DEALTIME COM LTD, S-1, 2000-03-23

DEALTIME COM LTD
S-1, 2000-03-23

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 23, 2000

REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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DEALTIME.COM LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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<S> <C> <C>
ISRAEL 7371 NOT APPLICABLE
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

1 ZORAN STREET
NETANYA 42504, ISRAEL
972-9-885-3744
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------

EZRA KATZEN, ESQ.
GENERAL COUNSEL
DEALTIME.COM, INC.
475 FIFTH AVENUE, 2ND FLOOR
NEW YORK, NY 10017-6220
(212) 905-8000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------

COPIES TO:

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<S> <C> <C> <C>
BARBARA L. BECKER, ESQ. DAN GEVA, ADV. MARK MANDEL, ESQ. AARON M. LAMPERT, ADV.
CHADBOURNE & PARKE LLP DAVID S. GLATT, ADV. JULIE C. ROSS, ESQ. NASCHITZ, BRANDES & CO.
30 ROCKEFELLER PLAZA MEITAR, LIQUORNIK, GEVA & MORRISON & FOERSTER LLP 5 TUVAL STREET
NEW YORK, NEW YORK 10112 CO. 1290 AVENUE OF THE AMERICAS TEL AVIV 67897, ISRAEL
(212) 408-5100 16 ABBA HILLEL SILVER ROAD NEW YORK, NEW YORK 10104 972-3-623-5000
RAMAT GAN 52506, ISRAEL (212) 468-8000
972-3-610-3100
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------

CALCULATION OF REGISTRATION FEE

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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C>
Ordinary Shares, par value NIS 0.01 per share........ $50,000,000 $13,200
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</TABLE>

(1) Estimated pursuant to Rule 457(o) under the Securities Act of 1933, as
amended, solely for the purpose of computing the amount of the registration
fee.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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EXPLANATORY NOTE

This registration statement contains two forms of prospectus: (a) one
prospectus to be used in connection with an offering in the United States and
Canada and (b) one prospectus to be used in connection with a concurrent
offering outside of the United States and Canada. The U.S. prospectus and the
international prospectus are identical in all respects except for the front
cover page and the "Underwriting" section. The front cover page and the
"Underwriting" section of the international prospectus are included immediately
before Part II of this registration statement.
<PAGE> 3

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE SOLICITING OFFERS TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED , 2000

[LOGO]

DEALTIME.COM LTD.
[ ] SHARES

ORDINARY SHARES
------------------------------
DealTime is offering ordinary shares. This is our initial
public offering and no public market currently exists for our ordinary shares.
We have applied for approval for quotation of our ordinary shares on the Nasdaq
National Market under the symbol "DEAL." We anticipate that the initial public
offering price will be between $ and $ per ordinary share.
------------------------------
INVESTING IN OUR ORDINARY SHARES INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
------------------------------

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PER SHARE TOTAL
--------- --------
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to DealTime.com Ltd. .............................. $ $
</TABLE>

THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

We have granted the underwriters a 30-day option to purchase up to
additional ordinary shares to cover any over-allotments.

Until , 2000, all dealers that buy, sell or trade our
ordinary shares, whether or not participating in this offering, may be required
to deliver a prospectus. This is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.

We intend to apply to the Israel Securities Authority for an exemption from
Israel's prospectus delivery requirements in relation to this offering. You
should not interpret that exemption, if granted, as validating the matters
contained in this prospectus or as an approval of their reliability or adequacy,
nor should you interpret that exemption as an expression of opinion concerning
the quality of the securities offered by this prospectus.

FleetBoston Robertson Stephens Inc. expects to deliver the ordinary shares
on or about , 2000.
------------------------------
ROBERTSON STEPHENS
BEAR, STEARNS & CO. INC.
WARBURG DILLON READ LLC
NOMURA INTERNATIONAL

THE DATE OF THIS PROSPECTUS IS [ ], 2000
<PAGE> 4

[Artwork to be provided by the Company.]
<PAGE> 5

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, ORDINARY SHARES ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED.
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF
THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY
SALE OF OUR ORDINARY SHARES.

------------------------

TABLE OF CONTENTS

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PAGE
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Summary..................................................... 1
Special Note Regarding Forward-Looking Statements........... 5
Risk Factors................................................ 6
Use of Proceeds............................................. 17
Dividend Policy............................................. 17
Capitalization.............................................. 18
Dilution.................................................... 19
Selected Consolidated Financial Data........................ 20
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 21
Business.................................................... 26
Management.................................................. 37
Related Party Transactions.................................. 45
Principal Shareholders...................................... 46
Description Of Ordinary Shares.............................. 47
Shares Eligible For Future Sale............................. 50
United States Federal Income Tax Considerations............. 52
Israeli Taxation and Investment Programs.................... 56
Underwriting................................................ 60
Legal Matters............................................... 63
Experts..................................................... 63
Enforceability Of Civil Liabilities......................... 64
Where You Can Find More Information......................... 65
Reports to Shareholders..................................... 65
Index to Consolidated Financial Statements.................. F-1
</TABLE>

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[THIS PAGE IS INTENTIONALLY LEFT BLANK.]
<PAGE> 7

SUMMARY

You should read the following summary together with the more detailed
information in this prospectus, including risk factors regarding our company and
the ordinary shares being sold in this offering.

OUR COMPANY

We are a real-time interactive information exchange and an enabler of
e-commerce for buyers and sellers. Our Web site, www.dealtime.com, allows buyers
to compare models, brands, merchant types and prices and to make purchases from
over five million deals across 7,000 online and offline sellers. We also offer
shopping guides, reviews of products and sellers, as well as a feature
comparison tool. Our robust, scalable technology architecture rapidly delivers
highly relevant search results and enables delivery of information to buyers
through personal computers and wireless devices. Our proprietary technology
provides merchants, manufacturers, industry analysts and other potential clients
with aggregated indication-of-interest data about consumer buying activity
through our DealAgent service. Sellers benefit through increased traffic,
conversion rates and average order values as well as through targeted direct
marketing opportunities made available by connecting sellers with motivated
buyers. We transform online shopping from a one-way business-to-consumer model
to a business-to-consumer-to-business cycle. In other words, our products and
services enable sellers to meet buyer demand more efficiently, which in turn
enhances our ability to attract additional and repeat buyers to our Web site.
According to PC Data, an industry publication, DealTime was the most visited
comparison shopping service in February 2000, receiving over 3.1 million unique
visits.

OUR MARKET OPPORTUNITY

International Data Corporation, a leading provider of information
technology data, estimates that annual worldwide commerce over the Internet will
increase from $111.4 billion in 1999 to $1.3 trillion by 2003 and that the
number of shoppers worldwide who buy goods and services online will grow from 48
million in 1999 to approximately 183 million in 2003. Increasing numbers of
buyers are drawn to the Internet to shop but they cannot get from a single site
the information they need to make an informed purchasing decision. According to
Jupiter Communications, a leading provider of research on Internet commerce, in
1999, 82% of Internet buyers went online intending to purchase a specific
product. Of this group, 81% visited more than one Web site before making a
purchase. Sellers, in turn, are searching for ways not only to develop a unique
brand to distinguish themselves from other similar online sellers, but also a
means to effectively respond to this buyer demand.

OUR SOLUTION

We respond to the needs of buyers and sellers by providing:

- an intuitive, convenient user interface that easily and rapidly compares
product and price information gathered from multiple buying sites,
including merchants, buying groups, auction sites and classified
advertisement sites;

- highly relevant product information from a wide variety of online sellers
by utilizing a proprietary product language recognition system designed
to maximize the accuracy and relevance of our search results;

- ongoing deal notification by frequently monitoring selected products at
predetermined intervals and notifying buyers when their tracking criteria
are met;

- the ability for buyers to perform comparative shopping searches and
purchase products through wireless devices through our DealTime AnyTime
service;

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- integrated product and merchant information with our search results, as
well as the ability for users to review, sort and filter specifications
of various products, based on their preferences, and conduct side-by-side
price or feature comparisons; and

- aggregated indication-of-interest data, through DealAgent, to sellers who
can then react to the demand data by posting deals on our Web site or
adjusting product prices.

OUR STRATEGY

Our objective is to be the world's leading real-time interactive
information exchange and e-commerce enabler for buyers and sellers by:

- establishing DealTime as a leading consumer brand;

- providing buyers with a user-friendly, convenient, accurate, flexible and
comprehensive Web site in order to build customer loyalty and increase
retention;

- expanding merchants' marketing opportunities and providing sellers with
access to valuable aggregated buyer demand data in order to build on our
market leadership and become sellers' preferred online shopping partner;

- extending the application and adaptability of DealTime products and
services across a wide range of wireless and other consumer electronic
devices;

- enhancing our global presence and expanding our international operations
into select foreign markets to ultimately create one global products and
services marketplace; and

- continuing to develop and improve our technology to maximize the scope
and accuracy of our searches and to maintain and further enhance our
competitive advantage.

OUR ADDRESS

Our principal executive offices are located at 1 Zoran Street, Netanya,
Israel. Our U.S. headquarters are located at 475 Fifth Avenue, 2nd Floor, New
York, New York 10017-6220. Our telephone number in New York is (212) 905-8000.

2
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THE OFFERING

Ordinary shares offered by
DealTime............................ shares

Ordinary shares to be outstanding
after
this offering..................... shares

Use of proceeds..................... We plan to use the net proceeds from
this offering for the continued growth
of our business including advertising
and marketing, international expansion,
new product development and general
corporate purposes including working
capital. See "Use of Proceeds."

Proposed Nasdaq National Market
symbol.............................. DEAL

ABOUT THIS PROSPECTUS

Unless otherwise indicated, the information in this prospectus:

- assumes no exercise of the underwriters' over-allotment option to
purchase from us up to additional ordinary shares to cover
over-allotments.

