(a)        Purchase Price. The aggregate purchase price to be paid by the Purchaser for the Purchased Shares shall be seventeen million US dollars (US$17,000,000) (the “Purchase Price”).

    (b)        Consequences of Non-Payment of the Final Installment. In the event that for any reason whatsoever the Final Installment is not paid in full by the Purchaser to the Sellers (directly or through the Escrow Agent) on or prior to the Final Installment Payment Date, then such non payment shall constitute a material breach of this Agreement by the Purchaser and the following shall be the sole and exclusive consequences of such non payment by Purchaser (for avoidance of doubt, any receipt of the Final Installment by the Escrow Agent in accordance with the instructions designated in writing by the Escrow Agent under the Escrow Agreement shall be considered payment; except that, payment accompanied by or followed by a claim by Purchaser to the Escrow Agent not to transfer or that prevents such transfer of the Final Installment to the Sellers, shall be considered non payment of such Final Installment by Purchaser):

    (i)        the Escrow Agent shall immediately transfer the Escrowed Shares to the Sellers as described below; and Purchaser shall have no right of any kind or type in such Escrowed Shares or in the Company. For avoidance of any doubt, it is agreed that even in the event of any dispute of any kind or type between the Purchaser and Sellers, the Escrowed Shares will be transferred immediately to the Sellers in case of any non payment of the Final Installment on the Final Installment Date.

    (ii)        the Purchaser shall have no claim or demand of any kind or type whatsoever against the Sellers or their affiliates under or in connection with this Agreement or any other related transaction document (including for any breach or alleged breach of this Agreement or any other related transaction document) and the Purchaser shall be deemed to have irrevocably waived and forever released the Sellers and their affiliates from any such claims or demands, including any claim of set-off. Without limitation of the above, the Purchaser, be deemed to have waived, any right to pursue specific performance of this Agreement. It is agreed that in the event the Sellers bring a claim for specific performance and win such a suit and actually receive the full Purchase Price, then from such date onwards the Purchaser may bring a claim for indemnity under Section 7 of this Agreement (including with respect to Purchaser’s Notice of Claim delivered to Sellers within the applicable Survival Period ).

    (iii)        Notwithstanding anything to the contrary in this Agreement or any other transaction document and regardless of Sellers decision as described in subsection (iv) below, the amount of one million US dollars (US$1,000,000) paid by the Purchasers at the Closing (Initial Payment), shall remain with the Sellers and be considered liquidated damages (“Liquidated Damages”).

    (iv)        Without derogating from the above, Sellers, in accordance with Sellers sole discretion, shall be entitled to decide whether they (x) wish to pursue specific performance of the Share Purchase contemplated by this Agreement, in addition to a claim for any other damages, expenses and costs which they may seek remedy for; or (y) consider this Agreement to be null and void or terminate this Agreement, without any liability to Sellers, and seek additional damages, expenses and costs with respect thereto, but only to the extent such additional damages, expenses and costs exceed the Liquidated Damages amount. In the event that the Sellers bring a claim for specific performance and win such a suit and actually receive the full Purchase Price, then the Initial Payment shall still be Liquidated Damages and shall not be counted towards the Purchase Price (for clarity, the Sellers can still claim other damages caused to Sellers due to such breach), unless Purchaser’s failure to pay resulted from a failure by a third party to provide funding to the Purchaser directly as a result of a material breach by Sellers of a representation in Section 2 and/or Section 3 of this Agreement.

    (c)        Consequences of Third Party Claims That Prevent Transfer of Escrowed Shares.

    (i)        Without derogating from Section 1.2(b) above, in the event that during the period in which the Escrowed Shares are held in escrow by the Escrow Agent any third party that has a claim against the Purchaser, brings a claim that results in a lien (“IKUL”) or similar measurement (“Purchaser Lien on Escrowed Shares”) on the Purchaser’s rights and entitlement to the Escrowed Shares, and such Purchaser Lien on Escrowed Shares was not lifted within twenty (20) days thereafter – then the following consequences shall apply: (a) the Sellers shall have the right to immediately terminate this Agreement, and in such case the Purchaser shall have no right of any kind or type in such Escrowed Shares or in the Company, and (ii) and the applicable Liquidated Damages amount shall remain with the Sellers and be considered liquidated damages in accordance with the provisions detailed in sub section (b) above.

