain Directors of the Company as set forth in this
Item No. 14. </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. 15</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 APPROVE
REMUNERATION TERMS FOR DIRECTORS AND <BR>EXTERNAL 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;As
of July 2006, External Directors and Directors of the Company receive remuneration
comprised of: an annual payment in the amount of NIS 30,708 (approximately $6,840) and an
additional payment per meeting of NIS 1,143 (approximately $255). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According
to the Companies Regulations (rules regarding remuneration and expenses for an External
Director) &#150; 2000 (the &#147;Regulations&#148;), a resolution for the payment of cash
remuneration to external directors which adheres to the cash range set forth in the second
and third schedules of the Regulations (as adjusted from time to time according to the
Regulations) required the approval of the Audit Committee, Board of Directors and
Shareholders. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
July 19, 2006, following the recommendation of the Compensation committee and the approval
of the Audit Committee, the Board of Directors approved remuneration for Directors and
External Directors as follows: an annual payment in the amount of NIS 34,575
(approximately $7,700) and an additional payment per meeting of NIS 1,820 (approximately
$405). The amounts set forth above adheres to the cash range set forth in the Regulations
and will be linked to the consumer price index according to the Regulations. The amounts
set forth above require the approval of the Shareholders&#146; Meeting. </FONT></P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following resolution is proposed for consideration by the shareholders: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>RESOLVED,
to approve the Directors and External Directors terms of remuneration, as set forth
in this Item No. 15.</B> </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors recommends that the shareholders vote &#147;FOR&#148; the approval of
the Directors and External Directors terms of remuneration, as set forth in this Item No.
15. </FONT></P>

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

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<H1 ALIGN=LEFT><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, 2006. </FONT></P>







<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN="3" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Name</FONT><HR WIDTH=20% SIZE=1 COLOR=BLACK 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=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Percentage of<BR>Ordinary<BR>Shares<BR>Beneficially Owned</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="66%" 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="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="12%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18.23</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>833,974</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>5.4</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Teuza - A Fairchild Technology Venture Ltd. (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>1,603,407</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>10.4</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>Teuza Management &amp; Development (1991) Ltd. (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>1,603,407</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>10.4</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Austin W. Marxe &amp; David Greenhouse (3)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,367,837</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>15.4</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. (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>1,175,600</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>7.6</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shai Saul (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>1,175,600</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>7.6</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Michael Elias (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>1,182,850</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>7.6</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tamir Fishman &amp; Co. Ltd. (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>1,180,700</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>7.6</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Eldad Tamir (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>1,180,700</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>7.6</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Danny Fishman (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>1,180,700</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>7.6</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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>963,042</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.1</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Moshe Finarov(6)</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>871,941</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>5.6</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
</TABLE><BR>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>* 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></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1)  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
following information is contained in Schedule 13D (Amendment No. 2) filed
               on December 18, 2003 by, among others, Clal Electronics 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 Livnat and Ruth Manor reported having shared voting
and                dispositive control over 2,823,584 shares. </FONT></TD>
</TR>
</TABLE>
<BR>

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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2)  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
information was provided by Avi Kerbs, President and Chief Executive Officer
               of Teuza Management &amp; Development Ltd., the management company of
Teuza-A                Fairchild Technology Venture Ltd. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3)  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As
reported on the Schedule 13G (Amendment 4) filed by Messrs. Marxe and
               Greenhouse on February 15, 2006, the amount indicated includes 536,778
shares                held by Special Situations Cayman Fund, L.P., 77,631 shares held by
Special                Situations Technology Fund, L.P., 397,869 shares held by Special
Situations                Technology Fund II, L.P., 109,246 shares held by Special
Situations Fund III,                L.P. and 1,246,313 shares held by Special Situations
Fund III, QP, L.P. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4)  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
following information is contained in a Schedule 13G (Amendment No. 2) filed
               by, among others, Tamir Fishman Ventures II, LLC (&#147;TFV&#148;), on
March 30,                2005: (a) Five limited partnerships and a corporation directly
beneficially own,                in the aggregate, 1,175,600 shares; (b) TFV beneficially
owns 1,175,600 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                shares; (d) Tamir Fishman &amp; Co.
Ltd is a managing member of TFV and reports                directly owning 5,100
additional shares; (e) Eldad Tamir and Danny Fishman are                each Co-President
and Co-CEO of Tamir Fishman &amp; Co. Ltd. The total number of                shares
beneficially owned collectively in this group is 1,182,850. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(5)  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Includes
shares held in trust under Israeli tax law for the benefit of the named
               shareholder and options to purchase 255,000 ordinary shares, which are
currently                exercisable. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(6)  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Includes
options to purchase 225,000 shares which are currently exercisable. </FONT></TD>
</TR>
</TABLE>
<BR>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Annual Report on Form
20-F </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 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 Mr. Dror David, 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>38</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Appendix A</B> </FONT></P>



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

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

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AS OF DECEMBER 31, 2004 </FONT></H1>

<p align=center>
<font size=2></font></p>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOVA MEASURING
INSTRUMENTS LTD. </FONT></H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONSOLIDATED FINANCIAL
STATEMENTS <BR><BR>AS OF DECEMBER 31, 2004 </FONT></H1>

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




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     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Page</FONT><HR WIDTH=95% SIZE=1 COLOR=#000000 NOSHADE></TH></TR>
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     <TD WIDTH=91% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><a href="#a201">Report Of Independent Registered Public Accounting Firm</a></B></FONT></TD>
     <TD WIDTH="9%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-1</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Consolidated Financial Statements</B></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;<a href="#a202">Balance Sheets - December 31, 2004 (as restated) and 2003</a></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-2</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;<a href="#a203">Statements of Operations - Years Ended December 31, 2004 (as restated), 2003 and 2002</a></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-3</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;<a href="#a204">Statements of Shareholders&#146; Equity and Comprehensive Loss - Years Ended December 31, 2004 (as restated), 2003
</a></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;<a href="#a204">and 2002</a></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-4</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;<a href="#a205">Statements of Cash Flows - Years Ended December 31, 2004 (as restated), 2003 and 2002</a></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-5 - F-6</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;<a href="#a206">Notes to the consolidated Financial Statements</a></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-7 - F-24</FONT></TD></TR>
</TABLE>

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<a name=a201></a>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM<BR>
TO THE SHAREHOLDERS OF<BR>
NOVA MEASURING INSTRUMENTS LTD.</B><BR>
</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have  audited  the  accompanying
 consolidated  balance  sheets  of Nova  Measuring  Instruments  Ltd.  (the "Company")
and its  subsidiaries as of December 31, 2004 and 2003, and the related  consolidated
 statements of operations,  shareholders'  equity and  comprehensive  loss and
cash flows for each of the three years in the period ended  December 31, 2004.  These
 financial  statements are the  responsibility  of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control of financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Company&#146;s internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As  discussed in Note 15, the
Company has restated its  consolidated  financial  statements  as of December 31, 2004. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our opinion,  the  consolidated
 financial  statements  referred to above  present  fairly,  in all material respects,
 the consolidated  financial position of the Company and its subsidiaries as of December
31, 2004 and 2003,  and their  consolidated  results of operations  and cash flows for
each of the three years in the period ended December 31, 2004, in conformity with
accounting  principles  generally  accepted in the United States of America. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Brightman Almagor &amp; Co.<BR>
Certified Public Accountants <BR>
A member firm of Deloitte Touche Tohmatsu</B>
</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tel Aviv, Israel<BR>
February 16, 2005
</FONT></P>



<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Except for Note 15, as to which the date is April 9, 2006</FONT></P>



<p align=center>
<font size=2>F - 1</font></p>
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<page>

<a name=a202></a>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>NOVA MEASURING INSTRUMENTS LTD.<BR>
CONSOLIDATED BALANCE SHEETS<BR>
</B></U>(In thousands, except share and per share data) </FONT>
</P>







<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
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     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>As of December 31,</FONT><HR WIDTH=95% SIZE=1 COLOR=#000000 NOSHADE></TH>
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<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>2004</FONT><HR WIDTH=95% SIZE=1 COLOR=#000000 NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT><HR WIDTH=95% SIZE=1 COLOR=#000000 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>(As restated*)</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>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="75%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CURRENT ASSETS</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="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></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="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Cash and cash equivalents</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  12,171</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  26,634</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Short-term interest-bearing bank deposits</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>1,916</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>711</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;&nbsp;Held-to-maturity securities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,583</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,296</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Trade accounts receivable (no allowance for doubtful accounts)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,850</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>5,804</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;&nbsp;Inventories (Note 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>6,354</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,152</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Other current assets</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>1,169</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,244</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=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>37,043</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>42,841</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT" colspan=7><FONT FACE="Times New Roman, Times, Serif" SIZE=2>LONG-TERM ASSETS</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;&nbsp;Long-term interest-bearing bank deposits</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>2,145</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>1,386</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Held-to-maturity securities</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>5,989</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>-</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;&nbsp;Other Long-term assets</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>382</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>242</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Severance pay funds (Note 6)</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>2,288</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>2,024</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=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>10,804</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,652</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;FIXED ASSETS, NET (Note 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>2,119</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>1,425</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=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;&nbsp;&nbsp;&nbsp;&nbsp;Total assets</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  49,966</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  47,918</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=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>   </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT" colspan=7><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CURRENT LIABILITIES</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;&nbsp;Trade accounts payable</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   4,795</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   5,389</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Other current liabilities (Note 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>6,539</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>7,102</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,334</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,491</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT" colspan=7><FONT FACE="Times New Roman, Times, Serif" SIZE=2>LONG-TERM LIABILITIES</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;&nbsp;Liability for employee termination benefits (Note 6)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,075</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>2,653</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Deferred income</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,831</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>263</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;&nbsp;Other long-term liability (Note 9)</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>145</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>175</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>

<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="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>7,051</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,091</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=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>COMMITMENTS AND CONTINGENCIES (Note 7)</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>   </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT" colspan=7><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SHAREHOLDERS' EQUITY (Note 8)</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;&nbsp;Ordinary shares, NIS 0.01 par value - authorized 40,000,000</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;&nbsp;&nbsp;&nbsp;shares, issued and outstanding 15,308,544</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;&nbsp;&nbsp;&nbsp;and 15,117,538 shares, respectively</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>46</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>46</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Additional paid-in capital</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>73,333</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>72,785</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;&nbsp;Deferred stock-based compensation</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>-</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>(122</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Accumulated other comprehensive income</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8</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</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;&nbsp;Accumulated deficit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(41,806</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(40,386</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total shareholders' equity</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>31,581</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>32,336</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  49,966</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  47,918</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>* See note 15</FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying notes are an
integral part of the consolidated financial statements. </FONT></P>

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

<a name=a203></a>

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<p ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>NOVA MEASURING
INSTRUMENTS LTD.<BR>CONSOLIDATED TATEMENTS OF OPERATIONS</B></U><BR>(In thousands, except share and per
share data) </FONT> </p>










<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year ended December 31,</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK 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>2004</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(As restated*)</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>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="69%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>REVENUES:</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>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product sales</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  29,274</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  21,152</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  14,506</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Services</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>7,532</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>5,536</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>5,865</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=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>36,806</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>26,688</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>20,371</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT" colspan=10><FONT FACE="Times New Roman, Times, Serif" SIZE=2>COST OF REVENUES:</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;&nbsp;&nbsp;&nbsp;&nbsp;Product sales</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>14,396</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>10,270</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,752</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Services</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,715</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,265</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,601</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=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>21,111</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16,535</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>13,353</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>GROSS PROFIT</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>15,695</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,153</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>7,018</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>OPERATING EXPENSES:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT" colspan=10><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development expenses, net of participation by the</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OCS of $1,926, $2,321 and $1,679, respectively (Note 7)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,665</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,561</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,894</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;&nbsp;&nbsp;&nbsp;&nbsp;Technology for use in research and development (Note 9)</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>-</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>-</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>1,478</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales and marketing expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,647</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,534</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,950</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;&nbsp;&nbsp;&nbsp;&nbsp;General and administrative expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,331</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>1,898</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>1,797</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other operating income (Note 10)</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>-</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>(2,203</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=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>17,643</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14,790</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>20,119</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>OPERATING LOSS</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>(1,948</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4,637</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(13,101</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>INTEREST INCOME</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;&nbsp;(net of related expenses of $56, $28 and $30, respectively)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>528</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>425</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>144</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NET LOSS FOR THE YEAR</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  (1,420</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  (4,212</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (12,957</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>LOSS PER SHARE</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;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic Loss per share</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (0.09</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (0.28</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (0.88</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shares used in calculation of basic loss per share</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>15,259</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14,994</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14,786</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>




<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>* See note 15</FONT></P>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying notes are an
integral part of the consolidated financial statements. </FONT></P>



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

<a name=a204></a>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<p ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>NOVA MEASURING
INSTRUMENTS LTD. </B></FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS&#146; EQUITY AND COMPREHENSIVE LOSS</U></B></FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>(In thousands) </FONT></P>