- assumes the conversion of all preferred shares of the Company into
ordinary shares immediately prior to the offering.

- does not assume the exercise of outstanding warrants to purchase
1,263,154 of our Series C Convertible Preferred Shares, which upon the
offering will become warrants to purchase 1,263,154 of our ordinary
shares.

- does not assume the exercise of outstanding warrants to purchase up to
265,524 of our Series D Convertible Preferred Shares, which upon the
offering will become warrants to purchase 265,524 of our ordinary shares.

- does not assume the exercise of outstanding options to purchase up to
4,162,667 ordinary shares which were outstanding as of December 31, 1999
and had a weighted average exercise price of approximately $0.27 per
share.

- assumes an initial offering price of $ per ordinary share, the
midpoint of the estimated initial public offering price range.

References in this prospectus to "DealTime," "DealTime.com," "the Company,"
"our company," "we," "our," and "us" refer to DealTime.com Ltd. and
DealTime.com, Inc., our wholly owned subsidiary. Our Web site is located at
www.dealtime.com. Information contained on our Web site is not intended to
constitute part of this prospectus.

DealTime(TM), DealTime.com(TM), DealAgent(TM), DoneDeal(TM) and DealTime
AnyTime(TM) are trademarks of DealTime. This prospectus contains other product
names, trade names and service marks of DealTime and other companies, all of
which are the property of their respective owners.

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SUMMARY CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The following table summarizes the consolidated financial data for our
business. You should read this information together with the consolidated
financial statements and the notes to those statements appearing elsewhere in
this prospectus. See "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

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FOR THE
YEAR ENDED
DECEMBER 31,
------------------
1998 1999
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<S> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net revenues................................................ $ 41 $ 525
Loss from operations........................................ (611) (19,359)
Net loss.................................................... (596) (19,066)
Preferred Share deemed dividend............................. -- (600)
Net loss attributable to ordinary shareholders.............. $ (596) $(19,666)
====== ========
Basic and diluted net loss per share........................ $(0.10) $ (3.22)
Basic and diluted weighted average shares outstanding....... 6,074 6,114
Pro forma basic and diluted net loss per share
(unaudited)............................................... $ (1.17)
Pro forma basic and diluted weighted average shares
outstanding (unaudited)................................... 16,774
</TABLE>

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<CAPTION>
AS OF DECEMBER 31, 1999
-----------------------
ACTUAL AS ADJUSTED
------- ------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $5,750
Working capital............................................. 1,853
Total assets................................................ 7,905
Long-term liabilities....................................... 128
Shareholders' equity........................................ 3,284
</TABLE>

The above table summarizes our balance sheet as of December 31, 1999 (1) on
an actual basis and (2) on an as adjusted basis to give effect to (a) the sale
of the ordinary shares in this offering, after deducting the underwriting
discounts and estimated offering expenses, (b) our anticipated application of
the net proceeds of the offering, and (c) the conversion of our outstanding
preferred shares into ordinary shares.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about us and our industry.
These statements may be found in the sections of this prospectus entitled,
"Summary," "Risk Factors," "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business," and
in this prospectus generally. These statements may be identified by the use of
words such as "expect," "estimate," "anticipate," "intend," "plan" and "will"
and similar expressions. These forward-looking statements involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of many factors, as more fully
described in the "Risk Factors" section and elsewhere in this prospectus. We
undertake no obligation to update in this prospectus any forward-looking
statements after the date of this prospectus.

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RISK FACTORS

Investing in our ordinary shares involves risk. You should carefully
consider the risks described below and other information in this prospectus
before deciding to invest in our ordinary shares.

RISKS RELATED TO OUR BUSINESS

WE ARE AN EARLY STAGE COMPANY IN A NEW AND RAPIDLY EVOLVING MARKET, WHICH MAKES
IT DIFFICULT FOR INVESTORS TO DETERMINE WHETHER WE WILL ACCOMPLISH OUR
OBJECTIVES.

DealTime.com Ltd. was incorporated in March 1997, and we began commercial
operations in January 1998. We launched our Web site in June 1999. As a result,
we have only a limited operating history on which you may base an evaluation of
our business and prospects. You should consider our prospects in light of the
risks, uncertainties, expenses and difficulties frequently encountered by
companies in their early stages of development, particularly companies in new
and rapidly evolving markets, such as online commerce, that are using new and
unproven business models. We may be unsuccessful if we are unable to:

- maintain and enhance the DealTime brand;

- develop and maintain a customer base;

- adapt to meet competitive developments;

- provide consistent, high-quality user experiences;

- develop relationships with strategic partners; and

- successfully expand into international markets.

WE ARE NOT PROFITABLE AND EXPECT TO CONTINUE TO INCUR LOSSES.

We incurred net losses of approximately $596,000 and $19.1 million for the
years ended December 31, 1998 and 1999, respectively. We have experienced losses
in each quarter since inception, and we have incurred net losses from inception
through December 31, 1999 of $19.7 million. We expect to continue to incur
losses for at least the next three years. The principal causes of our losses are
likely to continue to be significant brand development costs, marketing and
promotion costs, technology and systems development costs, international
expansion costs and general and administrative costs. With respect to both
current and future product and service offerings, we expect to increase our
operating expenses significantly in order to increase our user and merchant
bases, to enhance our brand image and to support our growing infrastructure. For
us to make a profit, our revenues will need to increase significantly to cover
these and other future costs. Otherwise, we may never achieve profitability. In
addition, if we do achieve profitability, we may not be able to sustain or
increase profitability in the future. For information about our operating
results, see "Selected Financial Information" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

WE WILL NEED ADDITIONAL CAPITAL TO OPERATE AND SUCCESSFULLY GROW OUR BUSINESS.

We require substantial capital to fund our business. We expect that the net
proceeds of this offering, together with our available funds, revenues and
amounts available under our new credit facility, will be sufficient to meet our
expected needs for working capital and capital expenditures for approximately
the next 12 months. After the end of that period, we may need to raise
additional funds. We cannot be certain that additional financing will be
available to us on favorable terms when required or at all. If we cannot raise
funds in a timely manner on acceptable terms, we may not be able to promote our
brand, develop or enhance our products and services, take advantage of future
opportunities or respond to competitive pressures or unexpected requirements. If
we successfully raise additional funds through the issuance of debt, we will be
required to service that debt and are likely to become subject to restrictive
covenants and other restrictions contained in the instruments governing that
debt, which may limit our operational flexibility. If we raise additional funds
through the issuance of equity securities, then these securities may have
rights, preferences or

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privileges senior to the rights of our ordinary shares, and holders of our
ordinary shares may experience dilution. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

OUR QUARTERLY RESULTS ARE LIKELY TO VARY SIGNIFICANTLY AND THESE POTENTIAL
FLUCTUATIONS IN OUR FINANCIAL RESULTS MAKE FINANCIAL FORECASTING DIFFICULT.

Due to our brief operating history, we have generated insufficient data to
permit meaningful period-to-period comparisons of our operating results. Our
quarterly operating results have varied significantly in the past and will
likely vary significantly in the future. As a result, we believe that
period-to-period comparisons of our operating results are not meaningful and
should not be relied upon as indicators of our future performance. Our operating
results may vary depending on a number of factors, some of which are outside our
control, including:

- demand for our online services by buyers, merchants and advertisers,
including the number of searches performed by our users and the rate at
which they click-through to merchant sites and advertiser sites;

- costs of attracting users to the DealTime.com Web site;

- the announcement or introduction of new or enhanced products or services
by our competitors;

- the mix of paying as opposed to non-paying merchants within searches
conducted by users;

- the amount and timing of operating costs and capital expenditures
relating to expansion of our operations;

- costs and delays in introducing new DealTime products and services and
improvements to existing products and services;

- changes in the growth rate of Internet usage and acceptance of online
commerce by consumers;

- fluctuations in buying patterns and Internet usage from season to season
and during holidays;

- technical difficulties, system failures or Internet downtime; and

- our ability to upgrade and develop our information technology systems and
infrastructure.

In addition, other than expenditures for advertising and promotion of the
DealTime brand, our current and future expense levels are based largely on our
investment plans and estimates of future revenues and are not variable. We may
be unable to adjust our expenditures quickly enough to compensate for any
unexpected revenue shortfall. In addition, we must spend heavily on advertising
and promotion to attract and retain buyers months in advance of any resulting
generation of revenues. It is possible that in one or more future quarters our
operating results will fall below the expectations of management or investors.
If this happens, the price of our ordinary shares could decline.

WE MUST CONTINUE TO DEVELOP AND MAINTAIN THE DEALTIME BRAND, WHICH IS COSTLY TO
DO AND WHICH MAY NOT GENERATE CORRESPONDING REVENUES.

We believe that broad recognition and a favorable consumer perception of
the DealTime brand are important to our future success. Due to the early stage
and competitive nature of the online market for comparison shopping services, we
may lose the opportunity to build a critical mass of users if we do not
establish our brand quickly. Promoting and positioning our brand will depend
largely on the success of our marketing efforts and our ability to provide
consistent, high-quality user experiences. To promote our brand, we intend to
continue to pursue an aggressive brand-enhancement strategy, which will include
mass market and multimedia advertising, promotional programs and public
relations activities. These initiatives will involve significant expense.

We spent approximately $12.3 million on advertising during the year ended
December 31, 1999. We expect to continue to commit significant funds to
advertising and promotions during the next 12 months. If our brand enhancement
strategy is unsuccessful, these expenditures may not result in a sufficient
increase in
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revenues to cover our advertising and promotions expenses and our expenditures
may never be recovered. In addition, even if our brand recognition increases,
the number of new users, the number of transactions on our Web site and our
advertising revenues may not increase.