    (ii)        In the event that during period in which the Escrowed Shares are held in escrow by the Escrow Agent any third party that has a claim against the Sellers brings a claim that results in a lien (“IKUL”) or similar measurement (“Seller Lien on Escrowed Shares”) on the Escrowed Shares that prevent the transfer of the Escrowed Shares to the Purchaser and such Seller Lien on Escrowed Shares was not lifted within twenty (20) days thereafter – then the following consequences shall apply: the Purchasers shall have the right to immediately terminate this Agreement, and in such case the Purchaser shall have no right of any kind or type in such Escrowed Shares or in the Company, and shall receive all portions of the Purchase Price already paid to the Sellers or to the Escrow Agent.

    (d)        Payment of the Purchase Price shall be in US Dollars and shall be made, by wire transfer of immediately available funds to a bank(s) account(s) designated by the Sellers and by the Escrow Agent, respectively, in a written notice to the Purchaser at least two (2) Business Days prior to the Closing.

    (a)        Schedule 2.10(a) of the Company Disclosure Schedule contains a complete and accurate list of all real property utilized, owned or leased by the Company or any Subsidiary.

    (b)        Each of the Company and its Subsidiaries has good and marketable title to, or valid leasehold interests in, all its properties and other assets except for such as are no longer, nor reasonably expected to be, used in the conduct of its business. All such properties and other assets, other than properties and other assets in which the Company or any of its Subsidiaries has a leasehold interest, are free and clear of all Liens.

    (c)        This Section 2.10 does not relate to any matters with respect to intellectual property, which are addressed solely in Section 2.15.

    (a)        Schedule 2.11(a) of the Company Disclosure Schedule contains a true and complete list of all written or oral Contracts agreements or understandings of the Company and/or any Subsidiary that are responsible for revenues, expenses or costs of at least two hundred thousand US dollars (US$200,000) per annum (the “Material Contracts”).

    (b)        Neither the Company nor any of its Subsidiaries is in material violation of or in material default under (nor does there exist any condition which upon the passage of time or the giving of notice or both would cause such a material violation of or material default under) any Material Contract to which it is a party or by which it or any of its properties or other assets is bound.

    (a)        All Tax Returns required to be filed by the Company and its Subsidiaries prior to the Closing Date for all taxable periods ending on or before the Closing Date have been timely filed, giving effect to any extension thereof and all such Tax Returns are true, complete and correct in all material respects. Each of the Company and its Subsidiaries (i) has paid all Taxes that are shown to be due on such Tax Returns, and (ii) has paid for the payment of all Taxes for which, to the knowledge of the Company, the Company or its Subsidiaries have liability for any taxable year or other period which shall have ended on or prior to the Closing Date. Each of the Company and its Subsidiaries has withheld all taxes, required to be withheld, on or prior to the Closing Date.

    (b)        There are no outstanding agreements extending the statutory period of limitation applicable to any claimfor, orthe period for the collection or assessmentof, Taxes due from the Company or any Subsidiary for any taxable period.

    (c)        To the knowledge of the Company, no investigation, audit or other proceeding by any court or Governmental Authority is pending with respect to any Taxes due from or with respect to the Company orany Subsidiary.

    (d)        Neither the Company nor any Subsidiary was required by any Governmental Authority to make any material adjustment in Taxes by reason of a change or proposed change in accounting method or otherwise.

    (e)        Neither theCompany nor any Subsidiary is liable forthe Taxes of any taxpayer other than the Company and such Subsidiary for any taxable period, which shall have ended on or prior to the Closing Date.

    (a)        Schedule 2.15(a) of the Company Disclosure Schedule lists all Trademarks (as defined below) and registered Copyrights (as defined below) and all registrations of, and applications to register, any of the foregoing with any Governmental Authority and any renewals or extensions thereof, owned or filed (as the case may be) by the Company or any Subsidiary. Neither the Company nor any Subsidiary has received any notice of, and to the Company’s knowledge there are no, Actions pending or threatened, in respect of the Company Intellectual Property (as defined below) which is owned by the Company, nor is the Company actually aware of any suit, action or proceeding for any third party rights in such Company Intellectual Property (as defined below). All the Intellectual Property necessary to conduct the business of the Company and its Subsidiaries, as presently conducted (the “Company Intellectual Property”) is owned exclusively or licensed from third parties by the Company or a Subsidiary, and with respect to Company Intellectual Property that is subject to a third party license, the Company and/or the Subsidiaries have the right to use such Company Intellectual Property free and clear of all Liens, subject to the terms of such third party licenses. Schedule 2.15(b) lists all of the Intellectual Property licensed by the Company to third parties, except for the sale or license of Company products to its customers.