<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Share capital</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK 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>Ordinary<BR>
shares</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1><BR>
Deferred<BR>
shares</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Additional<BR>
Paid-in<BR>
capital</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Deferred<BR>
stock-based<BR>
compensation</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Accumulated other<BR>
Comprehensive<BR>
Income (Loss)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Accumulated<BR>
Deficit</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Total</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="42%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance as of January 1, 2002</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>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="4%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     43</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="2%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   3</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     72,774</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  (2,073</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     (524</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (23,217</FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  47,006</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>Employee share-based plans</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>(*)-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <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>31</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <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>31</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amortization of deferred stock- based compensation</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>&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>&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>&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>1,073</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <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>1,073</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>Forfeiture of employee share options</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>&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>&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>(191</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>191</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <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>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Realization of losses on derivatives</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>&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>&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>&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>&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>212</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <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>212</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>Realization of losses on investments</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>&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>&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>&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>&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>312</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <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>312</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Conversion of deferred shares into ordinary shares</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&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>&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>&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>&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>-</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>Loss for the year</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>&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>&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>&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>&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>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(12,957</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(12,957</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">) </FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total comprehensive loss</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>&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>&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>&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>&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>&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>&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"><B>(12,433</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance as of December 31, 2002</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     46</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  -</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     72,614</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (809</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    -</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (36,174</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  35,677</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employee share-based plans</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>(*)-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <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>318</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <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>318</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>Amortization of deferred stock- based compensation</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>&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>&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>&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>540</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <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>540</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Forfeiture of employee share options</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>&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>&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>(147</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>147</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <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>-</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>Increase in fair market value of derivatives</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>&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>&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>&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>&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>13</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <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</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loss for the year</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>&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>&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>&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>&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>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4,212</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4,212</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total comprehensive loss</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>&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>&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>&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>&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>&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>&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"><B>(4,199</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance as of December 31, 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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     46</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  -</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     72,785</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (122</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       13</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (40,386</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  32,336</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employee share-based plans</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>(*)-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <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>548</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <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>548</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amortization of deferred stock- based compensation</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>&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>&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>&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>122</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <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>122</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>Forfeiture of employee share options</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Decrease in fair market value of derivatives</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>&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>&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>&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>&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>(5</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&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>(5</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>Net loss for the year (As restated (**))</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>&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>&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>&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>&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>&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>(1,420</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,420</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total comprehensive loss</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>&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>&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>&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>&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>&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>&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"><B>(1,425</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance as of December 31, 2004 (As restated (**))</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     46</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  -</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     73,333</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     -</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        8</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (41,806</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  31,581</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>



<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(*) Less than $1, (**) See note 15.</FONT></P>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying notes are an
integral part of the consolidated financial statements.  </FONT></P>

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

<a name=a205></a>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>NOVA MEASURING
INSTRUMENTS LTD.<BR>CONSOLIDATED STATEMENTS OF CASH FLOWS</B></U> </FONT>  <BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>(In thousands) </FONT></P>






<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year ended December 31,</FONT><HR WIDTH=98% SIZE=1 COLOR=#000000 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>2 0 0 4</FONT><HR WIDTH=95% SIZE=1 COLOR=#000000 NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2 0 0 3</FONT><HR WIDTH=95% SIZE=1 COLOR=#000000 NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2 0 0 2</FONT><HR WIDTH=95% SIZE=1 COLOR=#000000 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>(As restated*)</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>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="69%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CASH FLOWS - OPERATING ACTIVITIES</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>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;Net loss for the year</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,420</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  (4,212</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (12,957</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT" colspan=10><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;Adjustments to reconcile net loss for the year to net cash</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;used in operating activities - Schedule A</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>(109</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,295</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,046</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   </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;&nbsp;&nbsp;&nbsp;Net cash - operating activities</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>(1,529</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(5,507</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(7,911</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT" colspan=10><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CASH FLOWS - INVESTING ACTIVITIES</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>   </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;Technology for use in research and development</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>-</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>-</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>(1,265</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;Increase in short-term and long-term interest-bearing bank deposits</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>(1,964</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,475</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(622</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;Decrease (increase) in short-term and long-term held to maturity securities</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>(10,276</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3,302</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,220</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;Decrease in available for sale securities</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>-</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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,644</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;Additions to fixed assets</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>(1,242</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(364</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(601</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash - investing activities</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>(13,482</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(5,141</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,376</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   </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>CASH FLOWS - FINANCING ACTIVITIES</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>   </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shares issued under employee share-based plans</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>548</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>318</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>31</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   </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;&nbsp;&nbsp;&nbsp;Net cash - financing activities</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>548</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>318</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>31</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Increase (decrease) in cash and cash equivalents</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>(14,463</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(10,330</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,496</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>Cash and cash equivalents - beginning of year</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>26,634</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>36,964</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>34,468</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents - end of year</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  12,171</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  26,634</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  36,964</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=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>SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:</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>   </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Taxes paid</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>      65</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>      67</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>      53</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD></TR>
</TABLE><BR>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>* See note 15</FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying notes are an
integral part of the consolidated financial statements. </FONT></P>

<p align=center>
<font size=2>F - 5</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>NOVA MEASURING
INSTRUMENTS LTD.<BR>CONSOLIDATED STATEMENTS OF CASH FLOWS</B></U> </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>(In thousands) </FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN=TOP>
<TD WIDTH="15%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>SCHEDULE A</B> </FONT></TD>
<TD WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH="82%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
ADJUSTMENTS TO RECONCILE LOSS TO NET CASH USED IN OPERATING
ACTIVITIES</B> </FONT> </TD>
</TR>
</TABLE>
<BR>








<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year ended December 31,</FONT><HR WIDTH=98% SIZE=1 COLOR=#000000 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>2 0 0 4</FONT><HR WIDTH=95% SIZE=1 COLOR=#000000 NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2 0 0 3</FONT><HR WIDTH=95% SIZE=1 COLOR=#000000 NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2 0 0 2</FONT><HR WIDTH=95% SIZE=1 COLOR=#000000 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>(As restated*)</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>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="66%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income and expense items not involving cash flows:</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="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></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="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></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="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
      <TD>&nbsp; </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    548</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    716</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    802</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>   </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss from realization of available for sale securities</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>-</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>-</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>652</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>   </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;&nbsp;&nbsp;&nbsp;Technology for use in research and development</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>-</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>-</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>1,478</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>   </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of deferred stock-based compensation</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>122</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>540</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>1,073</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>   </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;&nbsp;&nbsp;&nbsp;Increase (decrease) in liability for employee</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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;termination benefits, net</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>310</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>168</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>(40</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="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>980</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>1,424</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,965</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   </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>Changes in assets and liabilities:</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>   </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in trade accounts receivable</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>(1,046</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,902</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,229</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>   </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;&nbsp;&nbsp;&nbsp;Decrease (increase) in other current assets and other</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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;long-term assets</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>(70</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(336</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>252</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>   </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease (increase) in inventories</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>(2,202</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,002</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,163</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>   </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;&nbsp;&nbsp;&nbsp;Increase (decrease) in trade accounts payable and other</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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;long-term liabilities</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>(624</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,011</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>653</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>   </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in long-term deferred income</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,568</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24</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>239</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>   </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;&nbsp;&nbsp;&nbsp;Increase (decrease) in other current liabilities</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>(715</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(514</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="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>(1,089</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,719</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,081</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (109</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1,295</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  5,046</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD></TR>
</TABLE>
<BR>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>* See note 15</FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying notes are an
integral part of the consolidated financial statements. </FONT></P>

<p align=center>
<font size=2>F - 6</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>



<a name=a206></a>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOVA MEASURING
INSTRUMENTS LTD. <BR>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS </B><BR>
(in thousands,
except share and per share data) </FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 1 &#150; GENERAL </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>A.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Business
Description</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Nova
Measuring Instruments (the &#147;Company&#148;) was incorporated in May 1993 and
commenced operations in October 1993 in the design, development and production of
integrated process control systems, used in the manufacturing of semiconductors. In
October 1995, the Company began manufacturing and marketing its systems. In addition, the
Company is continuing research and development for the next generation of its products
and additional applications for such products. The Company operates in one operating
segment. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company has wholly owned subsidiaries in the United States of America (the &#147;U.S.&#148;),
Japan, The Netherlands and Taiwan. All companies (the &#147;subsidiaries&#148;) are
engaged in pre-sale activities and providing technical support to customers. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
industry in which the Company operates is characterized by rapid technological
development in a competitive environment. Substantially most of the Company&#146;s
current sales are derived from a single product line for use exclusively by the
semiconductor industry, whose business is highly cyclical. The Company depends on a
limited number of suppliers, and at times a sole supplier. Any disruption or termination
of the suppliers&#146;operations may adversely affect the Company&#146;s production
capabilities. In addition, certain of the Company&#146;s development projects are in the
early stages and there can be no assurance that these projects will be successful. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
ordinary shares of the Company are traded on the NASDAQ National Market System since
April, 2000. The ordinary shares are also traded on the Tel-Aviv Stock Exchange, since
June, 2002. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Use
of Estimates in the Preparation of Financial Statements</B></FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities as
of the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those estimates. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 2 &#150;
SIGNIFICANT ACCOUNTING POLICIES </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
financial statements have been prepared in accordance with generally accepted accounting
principles (&#147;GAAP&#148;) in the United States of America. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
following is a summary of the significant accounting policies, which were applied in the
preparation of these financial statements, on a consistent basis: </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 7</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="Head Minor Center Bold-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOVA MEASURING
INSTRUMENTS LTD. <BR>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS </B><BR>
(in thousands,
except share and per share data) </FONT> </P>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 2 &#150;
SIGNIFICANT ACCOUNTING POLICIES (Cont.) </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>A.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Financial
Statements in U.S. Dollars</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
currency of the primary economic environment in which the operations of the Company and
its subsidiaries are conducted is the U.S. dollar (the &#147;dollar&#148;). Accordingly,
the Company uses the dollar as its functional and reporting currency. Certain of the
dollar amounts in the financial statements may represent the dollar equivalent of other
currencies, including the New Israeli Shekel (&#147;NIS&#148;), and may not be
exchangeable for dollars. <BR><BR>Transactions and balances denominated in dollars are presented
at their dollar amounts. Non-dollar transactions and balances are remeasured into dollars
in accordance with the principles set forth in Statement of Financial Accounting
Standards (&#147;SFAS&#148;) No. 52, &#147;Foreign Currency Translation,&#148; of the
Financial Accounting Standards Board (&#147;FASB&#148;). Net financing income includes
translation gains (losses), which were immaterial for all years presented.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Principles
of Consolidation</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;s financial statements include the financial statements of the Company and
its subsidiaries (the &#147;Group&#148;) after elimination of material intercompany
transactions and balances.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>C.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Cash
and Cash Equivalents</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Cash
and cash equivalents are comprised of cash and demand deposits in banks and other
short-term, highly liquid investments (primarily interest-bearing time deposits and
commercial papers) with maturity dates not exceeding three months from the date of
deposit.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>D.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Allowance
for Doubtful Accounts</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
allowance for doubtful accounts is recorded on the specific identification basis. No
allowance was deemed necessary by management.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>E.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Held-to-Maturity Securities</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Securities
held to maturity include investments in debt securities that the Company has positive
intent and ability to hold to maturity. Securities held to maturity are measured at
amortized cost.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>F.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Inventories</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Inventories
are presented at the lower of cost or market. Cost is determined as follows: <BR><BR>Raw
materials &#150; on the average cost basis. <BR><BR>Finished products and work in process &#150; at
actual cost (materials, labor and indirect manufacturing costs).  </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 8</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 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOVA MEASURING
INSTRUMENTS LTD. <BR>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS </B><BR>
(in thousands,
except share and per share data) </FONT> </P>


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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 2 -SIGNIFICANT
ACCOUNTING POLICIES (Cont.) </FONT></H1>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>G.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Fixed
assets</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Fixed
assets are presented at cost, net of accumulated depreciation.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Annual
depreciation is calculated based on the straight-line method over the shorter of the
estimated useful lives of the related assets or terms of the related leases. Annual
depreciation rates are as follows:  </FONT></TD>
</TR>
</TABLE>
<BR>



<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="400" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>%</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></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></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></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></TR>
<TR VALIGN=Bottom>
     <TD WIDTH="78%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Electronic equipment</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="15%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20-33</FONT></TD>
</TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Office furniture and equipment</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>6-15</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>Leasehold improvements</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>20</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>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD></TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
accordance with SFAS No. 144, &#147;Accounting for Impairment or Disposal of Long-Lived
Assets&#148; of the FASB, which supercedes SFAS No. 121, management reviews long-lived
assets for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable based on estimated future undiscounted
cash flows. If so indicated an impairment loss would be recognized for the difference
between the carrying amount of the asset and its fair value.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>H.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Accrued
Warranty Costs</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Accrued
warranty costs are calculated in respect of the warranty period on the Company&#146;s
products (generally one year) and are based on the Company&#146;s prior experience and in
accordance with management&#146;s estimate. See Note 5B for disclosure with regard to
accrued warranty costs. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>I.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Revenue
Recognition</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Company recognizes revenues upon
the shipment of its products to the customer provided that persuasive evidence of an
arrangement exists, title has transferred, the price is fixed, collection of resulting
receivables is probable and there are no remaining significant obligations. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
cases of  arrangements  with  multiple  deliverables,  revenue is typically  recognized
 upon  shipment,  if                      collection of the  resulting  receivable  is
probable,  the fee is fixed or  determinable,                      and  vendor-specific
 objective  evidence exists to allocate a portion of the total fee to
                     any  undelivered  elements  of  the  arrangement.   Such
 undelivered  elements  in  these                      arrangements  typically consist of
services and/or upgrades. If vendor-specific  objective                      evidence
does not exist for the undelivered  elements of the  arrangement,  all revenue is
                     deferred until such evidence does exist,  or until all elements are
 delivered,  whichever                      is earlier.                    <BR><BR>  Service
revenues  consist mainly of revenue from maintenance  contracts and are recognized
                     ratably over the contract period. </FONT></TD>
</TR>
</TABLE>
<BR>