IF OUR PRODUCTS AND SERVICES ARE NOT ACCEPTED WE MAY NOT BE ABLE TO ACHIEVE
PROFITABILITY.

We will be successful only if buyers use our Web site and sellers purchase
our products and services. It is difficult to predict the degree to which buyers
and sellers will use our Web site. We have launched and currently plan to
further launch innovative products and services, such as DealAgent and DoneDeal,
the demand for which is untested. DealAgent records and stores real-time
aggregated buyer demand data for sellers by monitoring traffic on our Web site
and allowing sellers to analyze the activity. DoneDeal, which we plan to launch
in the second quarter of 2000, will provide users with the ability to make
purchases by means of a single action. We also plan to expand the wireless
application of our products. The failure of our new products and services to
become commercially viable could significantly reduce the revenues that we
expect to generate.

OUR RECENT GROWTH HAS STRAINED OUR RESOURCES, AND IF WE ARE UNABLE TO MANAGE OUR
FUTURE GROWTH, OUR OPERATING RESULTS WILL BE IMPAIRED.

We have rapidly and significantly expanded our operations over a short
period of time. Since the commencement of our operations in January 1998, we
have grown from two to 168 full-time employees as of March 1, 2000. We expect
that further expansion will be required in order for us to succeed. Our rapid
growth has placed significant demands on our management and other resources. To
manage our future growth, we will need to attract, hire and retain highly
skilled and motivated senior management and employees. We also will need to
improve existing systems and implement additional systems for operational and
financial management and for training, integrating and managing our employees.
Any failure to expand in these areas efficiently could cause our operating
results to be impaired.

INTENSE COMPETITION COULD REDUCE OUR MARKET SHARE AND HARM OUR FINANCIAL
PERFORMANCE.

The market for comparison shopping Web sites is intensely competitive.
Because barriers to entry for basic price comparison services are limited,
current and new competitors can launch Web sites at a relatively low cost and
expand their operations rapidly. New technologies and the expansion of existing
technologies may also increase the competitive pressure that we face. We compete
with, among others:

- comparison shopping services, such as mySimon and Bottom Dollar;

- reverse auction sites, such as Priceline.com;

- store guides, such as Yahoo! Shopping and ShopNow.com;

- consumer buying guides, such as Ecompare and Deja.com;

- downloadable shopping aids, such as iChoose and ClickTheButton;

- buying groups, such as Accompany and Mercata which aggregate buyers'
orders;

- individual online merchants and auction sites, such as Buy.com and
Amazon.com; and

- auction sites, such as eBay and Yahoo!

Increased competition may diminish our ability to become profitable, decrease
our market share and damage the DealTime brand. Many of our competitors have
significantly longer operating histories, larger and broader customer bases and
greater technical expertise, brand recognition and online commerce experience
than we have. In addition, some of our competitors may be able to devote
significantly greater resources than we have available for marketing and
promotional campaigns, attracting traffic to their Web sites, hiring and
retaining key employees and developing Web sites and other systems. See
"Business -- Competition."

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WE ARE IN THE PROCESS OF REDESIGNING OUR WEB SITE AND IF THIS REDESIGN IS NOT
SUCCESSFUL OUR REVENUES MAY DECLINE.

We are in the process of redesigning our Web site and expect to re-launch
the site mid-year 2000. We cannot guarantee that our efforts to redesign and
re-launch our Web site will be successful. In connection with this transition,
we could experience unexpected disruptions in service, slower response times,
decreased customer service and satisfaction, and delays in the delivery of our
products and services. Any of these problems, delays or technical difficulties
could damage our reputation or our brand, adversely affect our business and
cause our revenues to decline.

EXCHANGE RATE FLUCTUATIONS BETWEEN THE U.S. DOLLAR AND THE NEW ISRAELI SHEKEL
MAY NEGATIVELY AFFECT OUR EARNINGS.

A substantial majority of our revenues and a substantial portion of our
expenses are denominated in dollars. However, a significant portion of our
costs, including personnel and facilities related expenses, is incurred in New
Israeli Shekels, NIS. Inflation in Israel will have the effect of increasing the
dollar cost of our operations in Israel, unless it is offset on a timely basis
by a devaluation of the NIS relative to the dollar. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Impact of
Inflation, Devaluation and Fluctuation of Currencies on Results of Operations,
Liabilities and Assets." If such adjustments in the exchange rate between the
dollar and NIS do not occur on a timely basis, our earnings may be negatively
affected.

ANY FAILURE TO OBTAIN THE TAX BENEFITS FROM THE STATE OF ISRAEL THAT WE EXPECT
TO RECEIVE COULD NEGATIVELY IMPACT OUR PLANS AND PROSPECTS.

We have applied for Israeli tax benefits by seeking approved enterprise
status for our existing capital investment programs pursuant to the Law for the
Encouragement of Capital Investments, 1959. We cannot be certain that the
Israeli government will grant us approved enterprise status. If our application
is denied and we begin to generate taxable income, our financial condition could
suffer because we would be unable to take advantage of such tax benefits.

In order to receive tax benefits, we must comply with a number of
conditions and criteria. If we fail to comply in whole or in part with these
conditions and criteria, the tax benefits that we expect to receive could be
partially or fully canceled. In addition, we could be forced to refund the
amount of the benefits we received, adjusted for inflation and interest.

From time to time, the government of Israel has discussed reducing or
eliminating the benefits available under the approved enterprise program. We
cannot be certain that these tax benefits will be continued in the future at
their current levels or at all. The termination or reduction of tax benefits
could have a negative effect on our business, financial condition and results of
operations. In addition, in the event that we increase our activities outside
the State of Israel due to future acquisitions or business expansion, these
activities generally will not be eligible for inclusion in Israeli tax benefit
programs. Accordingly, our effective corporate tax rate could increase
significantly in the future. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Effective Corporate Tax Rate."

CAPACITY CONSTRAINTS AND SYSTEM FAILURES COULD DAMAGE OUR REPUTATION FOR
RELIABILITY.

Our success depends on the performance, reliability and availability of our
online comparison shopping service. Our ability to meet those goals requires
that we have adequate capacity in our computer systems to cope with the volume
of traffic on our Web site. We have designed our systems to be scalable.
However, if the number of users of our service increases substantially, we will
need to significantly expand and upgrade our technology and network
infrastructure. We do not know whether we will be able to project accurately the
rate or timing of these increases or to expand and upgrade our systems and
infrastructure to accommodate these increases in a timely manner.

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<PAGE> 16

If our systems cannot be expanded to cope with increased Web site traffic,
we could experience unexpected disruptions in service, slower response times,
decreased customer service and customer satisfaction and delays in the
introduction of new products and services. Any of these problems could impair
our reputation, damage our brand and cause our revenues to decrease.

Our ability to provide high-quality customer service also depends on the
efficient and uninterrupted operation of our computer and communications
hardware systems. Our Web site service could experience periodic system
interruptions. Our systems and operations also are vulnerable to damage or
interruption from human error, natural disasters, power loss, telecommunication
failures, break-ins, sabotage, computer viruses, design defects, intentional
acts of vandalism and similar events. We do not have fully redundant systems, a
formal disaster recovery plan or alternative providers of hosting services. In
addition, we do not carry sufficient business interruption insurance to
compensate for losses that could occur. Any system failure that causes an
interruption in service or decreases the responsiveness of our Web site could
impair our reputation, damage our brand name and cause our revenues to decrease.

WE DEPEND ON OUR KEY MANAGEMENT PERSONNEL FOR SUCCESSFUL OPERATION OF OUR
BUSINESS.

Our success depends on the skills, experience and performance of our senior
management and other key personnel. We have recently hired many of our senior
managers as well as a number of managerial, marketing, planning, financial,
technical and operations personnel. If we do not quickly and efficiently
integrate these new personnel into our management and culture, our business
could suffer. Our business could also suffer if we do not successfully retain
our key personnel.

WE MAY NOT BE ABLE TO HIRE AND RETAIN THE PERSONNEL NEEDED TO EXPAND OUR
OPERATIONS.

Our future success depends on our ability to identify, hire, train, retain
and motivate highly skilled executive, technical, managerial, sales and
marketing and business development personnel. We intend to hire a significant
number of personnel during the next year. Competition for qualified personnel is
intense, particularly in the technology and Internet markets. If we fail to
attract, assimilate and retain a sufficient number of qualified personnel, our
ability to expand and manage our business could suffer.

OUR GROWTH AND OPERATING RESULTS COULD BE IMPAIRED BY THE RISKS ASSOCIATED WITH
INTERNATIONAL OPERATIONS.

Although our Web site may be accessed internationally, we have limited
experience in customizing our services to conform to local cultures, standards
and policies. We may have to compete with local companies that understand the
local market better than we do. In addition, most of our research and
development operations are located in Israel. We have recently begun expanding
into other countries, such as the United Kingdom, Japan and Germany, and expect
to continue to expand into other countries, including Brazil. As a result, we
are and will continue to be subject to the risks of doing business
internationally, including:

- regulatory requirements that may limit or prevent the offering of our
products and services or the aggregation of buyer information in local
jurisdictions;

- legal uncertainty regarding liability for the listing of consumer
products for sale;

- government-imposed limitations on access to the Internet;

- difficulties in staffing and managing foreign operations;

- fluctuations in the applicable currency exchange rates;

- longer payment cycles, different accounting practices and problems in
collecting accounts receivable;

- cultural non-acceptance of online commerce;

- political instability; and

- potential adverse tax consequences.

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<PAGE> 17

OUR SUCCESS WILL BE IMPAIRED IF WE ARE UNABLE TO PROCURE, PROTECT AND ENFORCE
OUR INTELLECTUAL PROPERTY RIGHTS.