    (b)        (i) with respect to Intellectual Property owned by the Company, to the Company’s knowledge, neither the Company nor any Subsidiary is infringing or has infringed upon, misappropriated or violated in any other way, any Intellectual Property rights of any third party rights and to the knowledge of the Company, no person is currently infringing upon any intellectual property rights of the Company or any Subsidiary, and (ii) with respect to Intellectual Property which is licensed from third parties to the Company, the Company is not actually aware that such third party Intellectual Property infringes or is alleged to infringe any Intellectual Property of others.

    (c)       Schedule 2.15(c)(1) lists all of the Company’s Intellectual Property licensed from third parties. Except as listed in Schedule 2.15(c)(2) of the Company Disclosure Schedule all Company Intellectual Property, other than the Company Intellectual Property which is licensed from third parties, was to the Company’s knowledge (i) developed by the Company, a Subsidiary or by employees or consultants thereof pursuant to a customary invention assignment agreement assigning all rights with respect thereto to the Company, (ii) created by third parties who assigned ownership of their rights to the Company pursuant to a customary confidentiality and invention assignment agreement, or (iii) assigned to the Company pursuant to a valid assignment agreement.

    (d)        Except as disclosed in Schedule 2.15(d) of the Company Disclosure Schedule, each person employed by the Company or a Subsidiary (including consultants and independent contractors) during the three-year (3) period ending on the date hereof and, to the Company’s knowledge, each other third party having access during such period to confidential information of the Company or a Subsidiary or to any Company Intellectual Property, has executed a confidentiality and non-disclosure agreement in a form containing terms customary in the industry. To the Company’s knowledge, neither the execution or delivery of such agreements, nor the carrying on of the business of the Company or any Subsidiary as currently conducted by any of their respective employees (including consultants and independent contractors, working in capacities similar to employees) conflicts with or constitutes a breach of the terms, conditions or provisions of, or constitutes a default under, any contract, covenant or instrument under which any such employee (including consultants and independent contractors, working in capacities similar to employees) is obligated. The Company and each Subsidiary have taken reasonable steps in accordance with normal industry practice to protect their rights in confidential information and trade secrets.

    (a)        Schedule 2.16(a) of the Company Disclosure Schedule sets forth a list of all the directors, officers, employees and consultants (excluding consultants and employees entitled to receive less than fifty thousand US dollars (US$50,000) per annum, lawyers and accountants) of the Company and any Subsidiary (the “Employees”) and all compensation and benefits payable per annum or which the Company or any Subsidiary, as relevant, is bound (pursuant to written or oral agreements) to provide to each Employee. Except as set forth in Schedule 2.16(a), no Employee is entitled to or was promised any equity rights in the Company, bonuses or other future payments of any type whatsoever from the Company; except for any bonuses or future payments due to such employees for work performed following the Closing Date in the ordinary course of business and consistent with the Company’s prior practices and which are not mentioned in Schedule 2.16, provided such bonuses and payments do not exceed an aggregate amount of two hundred thousand US dollars (US$200,000).

    (b)        The Purchaser has received true and complete copies of all employment and consultancy agreements (including any agreements between the Company or any Subsidiary and any such Employee concerning Company Intellectual Property, confidentiality and non-competition) under which the key Employees are engaged. Neither the Company nor any Subsidiary is a party or subject to any collective bargaining agreement with any labor union or any local or subdivision thereof. There is no current union organizing activity among any of the Employees or any union representative petition pending or threatened. Except as set forth on Schedule 2.16(b) of the Company Disclosure Schedule, there are no customs or customary practices regarding Employees that could be deemed to be binding on the Company or any Subsidiary.

    (c)        Each of the Company and its Subsidiaries is materially in compliance with all legislative or other provisions, rules and regulations relating to employees, and their terms and conditions of employment and has made all deductions, withholdings and payments required to be made by law, or reserves therefor have been made in the Company Financial Statements.

    (a)        (i) Each of the Company and its Subsidiaries is, and has been, in material compliance with all Environmental Laws and (ii) there is no Action pending, or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries or any real property owned, operated or leased by the Company or any of its Subsidiaries relating to or arising under Environmental Laws, and, to the knowledge of the Company, neither the Company nor any of its Subsidiaries has received any notice of or entered into or assumed by Contract or operation of law or otherwise, any obligation, liability, order, settlement, judgment, injunction or decree relating to or arising under Environmental Laws. This Section 2.18, including all subsections, represents the sole and exclusive representation and warranty of the Company regarding environmental matters. For purposes of this Agreement:

    (b)        each of the Company and its Subsidiaries has obtained all permits, licenses and other authorizations that are required under applicable Environmental Laws (“Environmental Permits”) to conduct their businesses and has filed all material obligatory reports, notices, assessments, plans, inventories, and applications required by Environmental Laws (collectively, “Filings”);