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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>J.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Research
and Development</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Research
and development costs are charged to operations as incurred. Amounts received or
receivable from the Government of Israel through the Office of the Chief Scientist (&#147;OCS&#148;)
as its participation in certain research and development projects are offset against the
Company&#146;s research and development costs. The accrual for grants receivable is
determined based on the terms of the programs, provided that the criteria for entitlement
have been met. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 9</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="Head Minor Center Bold-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOVA MEASURING
INSTRUMENTS LTD. <BR>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS </B><BR>
(in thousands,
except share and per share data) </FONT> </P>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 2 &#150;
SIGNIFICANT ACCOUNTING POLICIES (Cont.) </FONT></H1>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>K.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Income
Taxes</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Group accounts for income taxes utilizing the asset and liability method in accordance
with SFAS No. 109, &#147;Accounting for Income Taxes&#148; of the FASB. Current tax
liabilities are recognized for the estimated taxes payable on tax returns for the current
year. Deferred tax liabilities or assets are recognized for the estimated future tax
effects attributable to temporary differences between the income tax bases of assets and
liabilities and their reported amounts in the financial statements, and for tax loss
carryforwards. Measurement of current and deferred tax liabilities and assets is based on
provisions of enacted tax laws, and deferred tax assets are reduced, if necessary, by the
amount of tax benefits, the realization of which is not considered likely based on
available evidence. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>L.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Stock-Based
Compensation</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Group accounts for employee stock-based compensation in accordance with Accounting
Principles Board Opinion No. 25, &#147;Accounting for Stock Issued to Employees&#148; and
in accordance with FASB Interpretation No. 44. Pursuant to these accounting
pronouncements, the Group records compensation for stock options granted to employees
over the vesting period of the options based on the difference, if any, between the
exercise price of the options and the market price of the underlying shares at the grant
date. With respect to variable awards, changes in the market price of the underlying
shares at each balance sheet date affect the aggregate amount of compensation recorded.
Deferred compensation is amortized to compensation expense over the vesting period of the
options. See below for pro forma disclosures required in accordance with SFAS No. 123,
&#147;Accounting for Stock-Based Compensation&#148;, as amended by SFAS 148. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Pro
forma Loss Per Share According to SFAS 123 and SFAS 148:</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
For
purposes of estimating fair value in accordance with SFAS 123, the Company utilized the
Black-Scholes option-pricing model. The following assumptions were utilized in such
calculations for the years 2004, 2003 and 2002 (all in weighted averages): </FONT></TD>
</TR>
</TABLE>
<BR>



<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="500" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH="57%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Risk-free interest rate</FONT></TD>
     <TD WIDTH="11%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4%</FONT></TD>
     <TD WIDTH="19%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.4%</FONT></TD>
     <TD WIDTH="13%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.5%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Expected life of options</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7 years</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7 years</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7 years</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Expected weekly volatility</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>56%</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>82%</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>90%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Expected dividend yield</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>none</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>none</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>none</FONT></TD></TR>
<TR>
     <TD></TD>
     <TD></TD>
     <TD></TD>
     <TD></TD></TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Had
compensation cost for the Company&#146;s stock option plans been determined based on fair
value at the grant dates for all awards made in 2004, 2003 and 2002 in accordance with
SFAS 123, as amended by SFAS 148, the Company&#146;s pro forma loss per share
would have been as follows: </FONT></TD>
</TR>
</TABLE>
<BR>

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




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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOVA MEASURING
INSTRUMENTS LTD. <BR>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS </B><BR>
(in thousands,
except share and per share data) </FONT> </P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 2 -SIGNIFICANT
ACCOUNTING POLICIES (Cont.) </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>L.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Stock-Based
Compensation (Cont.)</B> </FONT></TD>
</TR>
</TABLE>
<BR>



<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="600" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2 0 0 4</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2 0 0 3</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2 0 0 2</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="63%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B>Pro forma net loss</B></U> </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="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></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="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></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="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net loss for the year, as reported</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1,420</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  (4,212</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (12,957</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" COLSPAN=10><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Deduct - stock-based compensation determined under</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>APB-25</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>122</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>540</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>1,073</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>Add - stock-based compensation determined</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>under SFAS 123</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>(1,258</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,348</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,265</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pro forma net loss</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (2,556</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  (5,020</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (14,149</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B>Pro forma loss per share</B></U> </FONT> </TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic - as reported</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (0.09</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (0.28</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (0.88</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic - pro forma</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (0.17</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (0.33</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (0.96</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>M.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Loss per Share</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Loss per share is presented in
accordance with SFAS 128 of the FASB, &#147;Earnings per Share.&#148; Pursuant to this
standard, basic earnings (loss) per share exclude the dilutive effects of convertible
securities and are computed by dividing income (loss) available to common shareholders by
the weighted-average number of common shares outstanding for the period. Diluted earnings
(loss) per share reflect the potential dilutive effect of all convertible securities. Due
to the anti-dilutive effect, basic loss per share was equal to diluted loss per share for
years 2004, 2003 and 2002. The number of potentially dilutive securities excluded from
diluted earnings per share due to the anti-dilutive effect amounted to 754,109, 2,608,475
and 2,093,767 in 2004, 2003 and 2002, respectively. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>N.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Derivative
Financial Instruments</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
SFAS
No. 133, &#147;Accounting for Derivative Instruments and Hedging Activities&#148; as
amended by SFAS No. 138 and SFAS No. 149, requires, principally, the presentation of all
derivatives as either assets or liabilities on the balance sheet and the measurement of
those instruments at fair value. Gains and losses resulting from changes in the fair
values of derivative instruments would be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
See
Note 14 for disclosure of the derivative financial instruments in accordance with such
pronouncements. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 11</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 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOVA MEASURING
INSTRUMENTS LTD. <BR>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS </B><BR>
(in thousands,
except share and per share data) </FONT> </P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 2 -SIGNIFICANT
ACCOUNTING POLICIES (Cont.) </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>O.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Reclassification</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Certain
previously reported amounts have been reclassified in these financial statements in order
to conform to the 2004 financial statements presentation. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>P.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>New
Accounting Pronouncements</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(1)</B></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>SFAS
No. 151 &#150; Inventory Costs, an Amendment of ARB No. 43, Chapter                4</B> &#150; In
November 2004 the FASB issued SFAS No. 151, &#147;Inventory                Costs, an
Amendment of ARB No. 43, Chapter 4&quot;. SFAS No. 151 amends the                guidance
in ARB 43, Chapter 4, &#147;Inventory Pricing&#148;, which provides
               guidance on the allocation of certain costs to inventory. SFAS 151
clarifies                that abnormal amounts of idle facility expense, freight,
handling costs, and                wasted material (spoilage) should be recognized as
current-period charges. In                addition, SFAS 151 requires that allocation of
fixed production overheads to the                costs of conversion be based on the
normal capacity of the production                facilities. The provisions of this
statement are effective for inventory costs                incurred during fiscal years
beginning after June 2005. The provisions of this                statement shall be
applied prospectively. The Company is assessing the impact of                the adoption
of this Standard, and currently estimates that its adoption is not
               expected to have a material effect on the Company&#146;s financial
position and                results of operations. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(2)</B></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>SFAS
No. 123 (revised 2004) &#147;Share Based Payments&#148;</B> &#150; In
               December 2004, the FASB issued SFAS No. 123 (revised 2004) &#147;Share
Based                Payments&#148; (&#147;SFAS 123(R)&#148;). This Statement is a
revision of FASB                Statement No. 123, &#147;Accounting for Stock-Based
Compensation&#148;, which                supersedes APB Opinion No. 25, &#147;Accounting
for Stock Issued to                Employees&#148; and its authoritative interpretations. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
SFAS
123(R) establishes standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods or services; focuses primarily on accounting
for transactions in which an entity obtains employee and directors services in
share-based payment transactions; and does not change the accounting guidance for
share-based payment transactions with parties other than employees. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
SFAS
123(R) eliminates the alternative to use APB 25&#145;s intrinsic value method of
accounting that was provided in SFAS 123 as originally issued and requires to measure the
cost of employee services received in exchange for an award of equity instruments based
on the grant-date fair value of the award. The fair-value-based method in this Statement
is similar to the fair-value-based method in SFAS 123 in most respects. The costs
associated with the awards will be recognized over the period during which an employee is
required to provide service in exchange for the award &#150; the requisite service period
(usually the vesting period). </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
grant-date fair value of employee share options and similar instruments will be estimated
using option-pricing models adjusted for the unique characteristics of those instruments
(unless observable market prices for the same or similar instruments are available). If
an equity award is modified after the grant date, incremental compensation cost will be
recognized in an amount equal to the excess of the fair value of the modified award over
the fair value of the original award immediately before the modification. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 12</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="Head Minor Center Bold-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOVA MEASURING
INSTRUMENTS LTD. <BR>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS </B><BR>
(in thousands,
except share and per share data) </FONT> </P>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 2 -SIGNIFICANT
ACCOUNTING POLICIES (Cont.) </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>P.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>New
Accounting Pronouncements (Cont.)</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(2)</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(Cont.)</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
provisions of SFAS 123(R) apply to all awards to be granted by the Company after June 30,
2005 and to awards modified, repurchased, or cancelled after that date. When initially
applying the provisions of SFAS 123(R), in the third quarter of 2005, the Company will be
required to elect between using either the &#147;modified prospective method&#148; or the
&#147;modified retrospective method&#148;. Under the modified prospective method, the
Company is required to recognize compensation cost for all awards granted after the
adoption of SFAS 123(R) and for the unvested portion of previously granted awards that
are outstanding on that date. Under the modified retrospective method, the Company is
required to restate its previously issued financial statements to recognize the amounts
previously calculated and reported on a pro forma basis, as if the original provisions of
SFAS 123 had been adopted. Under both methods, it is permitted to use either a straight
line or an accelerated method to amortize the cost as an expense for awards with graded
vesting. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Management
has recently commenced identifying the potential future impact of applying the provisions
of SFAS 123(R), including each of its proposed transition methods, yet is currently
unable to fully quantify the effect of this Standard on the Company&#146;s future
financial position and results of operations. Nonetheless, it is expected that the
adoption of SFAS 123(R) will increase the stock-based-award expenses the Company is to
record in the future in comparison to the expenses recorded under the guidance currently
applied by the Company. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(3)</B></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>SFAS
No. 153, Exchange of Non-Monetary Assets</B> &#150; In December 2004,                the
FASB issued SFAS No. 153, &#147;Exchanges of Nonmonetary Assets an amendment
               of APB No. 29&quot;. This Statement amends Opinion 29 to eliminate the
exception                for nonmonetary exchanges of similar productive assets and
replaces it with a                general exception for exchanges of nonmonetary assets
that do not have                commercial substance. The Statement specifies that a
nonmonetary exchange has                commercial substance if the future cash flows of
the entity are expected to                change significantly as a result of the
exchange. This Statement is effective                for nonmonetary asset exchanges
occurring in fiscal periods beginning after June                15, 2005. Earlier
application is permitted for nonmonetary asset exchanges                occurring in
fiscal periods beginning after the date this Statement is issued.
               Retroactive application is not permitted. The Company is assessing the
impact of                the adoption of this Standard, and currently estimates that its
adoption in not                expected to have a material effect on the Company&#146;s
financial position and                results of operations. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 3 -INVENTORIES </FONT></H1>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
</TR>
</TABLE>
<BR>






<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="600" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>As of December 31,</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK 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>2 0 0 4</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2 0 0 3</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="44%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Raw materials</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="8%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="17%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,640</FONT></TD>
        <TD WIDTH="9%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="17%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,050</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>Work in process</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,444</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>2,637</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Finished goods</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>1,270</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>465</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 6,354</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4,152</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD></TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
the years ended December 31, 2004 and 2003 the Company wrote down inventory
               in the amounts of $250 and $725, respectively </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 13</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="Head Minor Center Bold-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOVA MEASURING
INSTRUMENTS LTD. <BR>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS </B><BR>
(in thousands,
except share and per share data) </FONT> </P>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 4 -FIXED ASSETS, NET </FONT></H1>





<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="600" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>As of December 31,</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK 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>2 0 0 4</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2 0 0 3</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="68%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Cost:</B> </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></FONT></TD>
        <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></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>Electronic equipment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4,341</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,608</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Office furniture and equipment</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>597</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>364</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>Leasehold improvements</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>1,750</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>1,695</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,688</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>5,667</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Accumulated depreciation and amortization:</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Electronic equipment</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,140</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,013</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>Office furniture and equipment</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>354</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>226</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Leasehold improvements</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>1,075</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>1,003</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,569</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,242</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Net book value</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,119</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,425</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 5 -OTHER CURRENT
LIABILITIES </FONT></H1>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>                  A.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
</TR>
</TABLE>
<BR>





<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="600" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>As of December 31,</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK 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>2 0 0 4</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2 0 0 3</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="66%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accrued salaries and fringe benefits</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,667</FONT></TD>
        <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,838</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>Accrued warranty costs (See B below)</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>2,915</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>2,558</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Governmental institutions</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>933</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>1,249</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>Other</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24</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>457</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 6,539</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7,102</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>                  B. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accrued
warranty costs:</FONT></TD>
</TR>
</TABLE>
<BR>





<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="600" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>As of December 31,</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK 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>2 0 0 4</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2 0 0 3</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="62%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance as of beginning of year</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="11%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  2,558</FONT></TD>
        <TD WIDTH="7%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="11%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  2,276</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>Services provided under warranty</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>(2,830</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,424</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Changes in provision</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,187</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>1,706</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance as of end of year</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  2,915</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  2,558</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 6 - ACCRUED
SEVERANCE PAY </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Israeli
law and labor agreements determine the obligations of the Company to make severance
payments to dismissed employees and to employees leaving employment under certain other
circumstances. The obligation for severance pay benefits, as determined by Israeli law, is
based upon length of service and the employee&#146;s most recent salary. The liability is
partially covered through insurance policies purchased by the Company and deposits in a
severance fund. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Severance-pay
expense amounted to $691, $614 and $381 for 2004, 2003 and 2002, respectively.  </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 14</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 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOVA MEASURING
INSTRUMENTS LTD. <BR>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS </B><BR>
(in thousands,
except share and per share data) </FONT> </P>


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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 7 - COMMITMENTS AND CONTINGENCIES
 </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company has received grants in the aggregate amount of $7,485 from the OCS,
               as its participation of up to 50% of certain development costs. In
consideration                for such grants, the Company has undertaken to pay royalties
amounting to                3%-3.5% of the net sales of products developed, directly or
indirectly, from the                projects financed, not to exceed 100% of the grants
received. Refund of the                grants thereon is contingent on future sales and
the Company has no obligation                to refund grants if sufficient sales are not
generated. During the fourth                quarter of 2003, the OCS has approved the
Company&#146;s request to allocate                $2,203 from the grants provided by it
to a specific lithography project, to be                repaid as royalties only from
sales of lithography products. As a result, the                Company has canceled a
provision in the total amount of $2,203, made by it                mainly in prior years.
Such cancellation is included as Other Operating Income                in the Statement
of Operations for the year ended December 31, 2003. Royalty                expense
amounted to $0, $656, and $722 for the years 2004, 2003 and 2002,
               respectively. The balance of the contingent liability to the OCS as of
December                31, 2004 was approximately $4,035 (including $2,203 with respect
to the                lithography project, as mentioned above). </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Group rents its facilities under various operating lease agreements, which
               expire on various dates, the latest of which is in 2007. The minimum
rental                payments are as follows: </FONT></TD>
</TR>
</TABLE>
<BR>