We do not currently have any patents or registered trademarks. Although we
have filed United States patent applications as well as applications to register
our trademarks and service marks in the United States and internationally, our
present and future patent and trademark applications may not result in the
issuance of any valid patents or trademarks. In addition, effective trademark,
service mark, copyright and trade secret protection may not be available in
every country in which our Web site may be accessed. We rely on a combination of
laws and contractual restrictions, such as confidentiality agreements, to
establish and protect our proprietary rights. However, laws and contractual
restrictions may not be sufficient to prevent misappropriation of our technology
or to deter others from developing similar technologies. If we are unable to
procure, protect and enforce our intellectual property rights, then we may not
realize the full value of these assets, and our business may suffer.

We own the Internet domain name, www.dealtime.com, and various related
domain names. If we are unable to protect these domain names, our competitors
could capitalize on our brand recognition. We are aware that a few domain names
similar to DealTime.com have been registered in the United States and elsewhere
and that in some countries the domain name DealTime is not available. The
acquisition and maintenance of domain names are generally regulated by
governmental agencies and their designees. The regulation of domain names in the
United States and in foreign countries has recently changed and is subject to
further change in the near future. As a result, we may not acquire or maintain
our domain name in all of the countries in which our Web site may be accessed.
Furthermore, the relationship between regulations governing domain names and
laws protecting trademarks and similar proprietary rights is unclear. We may be
unable to prevent third parties from acquiring domain names that infringe or
otherwise decrease the value of our trademarks or other proprietary rights.

We rely on technologies that we license from third parties, such as the
suppliers of key database technology, our operating system and specific hardware
components. We cannot be certain that these third party technology licenses will
continue to be available to us on commercially reasonable terms or at all. The
loss of this technology could require us to obtain substitute technology of
lower quality or performance standards or at greater cost.

Our services operate in part by making Internet services and content
available to our users. This strategy creates the potential for intellectual
property claims to be made against us, either directly or through contractual
indemnification provisions with third parties. To date, we have not been
notified that our technologies infringe the proprietary rights of third parties.
However, we cannot be certain that third parties will not claim infringement by
us with respect to past, current or future technologies. We expect that
participants in our markets will be increasingly subject to infringement claims
as the number of services and competitors in our industry grows. Any claim,
whether meritorious or not, could be time consuming, divert management
resources, result in costly litigation, cause delays or require us to enter into
royalty or licensing agreements. Royalty or licensing agreements may not be
available on terms acceptable to us or at all.

We have, in the past, had experiences where another company was using or
had plans to use a name like ours as part of a company name, domain name,
trademark or service mark. Although we have not had the need to litigate to
date, litigation may be necessary to protect and enforce our intellectual
property rights and to determine the proprietary rights of others. Litigation of
this type could result in substantial costs and a diversion of our resources,
and we cannot be certain that we would ultimately prevail if litigation is
initiated. We also cannot be certain that we will not be subject to trademark
infringement claims. A successful infringement claim could require us to change
our name, which would be expensive and disruptive to our business. See
"Business -- Legal Proceedings."

OUR LENDER MAY FORECLOSE IF WE DRAW ON OUR CREDIT FACILITY AND DEFAULT ON OUR
INDEBTEDNESS.

In January 2000, we obtained a bank credit facility under which we may
borrow up to $2.0 million, and if we achieve specified levels of revenue, up to
$3.0 million. This credit facility is secured by a lien on all of our assets.
Currently, no amounts are outstanding under this credit facility. However, we
may borrow in the
11
<PAGE> 18

future and if we default on this credit facility, the lender may foreclose on
our assets. If our assets were foreclosed upon, they probably would be sold to
discharge our indebtedness under the credit facility. The lender's claim on our
assets is prior to the claim of our shareholders. As a result, the lender's
claim would be repaid and other obligations would be satisfied from the proceeds
of a foreclosure sale before any amounts would be distributed to our
shareholders. In addition, the agreements governing the bank credit facility may
restrict our ability to transfer assets or make other changes in the way that we
conduct our business.

WE MAY BE TREATED AS A PASSIVE FOREIGN INVESTMENT COMPANY, WHICH MAY SUBJECT
U.S. SHAREHOLDERS TO ADDITIONAL TAXES.

If for any taxable year, our passive income, or our assets which produce
passive income, exceed levels provided by law, we may be characterized as a
passive foreign investment company, or PFIC, for U.S. federal income tax
purposes. If we are treated as a PFIC, there could be adverse tax consequences
to U.S. shareholders. While we do not believe that we should be treated as a
PFIC, whether we are treated as a PFIC depends on questions of fact as to our
assets and revenues. Accordingly, we cannot be certain that we will not be
treated as a PFIC. See "United States Federal Income Tax Considerations -- Tax
Consequences if We Are a Passive Foreign Investment Company."

BECAUSE A SIGNIFICANT PORTION OF OUR OPERATIONS ARE IN ISRAEL, POLITICAL,
ECONOMIC OR MILITARY INSTABILITY THERE COULD ADVERSELY AFFECT OUR OPERATIONS.

We are incorporated under the laws of the State of Israel and we maintain
our principal research and development facilities there. Since the establishment
of the State of Israel in 1948, a state of hostility has existed between Israel
and some Arab nations. In addition, Israel and companies doing business with
Israel have been the subject of an economic boycott by some Arab countries.
Although Israel has entered into agreements with some Arab countries and the
Palestinian Authority, we cannot predict whether a full resolution of these
problems will be achieved or the nature of any such resolution. The political,
economic and military conditions to which Israel is subject directly affect us.
Accordingly, our operations could be disrupted if major hostilities involving
Israel occur.

WE MAY PURSUE ACQUISITIONS THAT BY THEIR NATURE PRESENT RISKS AND THAT MAY NOT
BE SUCCESSFUL.

In the future, we may pursue acquisitions to diversify our product and
service offerings and customer base or for other strategic purposes. We have no
prior history of making acquisitions and we cannot be certain that any future
acquisitions will be successful. The following are some of the risks associated
with acquisitions that could have a material adverse effect on our business,
financial condition or results of operations:

- We cannot ensure that any acquired businesses will achieve anticipated
revenues, earnings or positive cash flow from operations.

- We may be unable to integrate acquired businesses successfully and
realize anticipated economic, operational and other benefits in a timely
manner, particularly if we acquire a business in a market in which we
have limited or no current expertise, or with a corporate culture
different from our own. If we are unable to integrate acquired businesses
successfully, we could incur substantial costs and delays or other
operational, technical or financial problems.

- Acquisitions could disrupt our ongoing business, distract management,
divert resources and make it difficult to maintain our current business
standards, controls and procedures.

- We may finance future acquisitions by issuing ordinary shares for some or
all of the purchase price. This could dilute the ownership interests of
our shareholders. We may also incur additional debt or be required to
recognize amortization expense related to goodwill and other intangible
assets purchased in future acquisitions.

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<PAGE> 19

- We would be competing with other firms, many of which have greater
financial and other resources, to acquire attractive companies. We
believe this competition will increase, making it more difficult to
acquire suitable companies on acceptable terms.

RISKS RELATED TO THE INTERNET

OUR SUCCESS WILL DEPEND ON THE CONTINUED GROWTH OF ONLINE COMMERCE.

As an online commerce business, our future revenues and profits depend
significantly upon the widespread acceptance and use of the Internet and online
services as a medium for commerce. Rapid growth in the use of and interest in
the Internet and online services generally, and in their use as a medium for
commerce, is a recent phenomenon. This growth may not continue. For example, a
sufficiently broad base of buyers and sellers may not adopt, or continue to use,
the Internet as a medium of commerce. Demand for and market acceptance of
recently introduced products and services over the Internet are subject to a
high level of uncertainty, and there are few proven products and services. For
us to grow, buyers who historically have purchased through traditional merchants
will need to elect to purchase products and services online and merchants will
also need to adopt or expand use of the Internet as a channel of distribution.

Our success will depend upon the development and maintenance of the
Internet's infrastructure to cope with increased traffic. The Internet has
experienced a variety of outages and other delays as a result of damage to
portions of its infrastructure and will likely face such outages and delays in
the future. Outages and delays are likely to affect the level of Internet usage
generally, as well as the use of our Web site. In addition, the Internet could
lose its viability due to delays in the development or adoption of new standards
to handle increased levels of activity or due to increased government
regulation.

IF WE DO NOT RESPOND TO RAPID TECHNOLOGICAL CHANGES, OUR SERVICES COULD BECOME
OBSOLETE AND OUR BUSINESS WOULD BE SERIOUSLY HARMED.

The markets in which we compete are characterized by rapidly changing
technology, evolving industry standards, frequent new service and product
announcements, introductions and enhancements and changing consumer demands. We
may not be able to keep up with these rapid changes. As a result, our future
success will depend on our ability to adapt to rapidly changing technologies, to
respond to evolving industry standards and to improve the performance, features
and reliability of our Web site in response to competitive service and product
offerings and the evolving demands of the marketplace. In addition, the
widespread adoption of new Internet, networking or telecommunications
technologies or other technological changes may require us to incur substantial
expenditures to modify or adapt our Web site and infrastructure.

ONLINE PRIVACY, SECURITY AND CREDIT CARD FRAUD RISKS COULD SERIOUSLY HARM OUR
BUSINESS.