    (c)        no judicial or administrative proceedings or investigations are pending or, to the Company’s knowledge, threatened against the Company or any of its Subsidiaries and no written notice, citation, summons or order has been delivered to the Company or any Subsidiary by any Governmental Authority pursuant to any applicable Environmental Laws (collectively, “Environmental Claims”);

    (d)        there have been no environmental investigations, studies, audits, tests, reviews or other analyses conducted by the Company or the Subsidiary in relation to any real property owned or leased by the Company or any Subsidiary; and

    (e)        neither the Company nor any Subsidiary, nor any of the real property currently or, to the knowledge of the Company, formerly owned, operated or leased by them, is currently subject to any environmental remediation, clean-up or other environmental obligation arising under applicable Environmental Laws.

    (a)        Schedule 2.19(a) of the Company Disclosure Schedule contains a true and complete list of the Company’s material customers and the sales to such customers in respect of the business of the Company during the twelve-month period ended December 31, 2006 and the nine-month period ended September 30, 2007. The Company has received no written notice, from any customer listed on Schedule 2.19(a), announcing the termination of the agreement between the Company and such customer.

    (b)        Schedule 2.19(b) of the Company Disclosure Schedule contains a true and complete list of the Company’s material suppliers and the purchases by the Company and its Subsidiaries from such suppliers during the twelve-month period ended December 31, 2006 and the nine-month period ended September 30, 2007.

    (a)        Each insurance policy to which the Company or any of its Subsidiaries is a party or by which any of their assets are covered is valid and binding and in full force and effect, all premiums due thereunder have been paid when due and neither the Company nor any of its Subsidiaries has received any notice of cancellation or termination in respect of any such policy or is in default thereunder, and the Company has no knowledge of any reason or state of facts that could reasonably be expected to lead to the cancellation of such policies or of any threatened termination of, or material premium increase with respect to, any of such policies.

    (b)        No claim under any insurance policy covering the Company or any of its Subsidiaries or any of their assets is currently pending.

    (a)        Between the date of this Agreement and the receipt by the Sellers of the Purchase Price in full, (i) the Sellers shall have an observer on the Board of Directors of the Company and each of its Subsidiaries (and each committee thereof). Such observer shall have a right to participate in all meetings of the Board of Directors of the Company and each of its Subsidiaries (and all committees thereof) and shall receive all information received by other Board members at the same time that such information is provided to any or all of the other Board members, and (ii) the Sellers shall have full and free access to the Company and any information related to the Company. The Company will give the Sellers and their authorized representatives reasonable access to all offices and other facilities and to all books and records of each of the Company and its Subsidiaries and will permit the Sellers to make such inspections, and will fully cooperate with regard to such inspections, as it may reasonably require, and will cause its officers to furnish the Sellers such financial and operating data and other information with respect to the business and properties of the Company, as the Sellers may from time to time reasonably request.

    (b)        Between the date of this Agreement and the receipt by the Sellers of the Purchase Price in full, except for disclosures expressly permitted by the terms of the confidentiality provisions included in the term sheet executed by Magic Ltd. and the Purchaser, dated as of December 30, 2007, as it may be amended from time to time (the “Confidentiality Agreement”), the Purchaser shall hold, and shall cause its officers, employees, accountants, counsel, financial advisors and other representatives to hold, all information received from the Company and/or the Sellers, directly or indirectly, in confidence in accordance with the Confidentiality Agreement.

    (a)        Commencing on the Closing and thereafter, Purchaser shall, in response to a reasonable request by any Seller, provide to Magic Ltd., at no cost to the Sellers except for reimbursement of Purchaser’s, Company’s or such employee’s out-of-pocket expenses, the services of any key Employee, as reasonably requested by any of the Sellers to assist the Sellers with preparation of any filings with any Governmental Authority and response to any inquiries from any Governmental Authority or any third parties and preparation of financial statements for the year 2007.

    (b)        Commencing on the Closing and thereafter Sellers shall cooperate with the Company and Purchasers in the efforts to receive all consents and approvals required with respect to the Share Purchase in accordance with Schedule 2.6 of the Company Disclosure Schedule.

    (a)        Neither Seller shall, at any time during the three-year (3) period immediately following the Closing Date, directly or indirectly, own, manage, control or participate in the ownership, management or control of any business which competes with the Company’s business as conducted as of the Closing Date (i.e. selling the Company’s software application to the Continuance Care Retirement Community market) nor shall Sellers actively divert existing customers of the Company or any Subsidiary to a competitor of the Company or any Subsidiary; provided that, the foregoing shall not prohibit Sellers (together) from owning as a passive investment of five percent (5%) or less of the outstanding equity of any publicly-traded entity; and provided, further, for clarity, that it shall not prevent Sellers from selling the Software (as such term is defined in the License Agreement) or any new versions of such Software in any market whatsoever (including to competitors of the Company or its Subsidiaries).