<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="300" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Amount (US dollars)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></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></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></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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="37%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="22%" 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="37%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,218</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>2006</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>1,112</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2007</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>891</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD></TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Rental
expense for the facilities amounted to $1,248, $851 and $884 for the years 2004, 2003 and
2002, respectively. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>C. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company leases vehicles under various operating lease agreements, which
               expire on various dates, the latest of which is in 2007. The minimum
rental                payments are as follows: </FONT></TD>
</TR>
</TABLE>
<BR>



<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="400" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Amount (US dollars)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></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></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></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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="44%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="26%" 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="26%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>652</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>2006</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>582</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2007</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>258</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD></TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Vehicle
lease expense amounted to $669, $516 and $665 for the years 2004, 2003 and 2002,
respectively. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A
major customer who was a related party until August 2001 (the &#147;Former
               Related Party&#148;), has notified the Company that a lawsuit has been
filed                against it by a third party. The suit alleges that the Former
Related Party,                while using the Company&#146;s products, has infringed upon
numerous U.S.                patents owned by the third party. According to the agreement
between the Company                and the Former Related Party, the Company is to assume
responsibility and to                indemnify the Former Related Party for any losses
with regard to such suit. The                Company is unable to determine at this time
with any certainty the ultimate                outcome of the aforementioned issue and
its effect, if any, on the                Company&#146;s financial condition, operating
results and business. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>E. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On
February 2002 the Company signed a technology-license agreement, according to
               which the Company received a patent usage right as well as equipment in
exchange                for $1,502 and future payments of royalties of 5% of the net
revenues of the                products developed from the abovementioned technology. The
Company had no                liability with respect to such obligation, through December
31, 2004. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 15</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="Head Minor Center Bold-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOVA MEASURING
INSTRUMENTS LTD. <BR>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS </B><BR>
(in thousands,
except share and per share data) </FONT> </P>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 7 - COMMITMENTS AND
CONTINGENCIES (Cont.) </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
the last few months the Israeli Tax Authorities are approaching Israeli
               public companies and other entities with a request to provide certain
               information relating to the stamping of commercial documents in Israel. To
the                best of the Company&#146;s knowledge such companies and entities are
arguing                that the request contradicts the common practice in Israel.
Management estimates                that the Company&#146;s exposure, if any, in
connection with this request is not                expected to have a material effect on
the Company&#146;s financial position and                results of operations. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 8
- -SHAREHOLDERS&#146; EQUITY </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>A.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Share
Capital Transactions</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During
2002 the Company converted 1,057,021 issued and outstanding deferred E
               shares into 551 ordinary shares, and 1,100,000 authorized deferred E
shares into                1,100,000 authorized ordinary shares.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Since
2003, the Company sponsors an employee stock purchase plan (ESPP) for the
               benefit of its employees. Under the ESPP, substantially all employees may
               purchase the Company&#146;s ordinary shares through payroll deductions at
a                price equal to 85 percent of the lower of fair market value at the
beginning or                end of each six-month offering period. Shares purchases under
the ESPP are                limited to a maximum aggregate of 150,000 shares. In 2004 and
2003 the Company                issued 96,443 and 43,585, respectively shares under the
ESPP.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Rights
of Shares</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Holders
of ordinary shares are entitled to participate equally in the payment of cash dividends
and bonus shares (stock dividends) and, in the event of the liquidation of the Company,
in the distribution of assets after satisfaction of liabilities to creditors. Each
ordinary share is entitled to one vote on all matters to be voted on by shareholders. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>C.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Share
Option Plans</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;s Board of directors approves, from time to time, employee share option
plans, the last of which was approved in December 2004. The options usually vest over
four years and their term may not exceed 7 years. The exercise price of each option is
usually the market price of the underling share at the date of each grant. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Through
December 31, 2004, 5,730,822 share options have been issued under the plans, of which
1,621,488 options have been exercised, 314,700 options have been forfeited, 164,256 have
been terminated and 1,575,108 options were exercisable as of December 31, 2004. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
weighted average fair value (in dollars) of the options granted during 2004, 2003 and
2002,<I></I>according to Black-Scholes option-pricing model, amounted to $2.11, $1.43 and
$0.82 per option, respectively. Fair value was determined on the basis of the price of
the Company&#146;s share. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 16</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOVA MEASURING
INSTRUMENTS LTD. <BR>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS </B><BR>
(in thousands,
except share and per share data) </FONT> </P>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 8
- -SHAREHOLDERS&#146; EQUITY (Cont.) </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>C.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Share
Option Plans (Cont.)</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>A
summary of the status of the Company&#146;s share option plans as of December 31,
2004, 2003 and 2002, as well as changes during each of the years then ended, is
presented below:</B> </FONT></TD>
</TR>
</TABLE>
<BR>








<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2 &nbsp;0 &nbsp;0 &nbsp;4</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2 &nbsp;0 &nbsp;0 &nbsp;3</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2 &nbsp;0 &nbsp;0 &nbsp;2</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Share<BR>
options</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted<BR>
average<BR>
exercise<BR>
price</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Share<BR>
options</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted<BR>
average<BR>
exercise<BR>
price</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Share<BR>
options</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted<BR>
average<BR>
exercise<BR>
price</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></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>(US dollars)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>(US dollars)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>(US dollars)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="37%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Outstanding as of beginning of year</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="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,621,213</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="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.38</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="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,922,402</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="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.99</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="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,292,132</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="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.57</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>Granted</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>1,250,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.86</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>1,010,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.09</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>46,500</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>1.31</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exercised</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>(138,640</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.58</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(144,180</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.66</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>(294,403</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.11</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>Terminated</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>(37,974</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.81</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>(72,240</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.38</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(54,041</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.78</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Forfeited</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>(64,221</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.30</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>(94,769</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.27</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>(67,786</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.96</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Outstanding as of year end</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,630,378</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.57</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,621,213</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.38</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,922,402</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.99</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Options exercisable at year-end</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>1,575,108</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <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>1,290,609</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <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>1,149,186</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 2-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
The
following table summarizes information about share options outstanding as of December 31,
2004:</B> </FONT> </TD>
</TR>
</TABLE>
<BR>









<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=12><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Outstanding as of<BR>
December 31, 2004</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Exercisable as of<BR>
December 31, 2004</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Range of exercise<BR>
prices
</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Number<BR>
outstanding</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted<BR>
average<BR>
remaining<BR>
contractual<BR>
life
</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted average<BR>
exercise price
</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Number<BR>
exercisable</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted average<BR>
exercise price
</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(US dollars)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>(in years)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(US dollars)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>(US dollars)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="27%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.0025</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>38,578</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="8%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.5</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="8%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.0025</FONT></TD>
        <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></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>38,578</FONT></TD>
        <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="8%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.0025</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>2.06</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>860,169</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="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.2</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.06</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>213,455</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="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.06</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.46-3.69</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>910,412</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="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.4</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="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.735</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>748,966</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="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.78</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4</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>650,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.9</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="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.4</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>-</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="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.4</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.01</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>417,110</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="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.4</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="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.01</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>-</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="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.01</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.15</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>180,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.2</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.15</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-</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="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.15</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.16</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>102,272</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="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.16</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>102,272</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="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.16</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.27-7.37</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>471,837</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="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.5</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="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.95</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>471,837</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="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.95</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,630,378</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="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="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>1,575,108</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="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>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD></TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 17</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOVA MEASURING
INSTRUMENTS LTD. <BR>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS </B><BR>
(in thousands,
except share and per share data) </FONT> </P>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 9 &#150; OTHER
LONG-TERM LIABILITY </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
February 2002, the Company signed an agreement for the licensing of certain know-how and
technology, to be used in one of the Company&#146;s specific research and development
programs and which has no alternative use. In accordance with the principles set forth in
SFAS 2 these costs have been charged to the statement of operations in the year ended
December 31, 2002, at the present value of the minimum payments to be made under the
agreement.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 10 - OTHER OPERATING
INCOME </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
amount for the year ended December 31, 2003 represents cancellation of a provision with
respect to royalties to the OCS (see Note 7A.).  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 11 -INCOME TAXES </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>A.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Law
for the Encouragement of Capital Investments &#150; 1959</B></FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
October 1995, the Company was granted &#147;approved enterprise&#148; status under the
tax-exempt benefit track, as provided by the Israeli Law for the Encouragement of Capital
Investments &#150; 1959, for an investment program in the aggregate amount of $732 (&#147;the
first program&#148;). The Company had completed the investments under the program, which
received the approval of the Investments Center. The tax-exempt benefit track provides
for a tax exemption on undistributed earnings derived from assets included in the
approved enterprise investment program for the first four years of the seven-year benefit
period and a 25% tax rate for the remaining three years of the benefit period. Pursuant
to the tax-exempt benefit track, the Company is liable for tax at a 25% rate on
distributions to shareholders of earnings subject to the exemption. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
December 1999, the Company was granted another &#147;approved enterprise&#148; status for
an investment expansion program in the aggregate amount of $3,229 (&#147;the second
program&#148;) under the tax-exempt benefit track. The Company had completed the
investments under the expansion program and filled the final report with respect to this
plan. The tax-exempt benefit track provides for a tax exemption on undistributed earnings
derived from assets included in the approved enterprise investment program for the first
two years of the seven-year benefit period and a 25% tax rate for the remaining five
years of the benefit period. Pursuant to the tax-exempt benefit track, the Company is
liable for tax at a 25% rate on distributions to shareholders of earnings subject to the
exemption. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
January 2005, the Company was granted another &#147;approved enterprise&#148; status for
an investment expansion program in the aggregate amount of $1,000 (&#147;the third program&#148;)
under the tax-exempt benefit track. The tax-exempt benefit track, once approved, provides
for a tax exemption on undistributed earnings derived from assets included in the
approved enterprise investment program for the first two years of the seven-year benefit
period and a 25% tax rate for the remaining five years of the benefit period. Pursuant to
the tax-exempt benefit track, the Company is liable for tax at a 25% rate on
distributions to shareholders of earnings subject to the exemption. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
period in which the Company is entitled to the abovementioned tax benefits is limited to
seven years from the first year that taxable revenues are generated, and such benefits
must be utilized within 12 years from the year that operation (as defined) of the
approved enterprise commences, or 14 years from the year the approval is granted,
whichever is earlier. Accordingly, under the existing conditions, the tax benefits period
under the above-mentioned first, second and third programs ends in 2006, 2012 and 2018,
respectively. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 18</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOVA MEASURING
INSTRUMENTS LTD. <BR>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS </B><BR>
(in thousands,
except share and per share data) </FONT> </P>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 11 -INCOME TAXES
(Cont.) </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>A.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Law
for the Encouragement of Capital Investments &#150; 1959 (Cont.)</B></FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Dividends
paid from earnings that benefited from the approved enterprise tax status are subject to
a 15% tax to the recipient (for a period of 12 years from the end of the seven-year
benefit period), whereas dividends paid out of other earnings are subject to tax to the
recipient at the rate of 25% (or lower if paid to a treaty country), except when paid to
another Israeli company, in which case such dividends are exempt from tax. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
income of the Company that is not derived from assets, which are eligible for reduced
taxation benefits, as described above, is taxed at the statutory rate for Israeli
companies (see H below). </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
above tax benefits are conditioned upon fulfillment of the requirements stipulated by the
aforementioned law and the regulations promulgated there under, as well as the criteria
set forth in the certificates of approval. In the event of failure by the Company to
comply with these conditions, the tax benefits could be canceled, in whole or in part,
and the Company would be required to refund the amount of the canceled benefits, plus
interest and certain inflation adjustments. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
If
the investments of non-Israeli investors (as such investments are defined by the Law)
will exceed 25% then the seven-year benefit period mentioned above may be extended to ten
years. If the investments of non-Israeli investors is 49% or more, then the rate of tax
on earnings derived<I></I>from assets included in the approved enterprise investment
program will decrease to 10% &#150; 20%, depending on the level of ownership by
non-Israeli investors, examined on a yearly basis. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Law
for the Encouragement of Industry (Taxation), 1969</B></FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company is an &#147;industrial company&#148; under the Law for the encouragement of
Industry (Taxation), 1969 and, therefore, is entitled to certain tax benefits, mainly
accelerated rates of depreciation. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>C.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Taxation
Under Inflationary Conditions</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company reports for tax purposes in accordance with the provisions of the Income Tax Law
(Adjustments Due to Inflation) &#150; 1985, under which taxable income is measured in
terms of NIS adjusted for changes in the Israeli Consumer Price Index. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>D.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Deferred
Taxes</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company has accumulated losses for Israeli tax purposes as of December 31, 2004 in the
amount of approximately $43,000. At such date, other temporary differences were
approximately $ 7,000. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Israeli tax loss carryforwards have no expiration date. The Company expects that during
the period these losses are utilized, its undistributed earnings will be tax exempt.
Since the Company has no intention to distribute such earnings, there will be no tax
benefit available from such tax losses and no deferred taxes have been included in these
financial statements for these losses. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As
of December 31, 2004, the subsidiaries had a net operating loss carryforward of
approximately $1,290. A valuation allowance in the amount of approximately $515,
representing the entire benefit, was recorded regarding such loss.  </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 19</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOVA MEASURING
INSTRUMENTS LTD. <BR>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS </B><BR>
(in thousands,
except share and per share data) </FONT> </P>