The secure transmission of confidential information over the Internet is
essential in maintaining consumer and supplier confidence in online commerce.
Substantial or ongoing security breaches on our Web site or other Internet-based
systems could significantly disrupt our business. In the future, we intend to
rely on licensed encryption and authentication technology to effect secure
transmission of confidential information, including credit card numbers. It is
possible that advances in computer capabilities, new discoveries or other
developments could result in a compromise or breach of the technology that we
intend to use to protect merchant and customer transaction data. In addition, it
is possible that somebody with malicious intent could slow or disrupt the
operations of our Web site. We cannot guarantee that security measures taken by
us will prevent security breaches. A party that is able to circumvent our future
security systems could steal proprietary or personal information or cause
interruptions in our operations. Security breaches also could damage our
reputation and expose us to a risk of loss or litigation and possible liability.
Our insurance policies carry low coverage limits, which may not be adequate to
reimburse us for losses caused by security breaches. We also face risks
associated with security breaches affecting third parties conducting business
over the Internet. Consumers generally are concerned with security and privacy
on the Internet, and any publicized security problems could inhibit the growth
of the Internet as a trusted means of conducting commercial transactions.

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<PAGE> 20

Claims could also be based on other misuses of personal information, such
as for unauthorized marketing purposes. Web sites typically place identifying
data known as "cookies" on a user's computer hard drive without the user's
express consent. We use cookies for a variety of reasons, including the
collection of data derived from the user's Internet activity. Any reduction or
limitation in the use of cookies could limit the effectiveness of our sales and
marketing efforts. Most currently available Internet browsers allow users to
remove cookies at any time or to prevent cookies from being stored on their
computer hard drives. In addition, some commentators, privacy advocates and
governmental bodies have suggested that cookies should be limited or eliminated.
The Federal Trade Commission and several states have investigated the use of
personal information by online companies. We may incur expense if regulations
regarding the use of personal information are introduced or if our privacy
practices were investigated. If we are not able to aggregate buyer demand data,
our ability to generate revenues and our business model will be adversely
affected.

OUR BUSINESS MAY BE AFFECTED IF THE USE OF WIRELESS DATA SERVICES DOES NOT
CONTINUE TO GROW.

The markets for wireless data services and related products are still
emerging, and continued growth in, demand for and acceptance of these services
remains uncertain. Our growth depends, in part, on the acceptance of wireless
data services and Internet-enabled devices by consumers. Current barriers to
market acceptance of these services include cost, reliability, platform and
distribution channel constraints, safety, functionality and ease of use. We
cannot be certain that these barriers will be overcome. Since the market for our
services is new and evolving, it is difficult to predict the size of this market
or its future growth rate, if any. Our future financial performance will depend
in large part upon the continued demand for purchasing and information services
through wireless devices. We cannot be certain that a sufficient number of
buyers will demand these services or will seek online services provided through
the Internet on wireless devices. If the market for wireless online purchasing
and information services grows more slowly than we currently anticipate, our
revenues and results of operations could be adversely affected.

GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD ADD ADDITIONAL BURDENS TO
OUR DOING BUSINESS ON THE INTERNET.

Laws and regulations applicable to Internet communications, commerce and
advertising are becoming more prevalent. Online commerce is new and rapidly
changing, and federal and state regulations relating to the Internet and online
commerce are evolving. Currently, there are few laws or regulations directly
applicable to access to the Internet or online commerce. It is possible that
laws and regulations may be enacted to address issues such as user privacy,
pricing, content, copyrights, distribution, antitrust matters and the quality of
products and services. The adoption of these laws or regulations could reduce
the rate of growth of the Internet, which could potentially decrease the usage
of our Web site. In addition, the applicability to the Internet of existing laws
governing issues such as property ownership, copyrights and other intellectual
property issues, libel, obscenity and personal privacy is uncertain. Most of
these laws were adopted prior to the advent of the Internet and do not
contemplate or address the unique issues of the Internet. New laws applicable to
the Internet may impose substantial burdens on companies conducting business
over the Internet. In addition, the growth and development of online commerce
may prompt calls for more stringent consumer protection laws in the United
States and abroad.

Several telecommunications carriers have asked the Federal Communications
Commission, FCC, to regulate telecommunications over the Internet. Due to the
increasing use of the Internet and the burden it has placed on the
telecommunications infrastructure, telephone carriers have requested the FCC to
regulate Internet and online service providers and to impose access fees on
those providers. If the FCC imposes access fees, the costs of using the Internet
could increase dramatically. In this event, our business could be negatively
impacted.

WE MAY BECOME LIABLE FOR INTERNET TAXES.

Recent federal legislation limits the imposition of state and local taxes
on the Internet. In 1998, Congress passed the Internet Tax Freedom Act, which
places a three-year moratorium on state and local taxes on
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<PAGE> 21

(1) Internet access, unless such tax was already imposed prior to October 1,
1998, and (2) discriminatory taxes on online commerce. Congress may elect not to
renew this legislation in 2001, in which case state and local governments may be
free to impose Internet-specific taxes on electronically purchased goods, in
addition to any other taxes that may otherwise be imposed on the goods, subject
to the applicable constitutional standard. Any of these taxes could harm our
business. Due to the high level of uncertainty regarding the imposition of new
Internet-related taxes on online commerce, a number of states and a
Congressional advisory commission are reviewing appropriate tax treatment for
online commerce. We cannot predict the impact of additional laws or regulations
on our brand, reputation, business and results of operations.

WE MAY BE LIABLE FOR INFORMATION DISPLAYED ON AND COMMUNICATED THROUGH OUR WEB
SITE.

We may be subjected to claims for defamation, negligence, copyright or
trademark infringement or other theories of liability relating to the
information that we publish on our Web site. These claims have been brought
against online companies as well as print publications in the past. Based on
hyperlinks that we provide to other Web sites, we may also be subjected to
claims based upon online content that we do not control but that is accessible
from our Web site. Any costs incurred as a result of liability or asserted
liability for such claims could damage our brand, reputation, business and
results of operations.

RISKS RELATED TO THIS OFFERING

THERE HAS BEEN NO PRIOR MARKET FOR OUR ORDINARY SHARES; OUR SHARE PRICE MAY BE
VOLATILE.

Prior to the offering, there has been no public market for our ordinary
shares and it is possible that an active trading market may not develop or be
sustained after the offering. The initial public offering price for our ordinary
shares will be determined by negotiations between us and the representatives of
the underwriters and may not be representative of the price that will prevail in
the open market. Factors that may cause the market price of the ordinary shares
to fluctuate significantly after the offering include:

- variations in our results of operations;

- future sales of ordinary shares;

- our announcement or that of our competitors and others of technological
innovations or new products;

- market analysts' estimates of our performance; and

- general market conditions.

The public markets have experienced volatility that has particularly affected
the market prices of securities of many Internet companies for reasons that have
often been unrelated to operating results. This volatility may adversely affect
the market price of our ordinary shares and our visibility and credibility in
the markets.

IF OUR SHARE PRICE REMAINS VOLATILE, WE MAY BECOME SUBJECT TO SECURITIES
LITIGATION, WHICH IS EXPENSIVE AND COULD DIVERT OUR RESOURCES.

In the past, following periods of market volatility in the price of a
company's securities, security holders have instituted class action litigation.
Many companies in our industry have been subject to this type of litigation. If
the market value of our shares experiences adverse fluctuations, and we become
involved in this type of litigation, regardless of the outcome, we could incur
substantial legal costs and our management's attention could be diverted,
causing our business to suffer.

FUTURE SALES OF OUR ORDINARY SHARES MAY HURT OUR MARKET PRICE.

A substantial number of our ordinary shares will be available for resale
within a short period of time after the offering. If our shareholders sell
substantial amounts of our ordinary shares in the public market following the
offering, the market price of our ordinary shares could fall. These sales also
might make it more difficult for us to sell equity securities in the future at
times and prices that we deem appropriate.

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<PAGE> 22

WE MAY USE THE PROCEEDS FROM THIS OFFERING IN WAYS WITH WHICH YOU MAY NOT AGREE.

We are not required to allocate the proceeds from this offering to any
specific investment or transaction. Therefore, we have significant flexibility
in applying these proceeds and you cannot determine the value or propriety of
our use of proceeds. If we do not apply the funds we receive effectively, it
could have a materially adverse effect on our financial position, results of
operations and liquidity. See "Use of Proceeds" for a more detailed description
of how we intend to apply the proceeds from this offering.

YOU WILL EXPERIENCE IMMEDIATE AND SIGNIFICANT DILUTION OF BOOK VALUE PER SHARE.

The initial public offering price of our ordinary shares is substantially
higher than the net tangible book value per share of the outstanding ordinary
shares immediately after this offering. If you purchase our ordinary shares in
this offering, you will incur immediate dilution of approximately $ in the
net tangible book value per share of ordinary shares from the price you pay for
our ordinary shares in this offering. See "Dilution."

WE DO NOT ANTICIPATE DECLARING OR PAYING ANY DIVIDENDS.

We intend to retain all our future earnings to fund the development of our
business. Accordingly, we do not anticipate paying any cash dividends in the
foreseeable future.

AFTER THIS OFFERING, OUR EXECUTIVE OFFICERS, DIRECTORS AND PRINCIPAL
SHAREHOLDERS WILL STILL OWN A MAJORITY OF OUR VOTING SHARES AND WILL BE ABLE TO
EXERT SIGNIFICANT INFLUENCE OVER DECISIONS REQUIRING A SHAREHOLDER VOTE.

We anticipate that our executive officers, directors and principal
shareholders and their affiliates will, in the aggregate, beneficially own
approximately % of our outstanding ordinary shares following the completion
of this offering, assuming no exercise of options or warrants outstanding as of
December 31, 1999. As a result, our executive officers, directors and principal
shareholders will be able to exercise significant control over all matters
requiring approval by our shareholders, including the election of directors and
approval of mergers and other significant corporate transactions. This
concentration of ownership may also have the effect of delaying or preventing a
change in control that might otherwise benefit our shareholders.

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<PAGE> 23

USE OF PROCEEDS

We estimate that the net proceeds we will receive from the sale of
ordinary shares in this offering, assuming a public offering price of $ per
ordinary share, will be approximately $ million. If the underwriters
exercise their over-allotment option in full, we estimate that net proceeds to
us will be approximately $ million, after deducting the underwriting
discounts and estimated expenses of this offering.