    (b)        Any purchaser of a majority or a controlling interest in any of the Sellers (via merger, share acquisition or otherwise) shall be bound by the foregoing non-compete obligation solely with respect to such Sellers and its operations and/or business as of the closing of such acquisition, as a subsidiary, unit or division with such purchaser, as the case may be, and the foregoing undertaking shall not in any manner limit, restrict hinder any such other operations, activities, investments holdings etc., of such purchaser.

    (a)        The Company and the Sellers shall deliver to the Purchaser (or the Escrow Agent, as indicated) the following:

    (i)        to the Escrow Agent, stock certificates in the name of the Escrow Agent representing the Purchased Shares, accompanied by validly executed stock powers to the Escrow Agent with respect to the transfer of the Purchased Shares from the Sellers to the Escrow Agent;

    (ii)        to the Escrow Agent, blank stock power deeds allowing the Escrow Agent to transfer the Purchased Shares to either the Purchaser or the Sellers, as set forth in this Agreement, as the case may be;

    (iii)        to the Purchaser, resignations of all directors of the Company and its Subsidiaries of the Company and its Subsidiaries;

    (iv)        to the Purchaser, the License Agreement duly executed by Magic Ltd. and the Company; and

    (v)        to the Purchaser, the Escrow Agreement, duly executed by the Purchaser and the Escrow Agent.

    (b)        Purchaser shall deliver or cause to be delivered to the Sellers the following:

    (i)        a copy of the License Agreement duly executed by the Purchaser; and

    (ii)        the Purchaser shall pay to the Sellers the funds payable at the Closing pursuant to Section 1.2 hereof; and

    (iii)        The Purchaser shall deliver to the Sellers the Escrow Agreement, duly executed by the Purchaser.

    (c)        The Company shall record the transfer of the Purchased Shares to the Escrow Agent on the Company’s stockholders ledger and other records in accordance with the Escrow Agreement and the Company shall make all filings and registrations as may be necessary to perfect such transfer and shall deliver copies thereof to the Purchaser.

    (a)        From and after the Closing and until the lapse of the applicable Survival Period, the Sellers, jointly and severally, shall indemnify and hold the Purchaser and the Company and its respective officers, directors, employees, agents and representatives (the “Purchaser Indemnified Parties”) harmless, subject to certain limitations as described herein, from and against, and agree to promptly defend the Purchaser Indemnified Parties from and reimburse the Purchaser Indemnified Parties for, any and all Losses (as defined below) which any Purchaser Indemnified Party actually suffers or incurs, or becomes subject to, directly or indirectly as a result of or in connection with any: (i) material breach of any representation and warranty under this Agreement, (ii) material breach of any covenant made or other obligation by the Company or the Sellers in this Agreement and/or (iii) Tax liability or deficiency of the Company with respect to periods which have ended, on or prior to, the Closing Date. For the avoidance of doubt, a claim for indemnification in respect of Tax liability or deficiency of the Company as stated herein above shall not be subject to any limitation whatsoever, including, but not limited to any limitation of time or amount of claim, whether pursuant to this Agreement or any other agreement, and any such Tax liability which is subject to indemnity shall be paid by the Sellers to the relevant tax authorities no later than the last date upon which the Purchaser Indemnified Parties are required under applicable law to make such payments after giving effect to any extension obtained, such payment not to be deemed to limit the Sellers’ right to seek extension or otherwise challenge or dispute any requirement to pay such Taxes.

    (a)        The Purchaser shall as soon as possible notify the Sellers via registered mail, in writing of any claim or demand made by a third party (“Third Party Claim”), which the Purchaser has determined has given or could give rise to a right of indemnification under Section 7.2.