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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 11 -INCOME TAXES
(Cont.) </FONT></H1>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>E.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Effective
Tax Rates</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;s effective tax rates differ from the statutory rates applicable to the
Company for all years presented due primarily to its approved enterprise status (see A
above) and the tax loss carry-forward. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>F.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Tax
Assessments</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company received final tax assessments until and including tax year 2001.  </FONT></TD>
</TR>
</TABLE>
<BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>G.</B> </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               In light of losses for both financial reporting and tax purposes in 2002 and
               2003, a reconciliation of the effective income tax rate has not been presented.
               In 2004, &#147;theoretical&#148; income taxes on the Company&#146;s pre-tax
               income were primarily reduced by the utilization of tax loss carryforward from
               prior years for which a deferred tax asset had not been recorded and reduced tax
               rates related to approved enterprise. </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>H.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Tax
Rates</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
2004 the Israeli Knesset approved a law for the amendment of the Income Tax Ordinance,
according to which the regular corporate tax rate is to be reduced gradually and annually
from 36% to 35% for 2005 tax year ending in 30% for 2007 tax year. </FONT></TD>
</TR>
</TABLE>
<BR>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 12 -GEOGRAPHIC
AREAS AND MAJOR CUSTOMERS </FONT></H1>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>A.</B> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Sales
by geographic area (as percentage of total sales):</B> </FONT> </TD>
</TR>
</TABLE>
<BR>






<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="600" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year ended December 31,</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK 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>2 0 0 4</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2 0 0 3</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2 0 0 2</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>%</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>%</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>%</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="68%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>USA</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="4%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>67</FONT></TD>
        <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="4%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>62</FONT></TD>
        <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="4%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>61</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>Europe - primarily Italy, France and</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;&nbsp;&nbsp;Germany</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11</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</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Japan</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>18</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>21</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>20</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>Other</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4</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</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Total</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>100</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>100</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>100</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD></TR>
</TABLE><BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Sales
by major customers (as percentage of total sales):</B> </FONT> </TD>
</TR>
</TABLE>
<BR>






<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="600" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year ended December 31,</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK 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>2 0 0 4</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2 0 0 3</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2 0 0 2</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>%</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>%</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>%</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="38%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Customer A</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="11%" 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>12</FONT></TD>
        <TD WIDTH="12%" 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>14</FONT></TD>
        <TD WIDTH="12%" 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>20</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>Customer B</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Customer C</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>45</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>36</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>30</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>Customer D</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>18</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>29</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>22</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>C.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Assets
by location</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Substantially
all fixed assets are located in Israel.  </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 20</font></p>
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<page>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOVA MEASURING
INSTRUMENTS LTD. <BR>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS </B><BR>
(in thousands,
except share and per share data) </FONT> </P>


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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 13 -TRANSACTIONS
AND BALANCES WITH RELATED PARTIES </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
total directors&#146; fees (including the chairman of the Board) for the year 2004
amounted to $103 (2003 &#150; $122, 2002 -$50). Number of options granted to directors
amounted 380,000 and 200,000 in 2004 and 2003 respectively. </FONT></TD>
</TR>
</TABLE>
<BR>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 14 &#150; FINANCIAL
INSTRUMENTS </FONT></H1>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>A.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Fair
value of financial instruments</B></FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
A
financial instrument is defined as cash, evidence of an ownership interest in an entity,
or a contract that impose on one entity a contractual obligation either to deliver cash
or receive cash or another financial instrument to or from a second entity. Examples of
financial instruments include cash and cash equivalents, short-term interest-bearing bank
deposits, held to maturity securities, trade accounts receivable, investments, trade
accounts payable, accrued expenses, options and forward contracts. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
At
December 31, 2004 and 2003 the fair market value of the Company&#146;s financial
instruments did not materially differ from their respective book value. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Hedging
activities</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
2001, the Company entered into several currency-forward transactions (NIS/dollar) of
$8,750 with settlement dates ranging from January to June 2002, designed to reduce
cash-flow exposure to the impact of exchange-rate fluctuations on firm commitments of
$12,000. In accordance with SFAS 133 the Company recorded in 2001 an unrealized decrease
of $212 in fair market value in &#147;other comprehensive loss&#148;. The corresponding
liability was separately reported as &#147;fair market value of forward contracts&#148;within
&#147;other current liabilities&#148;. In 2002 this decrease was charged to operations on
the relevant settlement dates. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
2003, the company entered into currency-forward transaction (NIS/dollar) of $400 with a
settlement date of January 2004, designed to reduce cash-flow exposure to the impact of
exchange-rate fluctuations on firm commitments of $400. In accordance with SFAS 133 the
Company recorded in 2003 an increase of $13 in fair market value in &#147;Other
Comprehensive Income&#148;. In 2004 this increase was charged to operations on the
relevant settlement dates. In 2004, the company entered into currency-forward
transaction, to currency-put option and to currency-call option (NIS/dollar, Euro/dollar,
Yen/dollar) of $7,700 with settlement date through 2005, designed to reduce cash-flow
exposure to the impact of exchange-rate fluctuations on firm commitments of $7,700. In
accordance with SFAS 133 the Company recorded in 2004 an increase of $8 in fair market
value in &#147;Other Comprehensive Income&#148;. </FONT></TD>
</TR>
</TABLE>
<BR>


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

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOVA MEASURING
INSTRUMENTS LTD. <BR>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS </B><BR>
(in thousands,
except share and per share data) </FONT> </P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 15 - RESTATEMENT OF
FINANCIAL STATEMENTS </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Subsequent
to the issuance of the financial statements the Company decided to restate its financial
statements for the fiscal year ended December 31, 2004, to correctly apply revenue
recognition principles relating to certain sales transactions, as described below. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
During
2004, the Company sold certain systems to several customers. These transactions included
an option to a one-time upgrade of the sold system free of charge for an unlimited period
or during a two years period. The Company recognized all revenues from the sales of these
systems in 2004. EITF 00-21 <I>Revenue Arrangements with Multiple Deliverables
</I>(&#147;EITF&#148;), requires evaluation of each deliverable to determine whether it
should be a separate unit of accounting. These transactions are considered multiple
deliverables arrangement under the EITF, for which the upgrade right was not delivered.
The Company was unable to establish a vendor specific objective evidence
(&#147;VSOE&#148;) for the fair value of the upgrade right, therefore all revenues from
the sale of these systems have been deferred until such an upgrade will either be
exercised or expires. The restated financial statements include the effect of such
deferral of revenues and costs related to these transactions. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
another instance in 2004 the Company granted to one of it&#146;s customers trade in rights
with decreasing rates of discounts over a period of 5 years. The trade-in right provided
the customer with a discount toward the purchase price of a new system that is calculated
based on the price of the originally sold systems as follows: if the trade-in is performed
during the 1<SUP>st</SUP> and 2<SUP>nd</SUP> year after the sale &#150; 72% of the price
of the originally bought systems; 3<SUP>rd</SUP> year &#150; 47%; 4<SUP>th</SUP> year
&#150; 31%; 5<SUP>th</SUP> year &#150; 14%. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company recognized all revenues from the sales of these systems in 2004. The Company
reached a conclusion that only the portion that is not subject to the discounts schedule
above is fixed and determinable. The Company recognized only that portion and will
recognize the remaining balance in future periods based on the amounts released from the
above discount schedule. The restated financial statements include the effect of such
deferral and the directly related costs. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 22</font></p>
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<page>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOVA MEASURING
INSTRUMENTS LTD. <BR>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS </B><BR>
(in thousands,
except share and per share data) </FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 15 - RESTATEMENT OF
FINANCIAL STATEMENTS (Cont.) </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
tables below summarize the impact of the aforementioned restatement with respect to the
financial statements as of December 31, 2004 and for the year then ended:  </FONT></TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Consolidated
Statement of Operations:</B> </FONT></TD>
</TR>
</TABLE>
<BR>





<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year ended December 31, 2004</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH> </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>Previously<BR>Reported</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Adjusted</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>As Restated</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="5%"> </TD>
     <TD WIDTH="52%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Revenues-Product sales</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>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   33,347</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (4,073</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  29,274</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </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>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cost of revenues-Product Sales</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>15,361</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>(965</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14,396</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </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>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sales and marketing expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,868</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>(221</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,647</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </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>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating Profit (Loss)</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>939</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>(2,887</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,948</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </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>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income (loss)</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>1,467</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>(2,887</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,420</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </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>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic earning (loss) per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     0.10</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (0.19</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (0.09</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Consolidated
Balance Sheet:</B> </FONT> </TD>
</TR>
</TABLE>
<BR>




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>As of December 31, 2004</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH> </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>Previously<BR>Reported</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Adjusted</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>As Restated</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="5%"> </TD>
     <TD WIDTH="51%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Trade Accounts Receivables</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  7,461</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (611</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  6,850</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </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>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Inventories</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>5,239</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>1,115</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,354</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </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>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total Current Assets</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>36,539</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>504</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>37,043</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </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>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total Assets</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>49,462</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>504</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>49,966</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </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>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Trade Accounts Payables</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>5,016</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>(221</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,795</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </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>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other Current Liabilities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,389</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>150</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,539</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </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>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total Current Liabilities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 11,405</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (71</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 11,334</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 23</font></p>
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<page>


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOVA MEASURING
INSTRUMENTS LTD. <BR>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS </B><BR>
(in thousands,
except share and per share data) </FONT> </P>


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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 15 - RESTATEMENT OF
FINANCIAL STATEMENTS (Cont.) </FONT></H1>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><B>&nbsp;</B></TD>
<TD WIDTH=95%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Consolidated
Balance Sheet (Cont.):</B> </FONT> </TD>
</TR>
</TABLE>
<BR>







<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>As of December 31, 2004</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH> </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>Previously<BR>Reported</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Adjusted</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>As Restated</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="5%"> </TD>
     <TD WIDTH="52%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Long Term Liabilities-Deferred Income</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>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     369</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    3,462</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   3,831</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </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>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total Long Term Liabilities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,589</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,462</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>7,051</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </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>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accumulated Deficit</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(38,919</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,887</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(41,806</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </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>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total Shareholders Equity</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  34,468</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,887) </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  31,581</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>


<p align=center>
<font size=2>F - 24</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<PAGE>



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

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Insurance, Discharge and
Indemnity of Officers</U> </FONT> </H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company may, from time to time and subject to the provisions of any law: </FONT></TD>
</TR>
</TABLE>
<BR>






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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.1</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Enter into a contract for insuring the liability of an officer, in part or in whole, for
an obligation imposed on him as a result of an act or omission performed in his capacity
as an officer, in each of the following instances:</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.1.1 </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Breach
of duty of care with respect to the Company or another person.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.1.2 </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Breach
of trust with respect to the Company, provided that the officer acted in good faith and
had reasonable grounds to presume that the act would not impair the Company&#146;s best
interests.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>                     8.1.3 </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A
 monetary  obligation  imposed  on him for the  benefit  of  another
                                person. </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>8.2</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><STRIKE>To</STRIKE></FONT>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>I</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><STRIKE>i</STRIKE>ndemnify
an officer of the Company for <STRIKE>a debt</STRIKE> </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>an
obligation </U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>or expense specified in this Article
8.2</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>.1</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> below,
which was imposed on him </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>or
which he spent</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> as a result of an act which he
performed in his capacity as an officer:</FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.2.1 </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>(a)</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A monetary debt imposed on him for the benefit of another person under a judgment,
including a compromise settlement judgment or an arbitrator&#146;s decision which was
approved by a court.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>(b)</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>Reasonable
litigation expenses, including attorney&#146;s fees, which the           officer incurred
due to an investigation or procedure conducted against him by           an authority
authorized to conduct such an investigation or procedure, provided           that such an
investigation or procedure concluded without the filing of an           indictment
against the officer and without imposition of a monetary liability in           lieu of
criminal proceedings, or that such an investigation or procedure           concluded
without the filing of an indictment against the officer but the           officer is
imposed with a monetary liability in lieu of criminal proceedings           that the
offense in question does not require proof of <I>mens rea</I>. In this           Section
&#150; &#147;the conclusion of a procedure without the filing of           indictment in
an issue in which a criminal investigation began&#148; and           &#147;monetary
liability in lieu of criminal proceedings&#148;- as their meaning           in Section
260(A)(1a) to the Companies Law.</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </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">
<page>

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<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c) </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Reasonable
litigation expenses, including attorneys&#146; fees, which the           officer incurred
or for which he was obligated by a court, in a proceeding <STRIKE>instituted against him</STRIKE>
</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>filed</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
 by the Company
or in its name or by another person </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>against
him</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>, or in <STRIKE>a</STRIKE> criminal  <STRIKE>indictment</STRIKE>
</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>proceedings</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> of
which he <STRIKE>is</STRIKE>
</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>was</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> acquitted,
or in <STRIKE>a</STRIKE> criminal <STRIKE>charge</STRIKE>
</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>proceedings</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <STRIKE>of</STRIKE>
</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>in</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> which he is           convicted
provided that the offense <STRIKE>or offenses</STRIKE> in which
he </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>was</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><STRIKE>is</STRIKE>
convicted
</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>does not</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> require
</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>proof of</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<I>mens</I> <I>rea</I> <STRIKE>of negligence or strict liability</STRIKE>.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<STRIKE>8.2.2 Reasonable  litigation  expenses,  including  attorneys&#146;  fees,  which the  officer
 incurred or for                      which he was  obligated  by a court,  in a
proceeding  instituted  against him by the                      Company or in its name or
by another  person,  or in a criminal  indictment  of which                      he is
acquitted,  or in a criminal charge of which he is convicted  provided that the
                     offense or  offenses  in which he is  convicted  require  mens rea
of  negligence  or                      strict liability.</STRIKE> </FONT></TD>
</TR>
</TABLE>
<BR>