We plan to use the net proceeds from this offering for the continued growth
of our business, including advertising and marketing, international expansion,
new product development and general corporate purposes, including working
capital. We may also use a portion of these proceeds for potential acquisitions
of technologies, products or businesses which may be complementary to our
business. We have not yet determined the amount of net proceeds to be used
specifically for each of the foregoing purposes. We currently have no
commitments or agreements with respect to any future acquisitions or
investments. Accordingly, management will have significant flexibility in
applying the net proceeds of the offering. Pending their use as described above,
we intend to invest the net proceeds of this offering in interest-bearing
instruments.

DIVIDEND POLICY

We have not declared or paid any cash dividends on our share capital. We
currently intend to retain future earnings, if any, for use in the operation and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future.

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<PAGE> 24

CAPITALIZATION

The following table sets forth, as of December 31, 1999, our
capitalization:

- on an actual basis;

- on a pro forma basis to give effect to the conversion of our
preferred shares to ordinary shares upon the offering; and

- on a pro forma, as adjusted basis to give effect to the sale of
ordinary shares offered by us in this offering, at an assumed
offering price of $ per ordinary share after deducting the underwriting
discounts and estimated offering expenses payable by us, and the
application of the net proceeds therefrom.

Please read this table together with the sections of this prospectus
entitled "Selected Consolidated Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our consolidated
financial statements and related notes included in this prospectus.

<TABLE>
<CAPTION>
DECEMBER 31, 1999
-------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA ADJUSTED
-------- --------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Shareholders' Equity:
Series A Convertible Preferred Shares, NIS 0.01 par
value; 4,738,080 shares authorized, issued and
outstanding (Actual), none issued and outstanding
(Pro Forma and Pro Forma As Adjusted)............... $ 12
Series B Convertible Preferred Shares, NIS 0.01 par
value; 4,457,150 shares authorized, 4,314,293 issued
and outstanding (Actual), none issued and
outstanding (Pro Forma and Pro Forma As Adjusted)... 11
Series C Convertible Preferred Shares, NIS 0.01 par
value; 12,500,000 shares authorized; 8,554,781
shares issued and outstanding (Actual), none issued
and outstanding (Pro Forma and Pro Forma As
Adjusted)........................................... 20
Series D Convertible Preferred Shares, NIS 0.01 par
value; no shares authorized, issued or outstanding
(Actual); 10,200,000 shares authorized, none issued
and outstanding (Pro Forma and Pro Forma As
Adjusted)........................................... --
Ordinary Shares, NIS 0.01 par value; 28,304,770 shares
authorized; 5,261,920 shares issued and outstanding
(Actual), shares issued and outstanding
(Pro Forma) shares issued and outstanding
(Pro Forma As Adjusted)............................. 13
Additional paid-in capital............................. 22,890
Accumulated deficit.................................... (19,662)
--------
Total shareholders' equity.......................... 3,284
--------
Total capitalization................................ $ 3,284
========
</TABLE>

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<PAGE> 25

DILUTION

Our net tangible book value as of December 31, 1999 was $ , or
$ per share. Net tangible book value per share represents the total amount
of our tangible assets reduced by the total amount of our liabilities and
divided by the number of ordinary shares outstanding as of December 31, 1999.
After giving effect to our sale of shares in this offering at an assumed
initial public offering price of $ per ordinary share and receipt of the net
proceeds from this offering, after deducting the underwriting discounts and
estimated offering expenses, and the application of the estimated net proceeds
therefrom, our net tangible book value as of December 31, 1999 would have been
$ , or $ per share. This represents an immediate increase in pro forma
net tangible book value of $ per share to existing shareholders and an
immediate dilution in pro forma net tangible book value of $ per share to
new investors.

Dilution per share represents the difference between the price per share to
be paid by new investors and the net tangible book value per share immediately
after this offering. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro Forma net tangible book value per share before this
offering............................................. $
Pro Forma increase per share attributable to new
investors............................................
Pro Forma tangible book value per share after this
offering..................................................
--------
Pro Forma dilution per share to new investors............... $
========
</TABLE>

The following table sets forth, as of December 31, 1999, the differences
between the total consideration paid to us and the average price per share paid
by existing shareholders and by new investors purchasing shares in this
offering.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------- -------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders............................. % % $
New investors.....................................
------- --- -------- ----
Total........................................ 100% $ 100%
======= === ======== ====
</TABLE>

The foregoing table does not reflect:

- 4,117,667 ordinary shares issuable upon the exercise of options
outstanding as of December 31, 1999 under the 1999 Plan, with a weighted
average exercise price of $0.27 per share;

- 45,000 ordinary shares issuable upon the exercise of options outstanding
as of December 31, 1999, with a weighted average exercise price of $1.00
per share;

- 1,263,154 Series C Convertible Preferred Shares issuable upon the
exercise of outstanding warrants; and

- 265,524 Series D Convertible Preferred Shares issuable upon the exercise
of outstanding warrants.

If the underwriter's over-allotment option is exercised in full, the number
of ordinary shares held by existing shareholders will be reduced to % of
the total number of ordinary shares to be outstanding after this offering, and
will increase the number of ordinary shares held by the new investors to
shares, or % of the total number of ordinary shares to be outstanding
immediately after this offering.

19
<PAGE> 26

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and the
related notes included elsewhere in this prospectus. The selected consolidated
statement of operations data for the years ended December 31, 1998 and 1999 and
the selected consolidated balance sheet data as of December 31, 1998 and 1999
are derived from our audited consolidated financial statements included
elsewhere in this prospectus.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------
1998 1999
------- ---------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net revenues................................................ $ 41 $ 525
------ --------
Operating expenses:
Research and development.................................. 283 1,938
Selling and marketing..................................... 178 15,904
General and administrative................................ 191 2,042
------ --------
Total operating expenses............................. 652 19,884
------ --------
Loss from operations........................................ (611) (19,359)
Net interest income......................................... 15 293
------ --------
Net loss.................................................... (596) (19,066)
Preferred share deemed dividend............................. -- (600)
------ --------
Net loss attributable to ordinary shareholders.............. $ (596) $(19,666)
====== ========
Basic and diluted net loss per share........................ $(0.10) $ (3.22)
====== ========
Basic and diluted weighted average shares outstanding....... 6,074 6,114
====== ========
Pro forma basic and diluted net loss per share
(unaudited)............................................... $ (1.17)
========
Pro forma basic and diluted weighted average shares
outstanding (unaudited)................................... 16,774
========
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1998 1999
------ ---------
(IN THOUSANDS)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents................................... $ 631 $ 5,750
Working capital............................................. 398 1,853
Total assets................................................ 738 7,905
Long term liabilities....................................... 15 128
Accumulated deficit......................................... (596) (19,662)
Total shareholders' equity.................................. 438 3,284
</TABLE>

20
<PAGE> 27

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of
operations should be read in conjunction with our financial statements and the
related notes which appear elsewhere in this prospectus.

OVERVIEW

We were incorporated in Israel in March 1997 and initiated commercial
activity in January 1998. In December 1998, we incorporated our U.S. subsidiary,
DealTime.com, Inc., a Delaware corporation, and we launched our Web site in June
1999. Prior to that, our operations principally consisted of development
activity, recruiting personnel and raising capital. Since then, we have
continued to focus on these activities, as well as on generating revenue,
building our brand name through advertising and promotional activities,
expanding and enhancing our services and creating merchant and other strategic
relationships.

Prior to the launch of our Web site in June 1999, we primarily generated
revenues from the licensing of some of our technology to third parties.
Beginning in 1999, in conjunction with the launch of our Web site, we refocused
our company to provide comparative shopping services. Since the launch of our
Web site, license revenues have comprised an immaterial portion of our net
revenues.

Currently we generate revenues from two primary sources: advertising on our
Web site and merchant lead generation fees. Our advertising revenues consist of
fees for online advertising, as well as advertising revenue-sharing with
strategic partners. Our advertising revenues are derived principally from
short-term advertising contracts in which we agree to provide a specified number
of impressions to be delivered to users over a specified period of time. We
recognize advertising revenues ratably in the period in which the advertising is
displayed based on the number of actual impressions delivered.

We generate lead generation fees under agreements with merchants featured
on our Web site. Under these agreements, the merchant pays us for each time
someone clicks through to its Web site from our Web site. These revenues are
recognized in the period in which the user clicks through to the merchant's Web
site. See "Business -- Sales & Marketing."

There is heavy competition in the online comparative shopping market, which
has and may continue to influence our quarterly and annual net revenues and
results of operations. In addition, competition among other Web sites that are
not our direct competitors may impact the level of advertising on our Web sites
and the amount we may charge for such advertising.

Historically, substantially all of our revenues have been derived from
advertisers and merchants in the United States. In December 1999, we launched
our U.K. Web site, www.dealtime.co.uk, which extends our comparative shopping
service to U.K. buyers and sellers. We plan to launch local sites in Germany,
Japan, France and Brazil in the coming year.

The functional currency of our operation is the United States dollar, which
is the primary currency in the economic environment in which we conduct our
business. A significant portion of the costs associated with our Israeli
operations, including personnel and lease expenses, is incurred in NIS. The
results of our operations are subject to fluctuations in the dollar-NIS exchange
rate, which is influenced by various economic global factors including inflation
in Israel and the United States. The foreign currency exchange rate effects for
the year ended December 31, 1999 were not significant.

Our research and development teams are located in Israel and the United
States. Our Israel-based research and development team is engaged in the
development of our advanced searching, sorting and notification technologies. We
design our Web site in the United States. We strive to retain internal control
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<PAGE> 28

over proprietary processes rather than depend on third-party programmers and
designers. We expect to devote significant resources to research and development
as we add new features and services to our Web site.