    (b)        The Sellers shall have the right to assume, and with respect to claims or demands made by any tax authority which are subject to indemnification hereunder, shall be obligated to assume, the defense, including all costs and expenses of such defense and employ counsel to defend any such claim or demand asserted against any Purchaser Indemnified Party. Subject to the previous sentence, the Purchaser Indemnified Parties shall have the right to participate in (but not control) the defense of any such claim or demand at its own expense. Except with respect to the defense by the Sellers of any claim or demand related to taxes which is subject to indemnification hereunder, in the event that such counsel has a conflict of interest in representing such Purchaser Indemnified Party, Sellers shall also reimburse the Purchaser Indemnified Party for the reasonable expenses of one legal counsel to be appointed by it to participate in (but not control) the defense of any such claim. The Sellers shall notify the Purchaser Indemnified Parties in writing, within fifteen (15) Business Days after the date of the notice of claim given by the Purchaser to the Sellers under Section 7.3(a) of its election to defend any such third party claim or demand. The Sellers shall not settle or compromise any such claim or demand without the Purchaser’s prior written consent unless such settlement contains a complete discharge and full release of any liability of the Purchaser Indemnified Parties under such claim or demand. The Purchaser Indemnified Parties shall make available to the Sellers or its representatives, all records and other material in the Purchaser Indemnified Parties’ possession reasonably required by it for its use in contesting any third party claim or demand. The Purchaser Indemnified Parties shall not settle or compromise any such claim or demand without the Sellers’ prior written consent.

    (c)        If the Purchaser determines in good faith that it is entitled to indemnification pursuant to Section 7.2 (not based on a Third Party Claim) and the Purchaser desires to seek an indemnification claim hereunder, the Purchaser shall give to the Sellers a written notice with respect thereto, in addition to any notice required under Section 7.3(a) (a “Purchaser’s Notice of Claim”) setting forth in reasonable detail the basis for such claim, providing copies of all relevant documents or other information, and specifying the amount of Losses claimed (which, if not finally determined, may be a good faith estimate thereof) (the amount of Losses so claimed being hereinafter referred to as the “Purchaser’s Indemnity Claim Amount”).

    (d)        The Sellers may, within thirty (30) days after receipt of any Purchaser’s Notice of Claim, object to such Purchaser’s Notice of Claim and dispute the claim in full or any Purchaser’s Indemnity Claim Amount set forth in such Purchaser’s Notice of Claim by delivery to the Purchaser of written notice of such dispute (a “Sellers’ Dispute Notice”), setting forth in reasonable detail the basis for such dispute and the amount of the Purchaser’s Indemnity Claim Amount which the Sellers object to being claimed by the Purchaser in respect of the Purchaser’s Notice of Claim.

    (e)        If the Purchaser does not receive a Sellers’ Dispute Notice that relates to a Purchaser’s Notice of Claim within thirty (30) days after the Purchaser actually delivers such Purchaser’s Notice of Claim to Sellers, such claim specified in the Purchaser’s Notice of Claim will be conclusively deemed a liability of the Sellers and the Sellers shall pay the Purchaser’s Indemnity Claim Amount (subject to the limitation set forth below) on demand or set off such Indemnity Claim Amount (or any portion thereof) against any license fees still due to Sellers under the License Agreement in accordance with the provisions of Section 7.7 below, or, in case of any portion of the Purchaser’s Indemnity Claim Amount is subject to further assessment, on such later date when the amount of such claim (or such portion thereof) becomes finally determined. If the Sellers have timely delivered the Sellers’ Dispute Notice, as provided above, the Sellers and the Purchaser will proceed in good faith to negotiate a resolution of such dispute and, if not resolved through negotiations within thirty (30) days after the delivery of the Sellers’ Dispute Notice, the parties will be free to pursue such remedies as may be available under this Agreement.

    (f)        Commencement of the procedure stated in this Section 7.3 shall not preclude the Purchaser from commencing the procedure under Section 7.7 simultaneously.

    (a)        Both the Sellers and the Purchaser acknowledge that there is a sum of three million US dollars (US$3,000,000) to be paid as license fees (“License Fees”) under the License Agreement out of which, the first amount of one million US dollars (US$1,000,000) to be paid under the License Agreement (the “Exempt Amount”) shall be payable unconditionally to Magic Ltd. For the avoidance of any doubt, except for any First Year Tax Set Off, the Exempt Amount shall not be subject to the right of the Purchaser to set off as provided below and any set-off right under this Section will be allowed subject to and conditioned upon the payment in full of the Exempt Amount.

    (b)        The Sellers and the Purchaser agree that the following set off of Undisputable Indemnity Amounts (as defined below) will be allowed against the Remaining License Fees (as defined below) and that no other set off will be allowed; all according to the following terms and conditions: Commencement of the procedure stated in this Section 7.7 shall not preclude the Purchaser from seeking indemnity pursuant to Section 7.3 simultaneously.

    (i)        The Set Off Notice (as defined below) must be delivered to the Sellers prior to the due date for payment of any Remaining License Fees in accordance with the License Agreement; for avoidance of doubt, any Remaining License Fees (or portions thereof) not subject to a Set Off Notice on their payment date according to the License Agreement will be paid according to the terms of the License Agreement and may not be delayed or withheld for any reasons in connection with this Section 7.