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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.2.2 </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>The
Company may obligate in advance to indemnify an officer, as follows: </U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
</TR>
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<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><STRIKE>8.2.3</STRIKE>(a) </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><STRIKE>To obligate in advance to indemnify an officer,</STRIKE> </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>as
specified in Article 8.2.1(a)</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
provided </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>however</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
that the obligation shall be
               limited to the <STRIKE>types of</STRIKE> events which, <STRIKE>in the view of</STRIKE>
</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>according
to</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> the Board of Directors</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>&#146;
opinion</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>,
     <STRIKE>may be</STRIKE>
</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>are</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
foreseen </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>in
light of the Company&#146;s actual activities</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> at the time
</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>of
granting</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> the obligation to indemnify<STRIKE> is undertaken</STRIKE>, and <STRIKE>in</STRIKE>
</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>to</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> an
amount </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>of
criteria</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <STRIKE>determined by</STRIKE> </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>that</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
the                Board of Directors <STRIKE>which shall be</STRIKE>
</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>deems</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
reasonable <STRIKE>in</STRIKE> </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>under</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
the circumstances</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>, and that
in the                obligation to indemnify the events which, according to the Board of
               Directors&#146; opinion are foreseen in light of the Company&#146;s actual
               activities at the time of granting the obligation to indemnify, and the
amount                or criteria that the Board of Directors deems reasonable under the
circumstances                shall be specified.</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><STRIKE>.</STRIKE>  </FONT></TD>
</TR>
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<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>(b)</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>As
specified in Article 8.2.1(b) and in Article 8.2.1(c).</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
</TR>
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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.2.</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>3</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><STRIKE>4</STRIKE> </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><STRIKE>Without derogating from the provisions of Article 8.2.3 above, to</STRIKE> </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>The
Company may</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> indemnify an officer</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>, as specified in Articles 8.2.1(a), 8.2.1(b) and
8.2.1(c)</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> after the occurrence of </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>such</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> event which is to be indemnified.  </FONT></TD>
</TR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.3</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>(a)</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company may exempt an officer in advance from his liability, in part or in whole,
for damages resulting from breach of the officer&#146;s duty of care with respect to the
Company.</FONT></TD>
</TR>
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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>(b)</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2" COLOR="Blue"><U>Notwithstanding
Article 8.3(a) above, the Company may not exempt a Director in                advance
from his liability toward the Company due to the breach of duty of care                in
the event of a distribution, as defined in the Companies Law.</U></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </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">
<page>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9. </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
above provisions neither intend, nor shall they be construed, to limit the
          Company in any manner whatsoever in respect of its entering into a contract of
          insurance, discharge or indemnity: </FONT></TD>
</TR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       9.1 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>With
respect to those who are not officers in the Company,  including  employees,
                     contractors or advisors of the Company who are not officers therein;</FONT></TD>
</TR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.2</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
With respect to officers in the Company, to the extent that the insurance, discharge or
indemnity are not explicitly forbidden by law.</FONT></TD>
</TR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
provisions of Articles 8 and 9 above shall also apply to a corporate
          representative as if he were an officer of the Company. </FONT></TD>
</TR>
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<p align=center>
<font size=2></font></p>
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<page>



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

<IMG SRC="nova_part1.jpg">

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>LETTER OF
INDEMNIFICATION</U> </FONT> </H1>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company hereby undertakes to indemnify you for any obligation imposed on you
               or expense spent by you as a result of an act, which you performed in your
               capacity as an Officer of the Company (as defined under the Israeli
Companies                Law-1999) (hereinafter: the &#147;Officer&#148;), subject to the
applicable law,                the Company&#146;s Articles of Association and as follows: </FONT></TD>
</TR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Any
monetary obligation imposed on you in favor of another person under a
               judgment, including a compromise settlement judgment or an arbitrator&#146;s
               decision which was approved by court, subject to Section 1.4 below; </FONT></TD>
</TR>
</TABLE>
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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>1.2. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Reasonable
litigation expenses, including attorney&#146;s fees, which the                Officer
incurred due to an investigation or procedure conducted against him by                an
authority authorized to conduct such an investigation or procedure, provided
               that such an investigation or procedure concluded without the filing of an
               indictment against the Officer and without imposition of a monetary
liability in                lieu of criminal proceedings, or that such an investigation
or procedure                concluded without the filing of an indictment against the
Officer but the                Officer is imposed with a monetary liability in lieu of
criminal proceedings                that the offense in question does not require proof
of mens rea. In this                Section-&#147;the conclusion of a procedure without
the filing of indictment in                an issue in which a criminal investigation
began and &#147;monetary liability in                lieu of criminal proceedings&#148; &#150; as
their meaning in Section 260(A)(1a)                to the Companies Law </FONT></TD>
</TR>
</TABLE>
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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>1.3. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Reasonable
litigation expenses, including attorney&#146;s fees, which the                Officer
incurred or for which he was obligated by a court, in a proceeding filed
               by the Company or in its name or by another person against him, or in
criminal                proceedings of which he was acquitted, or in criminal proceedings
in which he                was convicted, provided that the offense in which he was
convicted does not                require proof of mens rea </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">
<page>

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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>1.4. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>With
regards to Section 1.1 this obligation to indemnify is limited to the
               events detailed in Annex A which according to the Board of Directors&#146;               opinion,
are foreseen in light of the Company&#146;s actual activities, and                which
shall not exceed <B><I>30% </I></B><I>(thirty percent)</I> of the                Company&#146;s
shareholders equity or $10,000,000 (ten million dollars), the                higher of
the two, as detailed below in Section 1.5. The Board of Directors has
               determined that such amounts and criteria set by the Board of Directors
are                reasonable under the circumstances. </FONT></TD>
</TR>
</TABLE>
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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>1.5. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
aggregate indemnification amount that the Company will pay to all of its
               Officers, whether in advance or post factum, under all the indemnification
               letters that shall be issued by the Company pursuant to this Letter of
               Indemnification, shall not exceed <B><I>30% </I></B><I></I><I>(thirty
               percent)</I> of the Company&#146;s shareholders equity, according to the
most                recent Company consolidated financial statements prior to the date of
the                indemnification payment or $10,000,000 (ten million dollars), the
higher of the                two (hereinafter the &#147;Maximum Indemnification Amount&#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>1.6. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
the event the indemnification amount the Company is required to pay its
               Officers, as set forth above, exceeds the Maximum Indemnification Amount
or its                remaining balance (as existing at that time), the Maximum
Indemnification Amount                or its remaining balance will be divided among the
Officers entitled to                indemnification, so that the amount of
indemnification each of them will                actually receive will be calculated in
accordance with the ratio between the                amount for which each individual may
be indemnified and the aggregate amount for                which all the relevant
Officers may be indemnified. </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>1.7.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>For
the avoidance of doubt, it is hereby clarified that nothing contained in
               this Letter of </B><B>Indemnification or in the above resolutions derogate
from                the Company&#146;s right, </B><B>subject to Board of Directors
approval, to                indemnify you post factum for any amounts </B><B>which you
may be obligated to                pay as set forth in paragraph 1 above without the </B><B>limitations
set forth                in paragraph 1.5. above. The aforesaid shall however not be </B><B>construed
as                an obligation of the Company to indemnify you after the fact.</B></FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company shall act according to this Letter of Indemnification as detailed
               above in regards to any other company controlled, directly or indirectly,
by the                Company (a &#147;Subsidiary&#148;) or in your capacity as a
director, or                observer at board of director meetings, of a company not
controlled by the                Company but where your appointment as a director or
observer results from the                Company&#146;s holdings in such company (&#147;Affiliate&#148;). </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">
<page>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Notwithstanding
the above, In no event will the Company indemnify you for the                following
events : </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>3.1. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a
breach of fiduciary duty, except for a breach of a fiduciary duty to the
               Company, a Subsidiary or an Affiliate while acting in good faith and
having                reasonable cause to assume that such act would not harm the Company&#146;s
               interests; </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>3.2. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a
reckless or intentional breach of duty of care that was not done negligently; </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>3.3. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>an
action taken with the intent of making personal gain unlawfully; </FONT></TD>
</TR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.4. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a
fine or penalty imposed upon you for an offense; </FONT></TD>
</TR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.5. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a
counterclaim made by the Company or in its name in connection with a claim
               against the Company filed by you. </FONT></TD>
</TR>
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<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company will make available all amounts needed in accordance with section 1
               above on the date on which such amounts are first payable by you (&#147;Time
of                Indebtedness&#148;). </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Advances
given to cover legal expenses in criminal proceedings according to                Article
1.1 &#150; 1.4 above, will be repaid by you to the Company if you are
               found not to fulfill the terms detailed in Sections 1.1 &#150; 1.4 above.
Other                advances will be repaid by you to the Company if it is determined
that you are                not lawfully entitled to such indemnification. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As
part of the aforementioned undertaking and subject to Articles 1.1 &#150;               1.4,
the Company will make available to you any security or guarantee that you
               may be required to post in accordance with an interim decision given by a
court                or an arbitrator, including for the purpose of substituting liens
imposed on                your assets. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company will indemnify you, in accordance with this Letter of
               Indemnification, even if at the relevant time of indebtedness you are no
longer                an Officer of the Company or of a Subsidiary or a director or board
observer of                an Affiliate, provided that the obligations are in respect of
actions taken by                you while you were an Officer and/or board observer, as
aforesaid, and in such                capacity, including if taken prior to the above
resolutions. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>It
is clarified that said indemnification payments will not be deemed to
               derogate from any right you may have to receive insurance proceeds as a
result                of the events set forth in this Letter that may be insured by an
insurance                carrier, if they are received (by you or by the Company on your
behalf) within                the framework of any directors and officers liability
insurance of the Company.                In order to avoid any doubt, it is hereby
clarified that the indemnification                amount according to this Letter will be
independent of (and in addition to) any                amount paid pursuant to such
insurance and/or indemnification. Similarly, it is                emphasized that this
Letter is not to be construed as an agreement for the                benefit of any third
party, including any insured party, and it is not                transferable, and no
insurer will have the right to request that the Company                participate in any
payment for which the insurer is obligated under any                insurance agreement
to which it is a party, other than a deductible that is                specified in such
agreement. </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">
<page>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subject
to this Letter of Indemnification, the indemnification will, in each                case,
cover all sums of money (100%) that you will be obligated to pay, in those
               circumstances for which indemnification is permitted under law and under
this                Letter of Indemnification. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company will be entitled to any amount collected from a third party in
               connection with liabilities indemnified hereunder. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indemnification
by the Company as detailed in this Letter of Indemnification                will also be
subject to fulfilling the following procedures: </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>11.1. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>You
will inform the Company of every legal proceeding that may be brought
               against you in connection with any event that may entitle you to
               indemnification, and of every warning made to you in writing, regarding
legal                proceedings that may be commenced against you, and this will be done
in a timely                manner, immediately after you first become aware of such, and
you will provide                to the Company or to whom the Company will instruct you,
all documents in                connection with such proceedings. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Similarly,
you must advise the Company on an ongoing and current basis concerning all events which
you suspect may give rise to the initiation of legal proceedings against you. </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>11.2.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company will, within a reasonable period of time (or within a shorter period           of
time if the matter requires filing a statement of defense or a response to a
          proceeding), take upon itself the handling of your defense in the legal
          proceeding and/or entrust such handling to any prominent attorney the Company
          may select at its discretion for this purpose, subject to the fulfillment of
all           the following conditions: (a) You have informed the Company as provided in
          Section &yacute;11.1 above ; and (b) the legal proceedings against you solely
          involves a claim for monetary damages. The Company and/or the above-mentioned
          attorney will be entitled to act within their exclusive discretion to bring the
          proceeding to a close; the appointed attorney will owe his/her duty of loyalty
          to the Company and to you. In the event that a conflict of interests arises
          between you and the Company, the attorney will so inform the Company of any
such           conflict and you, subject to the Company&#146;s approval, which approval
not to           be unreasonably withheld, will have the right to appoint an attorney on
your           behalf, and the provisions of this Letter will apply to expenses you may
incur           as a result of such appointment. If the Company decides to settle or
arbitrate a           monetary obligation, the Company will be entitled to do so, as long
as the           lawsuit or the threat of a lawsuit against you will be fully withdrawn.
At the           request of the Company you will sign any document that will empower the
Company           and/or attorney as mentioned above, to act on your behalf with regard
to your           defense in the above-mentioned proceedings and to represent you in all
matters           relating to these proceedings, as set forth above. Without derogating
from the           above provision with respect to a conflict of interests, in any event
where, on           reasonable grounds, the attorney chosen by the Company is
unacceptable to you,           you shall be entitled to appoint your own attorney and the
provisions of this           Letter will apply to expenses you may incur as a result,
provided, however, that           the proposed appointment of such attorney including the
identity and terms of           engagement of such attorney be brought immediately to the
attention of the           Company for its <I>prior</I> written approval, which approval
not to be           unreasonably withheld. </FONT></TD>
</TR>
</TABLE>
<BR>

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

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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>11.3.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>You
will cooperate with the Company and/or with any attorneys as set forth above           in
every reasonable manner required of you by any of them in connection with the
          handling of such legal proceedings, all subject to this Letter of
          Indemnification. </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>11.4.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Whether
or not the Company acts as specified in section &yacute;11.2 above, the           Company
will cover all other expenditures and payments that are mentioned in           this
Letter of Indemnification, so that you will not be required to pay or to
          finance them yourself. </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>11.5.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Your
indemnification in connection with any legal proceeding against you, as set
          forth in this Letter, will not be enforceable in connection with amounts you
may           be required to pay as a result of a settlement or arbitration unless the
Company           agrees in writing to the settlement or to the entering into the
arbitration           proceeding, as the case may be. </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>11.6.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If
required by law, the Company&#146;s authorized organs will consider the           request
for indemnification and the amount thereof and will determine if you are
          entitled to indemnification and the amount thereof. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.7.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If,
for any reason, the Company has decided not to appoint an attorney, as           detailed
in paragraph &yacute;11.2 above, you will have the right to appoint an           attorney
of your choice, provided that the proposed appointment of such attorney
          including the identity and terms of engagement of such attorney be brought
          immediately to the attention of the Company for its <I>prior</I> written
          approval, which approval not to be unreasonably withheld If you do not inform
          the Company regarding your choice of attorney in compliance with the above, the
          Company will have the right in its discretion to appoint an attorney on your
          behalf. </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">
<page>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12. </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This
letter is issued after receipt by the Company of all required approvals           under
law and the Articles of Association of the Company. Should any additional
          approval be required, the Company will exert its best effort to obtain such
          approval. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13. </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If
the Company pays to you, or on your behalf, any amount in connection with a
          legal proceeding as provided in this Letter, and thereafter it is determined
          that you are not entitled to such indemnification from the Company as detailed
          in this Letter of Indemnification, the sums paid by the Company will be
          considered a loan that was extended to you by the Company, which will be linked
          to the Consumer Price Index plus interest at the rate established in the Income
          Tax Regulations (Establishment of Interest Rates) &#150; 1985, as may be in
          effect from time to time, and you will be required to repay these sums to the
          Company when requested to do so in writing by the Company and in accordance
with           a payment schedule that the Company determines. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14. </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
order to remove any doubt, in the event of death, this Letter will apply to
          your heirs. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15. </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>No
waiver, omission or grant of extension by the Company or by you will be
          interpreted in any manner as a waiver of rights pursuant to this Letter or
under           applicable law, and will not prevent either party from taking all legal
and           other measures in order to enforce such rights. </FONT></TD>
</TR>
</TABLE>
<BR>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          If any undertaking included in this Letter of Undertaking is held invalid or
          unenforceable, such invalidity or unenforceability will not affect any of the
          other undertakings which will remain in full force and effect. Furthermore, if
          such invalid or unenforceable undertaking may be modified or amended so as to be
          valid and enforceable as a matter of law, such undertakings will be deemed to
          have been modified or amended, and any competent court or arbitrator are hereby
          authorized to modify or amend such undertaking, so as to be valid and
          enforceable to the maximum extent permitted by law. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          This Letter of Indemnification and the agreement herein shall be governed by and
          construed and enforced in accordance with the laws of the State of Israel,
          unless in contradiction with the Company&#146;s undertakings according to Item
          17 of the Company&#146;s registration statement filed with the Securities and
          Exchange Commission on April 10, 2000 and Item 9 of the Company&#146;s
          registration statements on Form S-8 filed with the Securities and Exchange
          Commission, in which case, the Company shall have no obligation to provide
          indemnity. Further, notwithstanding anything herein to the contrary, the Company
          shall have no obligation to provide indemnity hereunder if a court of competent
          jurisdiction determines that such indemnification is not lawful. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          This Letter will enter into affect upon your signature in the space provided
          below and return of the signed copy to the Company. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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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"><BR><BR>
<BR><BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
<B>DR. GIORA DISHON<BR>President &amp; CEO</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<page>