Our net losses have resulted from our significant investment in our
research and development, efforts to build sales and marketing and general and
administrative infrastructure and the start of significant and substantial
marketing, advertising and branding campaigns. These expenses have exceeded our
revenues. We expect to continue to invest significantly in this infrastructure
and in building our brand through advertising, marketing and promotion efforts.
Accordingly, we expect to incur substantial operating losses for the foreseeable
future and the rate at which such losses will be incurred may increase from
current levels.

RESULTS OF OPERATIONS

Due to our brief operating history, we have generated insufficient data to
allow for a meaningful period-to-period comparison of results of operations. Set
forth below is a discussion of our results of operations for the years ended
December 31, 1998 and 1999.

The following table sets forth for the periods indicated our results of
operations expressed as a percentage of net revenue:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1999
--------- ---------
<S> <C> <C>
Net revenues................................................ 100.0% 100.0%
Operating expenses:
Research and development.................................. 690.2 369.1
Selling and marketing..................................... 434.1 3,029.3
General and administrative................................ 465.9 389.0
-------- --------
Total operating expenses............................... 1,590.2 3,787.4
-------- --------
Loss from operations........................................ (1,490.2) (3,687.4)
Net interest income......................................... 36.6 55.8
-------- --------
Net loss.................................................... (1,453.7)% (3,631.6)%
======== ========
</TABLE>

YEARS ENDED DECEMBER 31, 1998 AND 1999

Revenues. Our net revenues were $41,000 and $525,000 for the years ended
December 31, 1998 and 1999, respectively. Our revenues in 1998 consisted
primarily of license fees for one of our proprietary applications, the DealTime
Notifier, and fees from programming contracted by third parties. These revenue
sources are not material sources of revenue for our continuing revenue model.
The increase in revenues from 1998 to 1999 was principally due to the launch of
our Web site in June 1999. Revenues in 1999 consist of advertising on our Web
site and merchant fees. Substantially all of our revenues in 1999 were generated
in the United States.

Research and development. Research and development expenses are primarily
comprised of salaries and related expenses of employees engaged in research,
design and development activities. They also include related supplies and
equipment costs of our development efforts. We charge these expenses to
operations as incurred. Our research and development expenditures were $283,000
and $1.9 million for the years ended December 31, 1998 and 1999, respectively.
The increase in research and development expenditures from 1998 to 1999
principally resulted from the increase in headcount and related expenses. The
decrease in research and development expenditures as a percentage of net
revenues in 1999 resulted from higher net revenues. In 2000, our research and
development expenditures will increase due to planned increases in personnel and
depreciation resulting from increased capital investment.

Selling and marketing. Selling and marketing expenses consist of salaries
and related costs for our sales and marketing teams (including commissions) and
advertising, marketing and promotion costs. Our selling and marketing expenses
were $178,000 and $15.9 million for the years ended December 31, 1998 and 1999,
respectively. The increase in selling and marketing expenses in dollars and as a
percentage of net revenues resulted from the addition of sales and marketing
personnel and the commencement of substantial marketing,

22
<PAGE> 29

advertising and branding activities in connection with the launch of our Web
site. In 2000, we will increase the dollar amount we spend on selling and
marketing activities in both domestic and international markets.

General and administrative. General and administrative expenses consist
primarily of personnel costs and general corporate costs, including finance,
accounting, human resources, rent, legal, insurance and depreciation. Our
general and administrative expenses were $191,000 and $2.0 million for the years
ended December 31, 1998 and 1999, respectively. The increase in general and
administrative expenditures resulted from the addition of additional management
and administrative personnel and related expenses and an increase in general
business costs due to the expansion of our operating activities. The decrease in
general and administrative expenses as a percentage of net revenues in 1999
resulted from higher net revenues. In 2000, our general and administrative
expenses will increase due to planned expansion of our operating activities and
entrance into new markets.

Net interest income. Net interest income includes interest income on our
cash accounts and finance expenses and fees. Interest income increased from
$15,000 to $293,000 for the years ended December 31, 1998 and 1999,
respectively. This increase resulted from higher invested cash balances.

Income taxes. As of December 31, 1999, we had approximately $16.5 million
of federal net operating loss carryforwards for tax reporting purposes that are
available to offset future taxable income and expire in 2014. Certain recent and
future changes in the share ownership of our company may restrict the
utilization of our federal net operating loss carryforwards (see Note 9 of Notes
to Consolidated Financial Statements). We also had approximately $3.2 million of
net operating loss carryforwards in Israel that do not expire. We have recorded
a valuation allowance for the entire net deferred tax asset since we do not
project to earn taxable income for the near future.

LIQUIDITY AND CAPITAL RESOURCES

Since the commencement of our operations, we have financed our operations
and capital expenditures primarily through the sale of preferred shares to
investors. During 1998 and 1999, we sold an aggregate of 16,607,154 preferred
shares and 1,263,154 warrants to purchase preferred shares for total proceeds to
us of approximately $22.9 million. Included in this amount are promissory notes
which we issued in August 1999 for proceeds of $12.0 million. All of these
promissory notes have now been converted into preferred shares and warrants to
purchase preferred shares.

We had cash and cash equivalents of $5.8 million as of December 31, 1999,
an increase from $631,000 as of December 31, 1998. The increase came primarily
from the sales of preferred shares and borrowings under promissory notes, all of
which have been converted into preferred shares and warrants to purchase
preferred shares.

Net cash used in operating activities was $352,000 and $15.3 million for
the years ended December 31, 1998 and 1999, respectively, primarily as a result
of net losses of $596,000 and $19.1 million for these periods, respectively.

Net cash used in investing activities was $51,000 and $1.5 million for the
years ended December 31, 1998 and 1999, respectively, principally as a result of
capital expenditures to support our expanded operations, such as our spending on
technology infrastructure. We may increase our capital expenditures in 2000.

Net cash provided by financing activities was $1.0 million and $21.9
million during the years ended December 31, 1998 and 1999, respectively,
primarily as a result of the issuance of preferred shares and promissory notes,
all of which have been converted into preferred shares and warrants to purchase
preferred shares.

Our capital requirements depend on many factors, including market
acceptance of our services, the resources we devote to developing, marketing and
selling our services, the timing and extent of deploying additional services,
the extent and timing of investments and other factors. We expect to devote
substantial capital resources to expand our sales, support, marketing and
product development organizations, to expand marketing programs, to establish
additional facilities worldwide and for other general corporate activities.

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<PAGE> 30

Based on current levels of operations and planned growth, we expect that
the net proceeds of this offering, together with our available funds and the
amounts available under our new credit facility (see below), will be sufficient
to meet our expected needs for working capital and capital expenditures for
approximately the next 12 months. Thereafter, if we do not have available
sufficient cash to finance our operations, we may be required to obtain
additional debt or equity financing. We cannot be certain that additional
financing will be available to us on favorable terms when required or at all.

Credit Facility

In January 2000, we obtained a bank credit facility under which we may
borrow up to $2.0 million, and in the event that our total sales exceed $1.0
million during the year ending October 31, 2000, up to $3.0 million. Borrowings
under this facility will bear interest at an annual rate of LIBOR plus 1.5%. The
credit facility is secured by a lien on all of our assets. Any amounts borrowed
must be repaid by December 31, 2000. As of the date of this prospectus, there
were no amounts outstanding under this credit facility.

In connection with the credit facility, we issued to an affiliate of the
lender a warrant to purchase Series D convertible preferred shares, Series D
Shares. Under this warrant, such affiliate may acquire between 38,447 and
173,010 Series D shares, depending on the extent to which we utilize the credit
facility. If we utilize up to $1.0 million of the credit facility, the number of
Series D shares for which the warrant may be exercised increases to 76,894. If
we utilize up to $2.0 million of the credit facility, the number of Series D
shares increases to 115,340. If we utilize over $2.0 million of the credit
facility, the number of Series D shares increases to 173,010. The warrant is
exercisable until the earlier of (1) January 3, 2003 and (2) the date that we
(a) consummate an initial public offering or (b) are acquired by or merge with
another entity. The exercise price of the warrant is approximately $5.20 per
share. Both the number of Series D shares for which the warrant may be exercised
and the exercise price per share are subject to adjustment in connection with
changes to our capital structure.

Series D Private Placement

In February 2000, we completed a private placement of our Series D shares
in which we issued 8,940,867 Series D shares for net proceeds of approximately
$48.9 million, after deducting placement fees and related expenses. In
connection with this private placement, we issued to Warburg Dillon Read LLC, as
placement agent, a warrant to purchase 227,077 Series D shares. The warrant may
not be exercised until February 2001 and terminates February 2004. The exercise
price of the warrant is $5.78 per share. Our Series D shares are convertible
into ordinary shares under certain conditions and have other preferential
rights.

Formation of Joint Venture

In February 2000, we formed DealTime.com K.K. as a joint venture with
Triangle Technologies Ltd. to market and sell our products and services in
Japan. We acquired a 90% interest in DealTime.com K.K. in exchange for an
initial investment of nine million yen (approximately $84,000) and Triangle
Technologies Ltd. acquired a 10% interest in DealTime.com K.K. in exchange for
an initial investment of one million yen (approximately $9,000).

DealTime.com K.K. is in the process of completing a private placement in
which it will issue up to an aggregate 2,100 of its Series A Convertible
Preferred Shares for aggregate proceeds of approximately $10 million. Upon
closing, our ownership of DealTime.com K.K. will be diluted to 54%.