    (ii)        Once a Set Off Notice was delivered to the Sellers during and subject to the applicable Survival Periods and the Cap Amount (as defined below), the Purchaser shall be allowed to withhold the Remaining License Fees (or a smaller amount, mentioned in the Set Off Notice) only until such time as the Set Off Notice (or any portion thereof) becomes either:

    (A)        an Undisputable Indemnity Amount – in which case Purchaser may set off the Remaining License Fees against such Undisputable Indemnity Amount; or

    (B)        a Rejected Set Off Notice (as defined below) – in which case the Purchaser shall immediately pay such Remaining License Fees (or a smaller amount, withheld due to the Set Off Notice) detailed therein (up to the Remaining License Fees).

    (iii)        There will be no set off of any sums unless the Sellers shall be liable to indemnify any Purchaser Indemnified Party in accordance with all the provisions and limitations of Section 7 herein.

    (iv)        All set offs together shall not exceed, in the aggregate, together with any other indemnity payment/obligations/claims under this Agreement, two million US dollars (US$2,000,000).

    (v)        In the event that any Remaining License Fees were actually withheld and thereafter were classified hereunder as Rejected Set Off Notice – the Purchaser shall add to the Remaining License Fees (or any portion thereof) an annual interest (paid ratably for part of a year) in the amount equal to the then current LIBOR plus three percent (3%) accrued from the due date for payment of such fees under the License Agreement until actual payment of such License Fees.

    (vi)        There will be no set off in case Purchaser is in default under this Agreement or the Company is in default under the License Agreement.

    (a)        The dispute shall be submitted to a single arbitrator (the “Arbitrator”) whose identity shall be agreed by the parties. In the event that parties fail to reach an agreement with respect to the identity of the arbitrator within seven (7) days of the date of delivery of a notice of a party to another party, any party may request the President of the Israeli Bar to appoint an arbitrator.

    (b)        The arbitration will take place in Tel-Aviv.

    (c)        The Arbitrator will submit his/her ruling within thirty (30) Business Days of the date of his/her appointment, which shall be reasoned and explained and shall be in accordance to the substantive laws of the State of Israel without giving effect, however, to its rules of procedure and evidence. The arbitrator may give interim remedies, but it is agreed between the Parties that each Party has the right to approach the competent courts of Tel Aviv-Jaffa (instead of the Arbitrator) to receive any interim remedies.

    (d)        Unless otherwise provided for in this Agreement, the Arbitrator’s fees and expenses shall be borne equally by the parties to the arbitration.

    (e)        The arbitral award may be enforced in any competent court having jurisdiction over the parties or their assets. Each party shall use its best efforts to ensure the arbitration is concluded as quickly and as efficiently as reasonably possible.

    (f)        For the avoidance of doubt, this Agreement shall constitute an arbitration agreement in accordance to the requirement of the Israeli Arbitration Laws, 1968 without the need for any other action to be taken.

    (a)        “Action” means any claim, action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority.

    (b)        “Affiliate” of any person means another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such person.

    (c)        “Business Day” shall have the meaning set forth in Rule 14d-1(g)(3) under the Exchange Act.

    (d)        “Material Adverse Effect” means any event that has a long term material adverse effect on the business of the Company and its Subsidiaries, taken as a whole, or that prevents the Company and/or Sellers from consummating the transaction under this Agreement.

    (e)        “Code” means the Internal Revenue Code of 1986, as amended

    (f)        “control” shall have the meaning ascribed to it in the Israel Securities Law, 5728-1968.

    (g)        “Company Closing Status” as defined in Section 5.9.

    (h)        “Company Intellectual Property” as defined in Section 2.15.

    (i)        “Environmental Laws” means all applicable U.S. federal, state, local or foreign statutes, codes, rules, regulations or permits relating to the environment, natural resources, pollution or contamination or toxic or hazardous substances.

    (j)        “First Year Tax Set Off” means a Set Off Notice delivered by the Purchaser, prior to the expiration of twelve (12) months following the Closing Date, relating to any claims or demands exceeding the sum of two million US dollars (US$2,000,000) made by any tax authority against the Company or any of its Subsidiaries prior to the expiration of twelve (12) months from the Closing Date and which are subject to indemnification under Section 7.2(a) (iii) hereunder.

    (k)        “Governmental Authority” means any national, state, local or municipal authority and any other entity exercising an executive, legislative, judicial, regulatory or administrative function of or pertaining to any such authority.