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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Annex A</U> </FONT> </H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subject to any provision of law, the
events are as follows: </FONT></P>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          The issuance of securities including, but not limited to the public according to
          a prospectus, a private offering, sales offering, the issuance of bonus shares,
          issuance of securities and/or any other manner of security offering and also
          tender offers for securities, the company&#146;s purchase of its own and it
          subsidiaries&#146; securities, as well as any action relating to any of the
          above. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          A &#147;Transaction&#148; or &#147;Activity&#148; as defined in Article 1 of the
          Companies Law, including among others a negotiation regarding such Transaction
          and/or Activity, transfer, sale and/or purchase of assets and/or liabilities,
          including securities and/or the granting and/or receiving of any right in any of
          the above, including among others, the acquisition, sale or merger of entities
          and/or any action connected directly or indirectly with such a Transaction. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          The filing of a report and/or announcement required by the Companies Law and/or
          Israeli Securities Law &#150; 1968, or U.S. Securities Laws, including the
          regulations pertaining to these laws, and/or according to rules and/or
          regulations adopted by the Tel-Aviv Stock Exchange or the NASDAQ or any other
          stock exchange and/or any law of any other country pertaining to these issues
          and/or the failure to file such a report and/or announcement. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Any decision regarding a distribution, as defined in the Companies Law including
          a distribution pursuant to a court order. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          A change in the Company&#146;s structure and/or a reorganization of the Company,
          including any arrangement between the Company and its shareholders and/or
          creditors according to the Companies Law, and/or any decision relating to these
          issues including, but not limited to, a merger, a demerger, a change in the
          Company&#146;s capital, the establishment of subsidiaries and/or their
          liquidation or sale, and/or all allotments or distributions. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Expressions, announcements, statements, including a position taken, and/or an
          opinion made in good faith by an Officer in the course of and/or in connection
          with his/her duties, including during negotiations and contracting with
          suppliers, consultants and consumers and/or during a meeting of the
          Company&#146;s management, Board of Directors and/or one of its committees. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          An action made in good faith in contradiction to the Company&#146;s Certificate
          of Incorporation, Memorandum of Incorporation and/or Articles of Association. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          An Action and/or decision relating to employer-employee relations including
          employment agreements, negotiations regarding employment agreements, salary
          and/or other employee benefits, including employee stock option plans and/or
          option distributions to employees. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          An action and/or decision relating to work safety and/or working conditions
          and/or employee activities and/or any event relating thereto. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          An action or decision relating to insurance matters and/or risk management of
          the Company. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Actions relating to the Company&#146;s commercial relations, including with
          employees, outside contractors, customers, suppliers, and service providers. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Preparation of work plans, including pricing, marketing, distribution, and
          instructions to employees, to customers and to suppliers and to cooperative
          arrangements, including with competitors. </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">
<page>

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          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Actions relating to product development, to the conduct of product testing,
          approvals, sales, distribution of licensing in their regard. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Decisions and/or actions relating to environmental compliance, including
          pollution, contamination, and hazardous materials. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Granting of liens on Company assets and granting guarantees on behalf of the
          Company. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Compliance with various governmental requirements in Israel and outside Israel,
          including a Ministry of Defense, Antitrust Authority, Securities Authority,
          Environmental Compliance Agency and Tax Authorities. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Establishment and management of financial policy, including credit policies,
          hedging against changes in currency exchange rates and utilization of cash
          reserves. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Causing damages, including bodily injury and property damage, partial or
          comprehensive loss, loss of use or disability, during any action or omission
          relating to the Company, or relating to its employees, agents or others who act
          or are purported to act on behalf of the Company. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          An event resulting from the Company being a publicly traded company or due to
          its shares being issued to the public. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Transfer of information required or permitted to be transferred under applicable
          law to an interested party of the Company. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          An act that may be considered as an infringement of the intellectual property
          rights of a third party, or an act relating to the Company&#146;s intellectual
          property, inter alia, by taking action and filing lawsuits. Also, any action
          taken against Nanomatrics in regards to protection of intellectual property. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Any of the above specified events relating to an activity of an entity
          controlled by the Company or an entity affiliated with the Company or pursuant
          to the Officer&#146;s position in an affiliated entity and/or in an entity
          controlled by the Company. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23.</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Any of the above specified events, whether occurring in Israel or occurring
          outside of Israel. </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">
<page>




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

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

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To: Dr. Micha Brunstein, </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dear Dr. Brunstein </FONT></P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2">TERMS
OF ENGAGEMENT IN THE POSITION OF CHAIRMAN OF <BR>THE BOARD OF DIRECTORS</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This letter establishes the terms of
your engagement with Nova Measuring Instruments Ltd., (&#147;Nova&#148;). </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Title/Position</U> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
You
will serve as the Chairman of the Board of Directors (the &#147;Board&#148;) of Nova. In
this capacity, you shall be entrusted with the responsibilities and duties as should be
borne by a chairman of the board of a company, in accordance with the Companies Law 1999
(the &#147;Companies&#146; Law&#148;) and as set forth in the Company&#146;s Articles of
Association and according to any other applicable law. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
your capacity as Chairman of the Board of Nova, you undertake to devote such time as is
necessary to discharge the responsibilities assigned to you. </FONT></TD>
</TR>
</TABLE>
<BR>

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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
You
will serve as the Chairman of the Board from June 19, 2006 and for an unlimited period.
It is agreed that your services may be terminated at any time at the sole discretion of
Nova&#146;s Board, and as set forth hereunder.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Remuneration</U></FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.1. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Annual
Fee</U>. As remuneration for your services, Nova shall pay you, or
                    cause to be paid to you, by way of Ital Strategies Ltd, an annual fee
(payable                     on a monthly basis) of $110,000 (One hundred and ten
thousand dollars US)                     payable in NIS. (the &#147;<B>Annual  Fee</B>&#148;).
Each payment will be                     against an invoice of Ital Strategies and will
include in addition VAT as                     required by law. </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">
<page>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.2. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Stock
Options.</U> In addition to the Annual Fee, and subject to, and in
                    accordance with, the terms and conditions of the Company&#146;s Stock
Option                     Plans, including all exhibits, schedules and appendices
attached thereto, you                     shall be entitled to receive, on the date of
the approval of this letter by the                     General Meeting of Shareholders of
the Company, options to purchase up to                     150,000 of the Company&#146;s
shares. The grant of such Options is subject to                     such adjustments as
may be required under any applicable law, including without
                    limitation, the use of a trustee for purposes of Section 102 of the
Income Tax                     Ordinance. In the event of a discrepancy between the terms
of this letter of                     terms of engagement and the terms of the Stock
Option Plan, the terms of the                     latter shall prevail. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Notwithstanding
the foregoing, in the event of (i) a proposed sale of all or substantially all of the
assets of the Company or; (ii) a proposed merger of the Company with or into another
corporation or entity, where following such transaction, the Company&#146;s Shareholders
hold less than 50% of the shares of the surviving entity; or (iii) a proposal to purchase
the Company&#146;s shares so that after such purchase the purchaser holds 50% or more of
the Company&#146;s Shares, provided that the purchaser is <U>not</U> numbered among the
Company&#146;s institutional investors at the date of the execution of the purchase
agreement; (hereinafter, in each case: an &#147;Acceleration Event&#148;), the vesting
process of said 150,000 options shall be accelerated so that all said 150,000 options
shall become exercisable and shall be considered fully vested, provided however that:  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
a).
at the date of completion and perfection occurrence of an Acceleration Event
          you shall be serving as the Chairman of the Board of Directors of the Company;
          and  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
b).
as a result of the Acceleration Event you are compelled to vacate your position
          as Chairman of the Board of Directors of the Company.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>No
Employer Employee Relations</U> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Notwithstanding
any work which you may perform for Nova, you hereby undertake that no employer-employee
relations shall exist between you and Nova, and you shall not be deemed to be an employee
of Nova and you shall agree to waive any claim to the contrary, and to indemnify Nova
against any damage borne by it in the event that any court of law, quasi-judicial
authority or any other administrative authority determines to the contrary. </FONT></TD>
</TR>
</TABLE>
<BR>

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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.1. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
term of appointment under this letter of terms of engagement, shall commence           on
June 19, 2006 and continue for an unlimited period (the &#147;Term&#148;),
          unless terminated as a result of any of the following: </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>i) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>you
are unable to perform your duties as Chairman of the Board of the Company           for
whatever reason;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ii) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
General Meeting of the Company decides not to reelect you as a director;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>iii) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
Board of Directors of the Company decides to terminate your appointment;  </FONT></TD>
</TR>
</TABLE>
<BR>

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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
all
subject to, and in accordance with, any applicable law and/or the Articles of Association
of the Company.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=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>5.2.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Upon
termination of your appointment as the Chairman of the Board of Nova, you           shall
be entitled to a one-time fee of $27,500. </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>5.3.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Upon
the termination of your appointment for whatever reason, you shall return           to
Nova all equipment, documents and all other materials, received in the course
          of the fulfillment of your duties hereunder, promptly to the Company. </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>5.4.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At
the termination of your appointment for whatever reason, you undertake to           hand
over your duties in an orderly way to whomsoever Nova shall appoint to           replace
you. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6. </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Restrictive
Covenants</U></FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.1.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>You
agree that during the term in which your services are provided to Nova you           will
not become associated, whether as principal, partner, employee, consultant           or
shareholder (other than as a holder of not more than 1% of the outstanding
          voting shares of any publicly traded company), with any entity that is actively
          engaged in any geographic area in any business which is in substantial and
          direct competition with Nova. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.2.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>You
further agree that during the term in which your services are provided to           Nova
you will not induce any employee of Nova to be employed or perform services
          elsewhere. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.3.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Finally,
you agree that during the term in which you provide services to Nova           and
thereafter (subject to the requirements of legal process) you will hold in
          confidence all trade secrets, confidential information and proprietary
materials           of Nova. For the avoidance of doubt proprietary materials of Nova
shall include           any work product prepared by you during or in relation to your
services under           this letter however, information and materials shall not be
considered to be           trade secrets, confidential or proprietary if they (a) have
previously been           disclosed to the public, or are in the public domain, other
than as a result of           the your breach of this paragraph 6, or (b) are known or
generally available           within any trade or industry of Nova. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7. </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Miscellaneous</U></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>7.1.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>You
undertake to notify the Board of Directors immediately, and without delay,
          regarding any matter about which a question could arise with respect to a
          personal interest and/or a conflict of interest with your duties to Nova and
          your undertakings arising hereunder, and/or with respect to any other matter
          which may prevent you, in accordance with any applicable law and/or with the
          Articles of Association of Nova from serving as the Chairman of the Board of
          Nova. </FONT></TD>
</TR>
</TABLE>
<BR>

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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.2.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This
letter of terms of engagement shall be exclusively governed by and           construed
and enforced in accordance with the laws of the State of Israel. The           competent
courts or tribunals of the Tel-Aviv &#150; Jaffa district shall have           exclusive
jurisdiction with respect to any dispute or controversy arising out           of, or in
connection with, this letter of terms of engagement. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8. </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Approvals:</U> Please
be advised that under applicable law, the terms of your           engagement as
elaborated in this letter are subject to the approval of           Nova&#146;s Audit
Committee, Board of Directors and the Shareholders&#146;          General Meeting. Nova
shall not be liable for failing to obtain such approvals. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9. </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If
the foregoing terms are acceptable to you, please indicate your acceptance           and
agreement by signing the enclosed copy of this letter and returning it to           Nova
attn: Dr. Giora Dishon. </FONT></TD>
</TR>
</TABLE>
<BR>


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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">Very truly yours,<BR><BR>
Nova Measuring Instruments Ltd..<BR><BR>
Accepted and Agreed: <I>[Date]</I><BR><BR>
<BR>By: /s/ Dr. Micha Brunstein<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Dr. Micha Brunstein </FONT></TD>
</TR>
</TABLE>
<BR>

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





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

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>GIORA DISHON <BR>
EMPLOYMENT AGREEMENT </FONT></P>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>THIS
EMPLOYMENT AGREEMENT is entered into as of the 1<SUP>st</SUP> day of July, 2006, <BR>
by and between </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Nova Measuring
Instruments Ltd., </B>(no. 51-181246-3) a corporation organized and existing under thelaws
<BR>of the State of Israel having its principal place of business at Rehovot, Israel, (the &#147;<B>Company</B>&#148;); <BR>
and <BR>
Giora Dishon, Israeli I.D. ___________ (the &#147;<B>CEO</B>&#148;). </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>WHEREAS, the CEO has served as CEO of
the Company for a period of 14 years in accordance with an employment agreement executed
on 14<SUP>th</SUP> of October 1993 (hereinafter: the &#147;<B>1993 Employment
Agreement</B>&#148;); and </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>WHEREAS the Company desires to
continue to employ the CEO in the post, and in accordance with the conditions, as set
forth in the 1993 Employment Agreement except as amended by this agreement (the
<B>&#147;Agreement</B>&#148;), and the CEO desires to enter into such employment
agreement, on the terms and conditions as set forth herein. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOW, THEREFORE, in consideration of
the respective agreements of the parties contained herein, the parties agree as follows: </FONT></P>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
terms of the Preamble above shall constitute an integral part of this
          Agreement. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>Application
of the 1993 Employment Agreement.</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
All
the terms and conditions of the 1993 Employment Agreement shall apply, subject to the
explicit provisions of this Agreement, and except where amended by this Agreement. </FONT></TD>
</TR>
</TABLE>
<BR>

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

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.1. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Salary</U>.
As of the date hereof and throughout the duration of this                Agreement, the
Company shall pay or cause to be paid to the CEO a gross monthly                salary of
$15,000 (Fifteen thousand dollars US) payable in NIS. (the                &#147;<B>Base
Salary</B>&#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>3.2. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Stock
Options.</U> In addition to the Base Salary, and subject to the terms                and
conditions of Stock Option Plan No. 8, including all exhibits, schedules and
               appendices attached thereto, CEO shall be entitled to receive options to
               purchase up to 100,000 ordinary shares of Nova Measuring Instruments Ltd,
on the                date of the approval of this Employment Agreement by the General
Meeting of                Shareholders of the Company<I>. </I>The grant of such Options
is subject to such                adjustments as may be required under any applicable
law, including without                limitation, the use of a trustee for purposes of
Section 102 of the Income Tax                Ordinance. </FONT></TD>
</TR>
</TABLE>
<BR>

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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
For
the removal of doubt it is hereby clarified that in the event of any conflict between the
terms of the aforementioned Stock Option Plan and the terms of this Agreement, the terms
of the Stock Option Plan shall prevail. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Executive
Insurance (Bituach Menahalim) and Education Fund</U></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>4.1. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As
requested by the CEO, the payments of the Company, as set forth in the 1993
               Employment Agreement, shall be paid up to the permitted tax exemption
ceiling,                in accordance with relevant tax laws and regulations, as these
may be amended                from time to time. Beyond the permitted tax exemption
ceiling, no deduction from                the CEO shall be made, while the contribution
of the Company shall be paid,                instead, directly to the CEO. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.2. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For
the removal of doubt, it is hereby clarified that, subject to the provisions
               of all applicable laws and regulations, and without imposing increased
payment                obligations on the Company beyond those set forth herein-above,
CEO shall be                entitled to adjust the percentages in the Executive Insurance
Scheme from those                set forth in the 1993 Employment Agreement. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.3. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For
the removal of doubt, it is hereby clarified that the amounts paid directly
               to the CEO, in accordance with section 4.1 above as requested by the CEO,
shall                not be considered as part of the Base Salary (&#147;Regular Salary&#148;)
for                the purposes of calculating Severance Pay. </FONT></TD>
</TR>
</TABLE>
<BR>

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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.1. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This
Agreement shall come into effect on July 1, 2006. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
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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>5.2. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
the event of the appointment by the Company of a new CEO to the Company, the
               Company hereby undertakes to employ CEO, in another suitable position
within the                Company, for a period of two years from the date of such
appointment (the                &#147;<B>Minimum Period</B>&#148;). </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.3. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Before
the expiry of the Minimum Period, the Board of Directors of the Company
               may decide to terminate CEO&#146;s employment in the Company, upon
provision to                CEO of prior written notice. In this event, CEO shall be
entitled to receive                salary payments, including all terms, rights and
conditions, to which he was                entitled during his employment in the Company,
until the completion of said                Minimum Period. </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>5.4. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Without
derogating from the foregoing, in the event that during such Minimum
               Period as set forth in section 6.2 above, CEO concludes that he is unable
to                serve the Company as required, following the afore-mentioned CEO
appointment, he                shall be entitled to give one year prior written notice to
the Company of his                decision to terminate his employment in the Company. In
this case the terms set                forth in sections 6.2 and 6.3 above shall continue
for one year from the date of                such notice but not beyond the end of the
Minimum Period. </FONT></TD>
</TR>
</TABLE>
<BR>

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

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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>5.5. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
addition, and notwithstanding the provisions of the final sentence of Section
               3.2 above, and notwithstanding anything to the contrary contained in Stock
               Option Plan 8, the options of CEO shall continue to vest during the
               afore-mentioned two year period. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Notwithstanding
the foregoing, in the event of (i) a proposed sale of all or substantially all of the
assets of the Company or; (ii) a proposed merger of the Company with or into another
corporation or entity, where, following such transaction, the Company&#146;s Shareholders
hold less than 50% of the shares of the surviving entity; or (iii) a proposal to purchase
the Company&#146;s shares so that following such purchase the purchaser holds 50% or more
of the Company&#146;s Shares, provided that the purchaser is <U>not</U> numbered among the
Company&#146;s institutional investors at the date of the execution of the purchase
agreement; (hereinafter, in each case: an &#147;Acceleration Event&#148;), the vesting
process of said 100,000 options shall be accelerated so that all said 100,000 options
shall become exercisable and shall be considered fully vested, provided however that: </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
a).
at the date of completion and perfection occurrence of an Acceleration Event
                    CEO is serving as an employee of the Company; and  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
b).
as a result of the Acceleration Event CEO ceases to hold a position in the
                    Company.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=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>5.6. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At
the termination of CEO&#146;s employment for whatever reason, CEO undertakes
               to hand over his duties in an orderly way to whomsoever the Company shall
               appoint to replace CEO. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.7. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Upon
the termination of CEO&#146;s employment in the Company, this Agreement, as
               well as all prior agreements, including the 1993 Employment Agreement,
shall                expire, subject to the application of the 1993 Employment Agreement
provisions                regarding the obligations of CEO upon termination, including
with respect to                confidentiality and non competition. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>IN WITNESS WHEREOF, the Company has
caused the Agreement to be executed by its duly authorized officer, and the CEO has
executed the Agreement, as of the day and year first above written. </FONT></P>





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<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH="40%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Nova Measuring Instruments Ltd.</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH="50%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Giora Dishon</FONT></TD>
</TR>
</TABLE>
<BR>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>By: _________,<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;_________,
</FONT></P>

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



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

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MOSHE FINAROV <BR>
EMPLOYMENT AGREEMENT </FONT></P>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>THIS
EMPLOYMENT AGREEMENT is entered into as of the 1<SUP>st</SUP> day of July, 2006, <BR>
by and
between </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Nova Measuring Instruments
Ltd</B>., (no. 51-181246-3) a corporation organized and existing under the laws of the
State of Israel having its principal place of business at Rehovot, Israel, (the
&#147;<B>Company</B>&#148;); </FONT> </P>

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

<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Moshe Finarov, Israeli I.D. 303626725 (the "<B>Employee</B>"). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>WHEREAS, Employee has served as Chief
Technology Officer of the Company for a period of 14 years in accordance with an
employment agreement executed on 14<SUP>th</SUP> of October 1993 (hereinafter: the
&#147;<B>1993 Employment Agreement</B>&#148;); and </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>WHEREAS the Company desires to
continue to employ the Employee in the post, and in accordance with the conditions, as set
forth in the 1993 Employment Agreement except as amended by this agreement (the
&#147;<B>Agreement</B>&#148;) , and the Employee desires to enter into such employment
agreement, on the terms and conditions as set forth herein. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOW, THEREFORE, in consideration of
the respective agreements of the parties contained herein, the parties agree as follows: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
terms of the Preamble above shall constitute an integral part of this
          Agreement. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>Application
of the 1993 Employment Agreement.</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
All
the terms and conditions of the 1993 Employment Agreement shall apply, subject to the
explicit provisions of this Agreement, and except where amended by this Agreement. </FONT></TD>
</TR>
</TABLE>
<BR>

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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.1. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Salary</U>.
As of the date hereof and throughout the duration of this                Agreement, the
Company shall pay or cause to be paid to the Employee a gross                monthly
salary of $14,000 (Fourteen thousand dollars US) payable in NIS. (the
               &#147;<B>Base Salary</B>&#148;). </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.2. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Stock
Options.</U> In addition to the Base Salary, and subject to the terms                and
conditions of Stock Option Plan No. 8, including all exhibits, schedules and
               appendices attached thereto, Employee shall be entitled to receive options
to                purchase up to 100,000 ordinary shares of Nova Measuring Instruments Ltd<I>.</I>               on
the date of the approval of this Employment Agreement by the General Meeting
               of Shareholders of the Company<I>. </I> The grant of such Options is
subject to                such adjustments as may be required under any applicable law,
including without                limitation, the use of a trustee for purposes of Section
102 of the Income Tax                Ordinance. </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">
<page>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
For
the removal of doubt it is hereby clarified that in the event of any conflict between the
terms of the aforementioned Stock Option Plan and the terms of this Agreement, the terms
of the Stock Option Plan shall prevail. </FONT></TD>
</TR>
</TABLE>
<BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>4.</B> </FONT></TD>
               <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               <B><U>Executive Insurance (Bituach Menahalim) and Education Fund</U></B> </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.1. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As
requested by the Employee, the payments of the Company, as set forth in the
               1993 Employment Agreement, shall be paid up to the permitted tax exemption
               ceiling, in accordance with relevant tax laws and regulations, as these
may be                amended from time to time. Beyond the permitted tax exemption
ceiling, no                deduction from the Employee shall be made, while the
contribution of the Company                shall be paid, instead, directly to the
Employee. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.2. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For
the removal of doubt, it is hereby clarified that, subject to the provisions
               of all applicable laws and regulations, and without imposing increased
payment                obligations on the Company beyond those set forth herein-above,
the Employee                shall be entitled to adjust the percentages in the Executive
Insurance Scheme                from those set forth in the 1993 Employment Agreement. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.3. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For
the removal of doubt, it is hereby agreed that the amounts paid directly to
               the Employee, in accordance with section 4.1 above, as requested by the
Employee                shall not be considered as part of the Base Salary (&#147;Regular
Salary&#148;)                for the purposes of calculating Severance Pay. </FONT></TD>
</TR>
</TABLE>
<BR>

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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.1. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This
Agreement shall come into effect on July 1, 2006. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.2. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
the event of the appointment by the Company of a new CEO to the Company, the
               Company hereby undertakes to employ the Employee, whether as Chief
Technical                Officer or as Senior Technology Consultant for a period of <U>two
years</U> from                the date of execution of this Agreement (the &#147;<B>Minimum
Period</B>&#148;). </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.3. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Before
the expiry of the Minimum Period, the Board of Directors of the Company
               may decide to terminate Employee&#146;s employment in the Company, upon
               provision to the Employee of prior written notice. In this event, Employee
shall                be entitled to receive salary payments, including all terms, rights
and                conditions, to which he was entitled during his employment in the
Company, until                the completion of said Minimum Period. </FONT></TD>
</TR>
</TABLE>
<BR>

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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.4. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Without
derogating from the foregoing, in the event that during such Minimum
               Period as set forth in section 6.2 above, Employee concludes that he is
unable                to serve the Company as required, following the afore-mentioned CEO
appointment,                he shall be entitled to give one year prior written notice to
the Company of his                decision to terminate his employment in the Company. In
this case the terms set                forth in sections 6.2 and 6.3 above shall continue
for one year from the date of                such notice but not beyond the end of the
Minimum Period. . </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.5. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
addition, and notwithstanding the provisions of the final sentence of Section
               3.2 above, and notwithstanding anything to the contrary contained in Stock
               Option Plan 8, the options of the Employee shall continue to vest up to
the end                of such two-year period. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Notwithstanding
the foregoing, in the event of (i) a proposed sale of all or substantially all of the
assets of the Company or; (ii) a proposed merger of the Company with or into another
corporation or entity, where, following such transaction, the Company&#146;s Shareholders
hold less than 50% of the shares of the surviving entity; or (iii) a proposal to purchase
the Company&#146;s shares so that following such purchase the purchaser holds 50% or more
of the Company&#146;s Shares, provided that the purchaser is <U>not</U> numbered among the
Company&#146;s institutional investors at the date of the execution of the purchase
agreement; (hereinafter, in each case: an &#147;Acceleration Event&#148;), the vesting
process of said 100,000 options shall be accelerated so that all said 100,000 options
shall become exercisable and shall be considered fully vested, provided however that: </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
a).
at the date of completion and perfection occurrence of an Acceleration Event
                    Employee is serving as an employee of the Company; and  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
b).
as a result of the Acceleration Event Employee ceases to hold a position in the
                    Company.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=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>5.6. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At
the termination of the Employee&#146;s employment for whatever reason,
               Employee undertakes to hand over his duties in an orderly way to
whomsoever the                Company shall appoint to replace the Employee. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.7. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Upon
the termination of Employee&#146;s employment in the Company, this
               Agreement, as well as all prior agreements, including the 1993 Employment
               Agreement, shall expire, subject to the application of the 1993 Employment
               Agreement provisions regarding the obligations of Employee upon
termination,                including with respect to confidentiality and non
competition. </FONT></TD>
</TR>
</TABLE>
<BR>

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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>IN WITNESS WHEREOF, the Company has
caused the Agreement to be executed by its duly authorized officer, and the Employee has
executed the Agreement, as of the day and year first above written. </FONT></P>


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<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH="40%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Nova Measuring Instruments Ltd.</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH="50%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Moshe Finarov</FONT></TD>
</TR>
</TABLE>
<BR>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>By: _________,<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;_________,
</FONT></P>






<p align=center>
<font size=2>4</font></p>
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`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