    (l)        “Intellectual Property” means any and all intellectual property, in any jurisdiction including: (i) all trade marks, service marks, brand names, certification marks, trade dress, assumed names, business names, trade names and other indications of origin (“Trademarks”); (ii) patents and patent rights (“Patents”); (iii) trade secrets and other confidential or non-public business information, including formulae, compositions, inventor’s notes, discoveries and improvements, know-how, manufacturing and production processes and techniques, and research and development information (whether or not patentable), invention disclosures, unpatented blue prints, drawings, specifications, designs, plans, proposals and technical data, business and marketing plans, and customer lists and information; (iv) writings and other copyrightable works of authorship, including computer programs, databases and documentation therefor, and all copyrights to any of the foregoing (“Copyrights”) ; (v) integrated circuit topographies and mask works; (vi) moral rights; (vii) features of shape, configuration, pattern or ornament and design registrations; (viii) any other intellectual property rights, and (ix) registrations of, and applications to register, any of the foregoing with any Governmental Authority and any renewals or extensions thereof.

    (m)        “knowledge” ofthe Company or of the Sellers shall mean the actual knowledge of the persons listed in Schedule 9.10(m) after due inquiry with their subordinated persons in the Company (including applicable consultants), the Company’s accountants and legal advisors.

    (n)        “Loss” means all liability, loss, damage or injury, and all costs and expenses, including interest, and including further without limitation, penalties, costs of preparation and investigation and the reasonable fees and expenses of attorneys, accountants and other professional advisers, actually incurred.

    (o)        “person” means an individual, corporation, partnership, joint venture, association, trust, unincorporated organization or, as applicable, any other entity.

    (p)        “Permitted Actions” as defined in Section 5.1.

    (q)        “Purchaser Material Adverse Effect” means any event that would, or reasonably be expected to, materially impact or delay the ability of the Purchaser to perform its obligations under this Agreement and the License Agreement or to consummate the transactions contemplated by this Agreement and the License Agreement.

    (r)        “Purchaser Survival Period” means one year from the Closing Date.

    (s)        “Rejected Set Off Notice” means any one of the following: (i) a Set Off Notice, which following discussions between a Seller and Purchaser, both parties agree should be rejected by such Seller, or (ii) a final and an unappealable Arbitration or court ruling with respect to any such Set Off Notice (or portions thereof) which was disputed by the relevant Seller rejecting such Set Off Notice.

    (t)        “Remaining License Fees” only if the payment to Magic Ltd. of the Exempt Amount was made, this term shall mean any remaining amount equal to the Cap Amount of the License Fee.

    (u)        “Subsidiaries” means any entity over which the Company has control.

    (v)        “Set Off Notice” means a written notice submitted in good faith by Purchaser to any Seller asking to set off the Remaining License Fees (or any portion thereof) resulting from any (a) Third Party Claim, or (b) Purchaser’s Notice of Claim (as such terms are defined above) (all within the applicable Survival Period) delivered in writing and reasonable detail to such Seller; which Purchaser believes in good faith is subject to indemnification by such Seller in accordance with the provisions of Section 7.7.

    (w)        “Taxes” shall mean means any U.S. federal tax or Israeli, state, local or other foreign income tax, gross receipts tax, license tax, payroll tax, employment tax, excise tax, severance tax, stamp tax, occupation tax, premium tax, windfall profits tax, environmental tax (including taxes under section 59A of the Code), customs duties, capital stock tax, franchise tax, profits tax, withholding tax, social security tax (or similar), unemployment tax, disability tax, real property tax, personal property tax, sales tax, use tax, transfer tax, registration tax, value added tax, or other tax of any kind whatsoever, including any interest, penalty or addition thereto, whether disputed or not.

    (x)        “Tax Returns” shall mean any return, declaration, report, claim for refund or information return or statement relating to any Tax, including any schedule or attachment thereto and including any amendment thereof.

    (y)        “Undisputable Indemnity Amount” means any one of the following: (i) the amount stated in a Set Off Notice, undisputed by the Sellers in writing within thirty (30) days following the receipt of such Set Off Notice by such Seller, and (ii) the amount of a final and an unappealable Arbitration or court ruling upholding the Set Off Notice with respect to any such Set Off Notice (or potions thereof) which was disputed by such Seller.

    (a)        The Attachments, Annexes and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof.

    (b)        It is understood and agreed that the specification of any dollar amount in the representations and warranties contained in this Agreement or the inclusion of any specific item in the disclosure schedule is not intended to imply that such amounts or higher or lower amounts, or the items so included or other items, are or are not material, and neither party shall use the fact of the setting of such amounts or the fact of the inclusion of any such item in the disclosure schedule in any dispute or controversy between the parties hereto as to whether any obligation, item or matter not described herein or included in the disclosure schedule is or is not material for purposes of this Agreement.