EFFECTIVE CORPORATE TAX RATE

Although we generated no taxable income since inception, our tax rate will
reflect a mix of the United States statutory tax rate on our United States
income and the Israeli tax rate discussed below. Israeli companies are generally
subject to income tax at the rate of 36% of taxable income. We have applied for
approved enterprise status in Israel under the Law for the Encouragement of
Capital Investments, 1959, for our investment program and therefore may become
eligible for tax benefits. Pursuant to these benefits, if
24
<PAGE> 31

approved, we may enjoy a tax exemption from Israeli taxes on income derived
during the first two years in which each investment program produces taxable
income, subject to certain timing restrictions, provided that we do not
distribute such income as a dividend, and a reduced tax rate of 10% to 25% for
the next five to eight years. See "Israeli Taxation and Investment
Programs -- Law for the Encouragement of Capital Investments, 1959." We cannot
be certain that we will obtain approval for any of our investment programs or
that the provisions of the law will not change. Since we have incurred tax
losses through December 31, 1999, we have not yet used the tax benefits for
which we may become eligible.

IMPACT OF INFLATION, DEVALUATION AND FLUCTUATION OF CURRENCIES ON RESULTS OF
OPERATIONS, LIABILITIES AND ASSETS

Although substantially all of our revenues are paid in or linked to the
dollar, a significant portion of the cost of our Israeli operations, mainly
personnel and facility-related expenses, is incurred in NIS. Accordingly,
inflation in Israel and dollar exchange rate fluctuations have some influence on
our expenses and, as a result, on our net income. Any increase in the rate of
inflation in Israel will increase the dollar cost of our operations in Israel,
unless the increase is offset on a timely basis by a devaluation of the NIS in
relation to the dollar.

In 1997 and 1998, the rate of devaluation of the NIS against the dollar has
exceeded the rate of inflation in Israel. This represents a reversal from prior
years, which has benefitted us. However, in 1999, the rate of inflation in
Israel exceeded the rate of devaluation of the NIS. If inflation in Israel
exceeds the devaluation of the NIS against the dollar or if the timing of the
devaluation lags behind increases in inflation in Israel our dollar-measured
results of operations will be adversely affected.

We do not presently engage in any hedging or other transactions intended to
manage risks relating to foreign currency exchange rate or interest rate
fluctuations. We also do not own any market risk sensitive instruments. However,
we may in the future undertake hedging or other similar transactions or invest
in the market risk sensitive instruments if we determine that these transactions
or investments are necessary to offset currency risks.

25
<PAGE> 32

BUSINESS

OVERVIEW

We are a real-time interactive information exchange and an enabler of
e-commerce for buyers and sellers. Our DealTime.com Web site allows buyers to
compare models, brands, merchant types and prices and to make purchases from
over five million deals across 7,000 online and offline sellers. We also offer
shopping guides, reviews of products and sellers, as well as a feature
comparison tool. Buyers can purchase directly from merchants and, in the near
future, will be able to utilize DoneDeal, our single-action purchasing feature.
Buyers interested in waiting until their tracking criteria are met can be
notified by us when we find a matching deal. Our robust, scalable technology
architecture rapidly delivers highly relevant search results and enables
delivery of information to buyers through personal computers and wireless
devices.

Our proprietary technology provides merchants, manufactures, industry
analysts and other potential customers with aggregated indication-of-interest
data about consumer buying activity through our DealAgent service. DealAgent
offers sellers the ability to analyze, view and react in real-time to the
aggregated buyer demand data we provide. Sellers benefit through increased
traffic, conversion rates and average order values as well as through targeted
direct marketing opportunities made available by connecting sellers with
motivated buyers.

We transform online shopping from a one-way business-to-consumer model to a
business-to-consumer-to-business cycle. In other words, our products and
services enable sellers to meet buyer demand more efficiently, which in turn
enhances our ability to attract additional and repeat buyers to our Web site.
According to PC Data, DealTime was the most visited comparison shopping service
in February 2000, receiving over 3.1 million unique visits.

INDUSTRY BACKGROUND

Growth of commerce on the Internet

The rapid growth of the Internet and online commerce has revolutionized the
way in which buyers and sellers communicate, share information and conduct
business. International Data Corporation estimates that annual worldwide
commerce over the Internet will increase from $111.4 billion in 1999 to $1.3
trillion by 2003.

A number of unique characteristics differentiate the Internet from
traditional media. Buyers can communicate or access dynamic and interactive
content on a real-time basis without geographic or time limitations, access a
broader range of online product offerings, and communicate and interact
instantaneously with one or more sellers at minimal cost. As a result, the
Internet has the potential to support a highly efficient market in which buyers
and sellers will be able to interact based on real-time supply and demand
information. This new e-commerce model will enable buyers to efficiently and
conveniently gather comparative purchasing data, to shop and to communicate with
sellers in many new ways. This model may provide sellers with additional revenue
opportunities by making available a dynamic source of aggregated customer and
demand information and by greatly enhancing the speed and efficiency of
transactions between buyers and sellers. In addition, sellers may be able to
acquire more buyers at a lower cost.

Limitations of Traditional Shopping

Although traditional shopping may be familiar to buyers, the offline
marketplace is large, highly fragmented and geographically diverse, making it
time-consuming, costly and inefficient for buyers and sellers to reach one
another. In order to make informed purchasing decisions, buyers typically have
to undertake independent product research and then travel from store to store to
compare prices. Similarly, in order to make informed customer acquisition and
inventory decisions, sellers typically have to rely on outdated historical
information. As a result of these inconveniences and inefficiencies, buyers and
sellers are increasingly turning to the online marketplace.

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<PAGE> 33

Challenges facing online buyers and sellers

Although the advent of online commerce has given buyers and sellers a more
convenient channel to interact, we believe the online marketplace still suffers
from many of the limitations of the offline marketplace. Like traditional
stores, online marketplaces frequently carry products from only a limited number
of retailers, including retailers with whom they have a preferred relationship.
In addition, in order to make informed purchasing decisions, buyers still have
to conduct online research and, in many cases, navigate from site to site to
compare prices. Similarly, in order to make informed customer acquisition and
inventory decisions, sellers still have to rely on outdated historical
information.

The Internet also poses new challenges to buyers and sellers. Industry data
indicates that online shoppers compare product information from multiple
merchants before making a purchase. According to Jupiter Communications in 1999,
82% of Internet buyers went online intending to purchase a specific product. Of
this group, 81% visited more than one Web site before making a purchase.
Internet search engines offer a limited solution by allowing buyers to search
for destinations but were not designed specifically for online shopping and, as
a result, return many irrelevant search results. Buyers, therefore, need to be
able to find relevant sites and sellers need to develop a unique brand to
distinguish themselves from other, often similar, online sellers. The increasing
number of online commerce opportunities and the ease with which buyers may
navigate online, has increased pressure on sellers to recruit buyers to their
sites and retain them. Although merchant sites often aggregate certain consumer
data, most sites do not provide up-to-date consumer demand information, leaving
sellers even more vulnerable to the new competitive pressures brought about by
the Internet.

Limitations of online comparison shopping services.

To address these challenges faced by buyers and sellers, a number of
different online services have emerged. One popular resource is the comparison
shopping service which presents buyers with the ability to compare prices for
products from a variety of buying opportunities. Although online comparison
shopping services are designed to help buyers and sellers overcome some of the
confusion and inefficiencies still present in the online marketplace, we believe
such services do not capitalize on the full potential of the Internet because
they cannot do all of the following:

- sort results by buyer preference and present the search results in a
logical and user-friendly manner;

- conduct highly specific searches by allowing buyers to specify search
parameters and filter irrelevant search results effectively;

- continue to search for deals after the buyer leaves the Web site and
notify buyers of any changes in purchasing opportunities;

- obtain product and merchant information and ratings;

- differentiate products not only by the description as listed on a
particular merchant site but also by information not specifically
included on the site;

- search a comprehensive range of online sellers;

- add new merchant sites at a rate that keeps pace with the increase of
online shopping sites;

- allow buyers to perform comparison shopping remotely through wireless
devices; and

- complete the purchase without leaving the comparison shopping site.

In addition, while other comparison shopping services provide information
to buyers, they do not currently provide sellers with valuable information
generated by buyer activity. These services do not provide aggregated buyer
demand data that shows comparative demand for various products on the basis of
models, brands, merchants, prices and other features. Furthermore, they do not
provide a way for sellers or manufacturers to respond immediately to buyer
demand with appropriate pricing, availability, shipping and

27
<PAGE> 34

other adjustments. We believe these services do not adequately address the needs
of merchants and other sellers because they fail to enable seamless, continuous
and efficient interaction between buyers and sellers.

THE DEALTIME SOLUTION

DealTime is a real-time interactive information exchange and an enabler of
e-commerce for buyers and sellers. We help buyers search, sort, compare and buy
consumer goods and services from a wide range of sellers, not available through
traditional storefront or online shopping. We also aggregate valuable buyer
demand data and enable sellers to analyze this data and quickly respond. Our
benefits include:

A compelling shopping experience

We offer an intuitive, convenient user interface that easily and rapidly
compares product and price information from over 7,000 merchants. Buyers can
choose from over five million deals across multiple online and offline sellers,
including merchants, buying groups, auction sites and classified advertisement
sites. Because buyers use different criteria to make purchase decisions, we
allow our buyers to re-sort the search results using different variables,
including price, type of merchant, product model, brand and merchant ratings. We
also help buyers make purchasing decisions by integrating merchant and product
reviews with our search results.

Superior search capabilities

We have designed a proprietary product language recognition system to
maximize the accuracy and relevance of our search results. For example, while
different sellers may list a Pentium III computer as "P3," "PIII" or "Pentium
3," our system recognizes and returns all of these results in response to a
buyer query. In addition, our product language recognition system integrates
product specifications with the product name. For instance, a buyer searching
for a product with particular specifications, such as a computer with a 500 MHz
processor and 64 MB of RAM, would retrieve results matching those exact
specifications even if the seller has listed only the product name on its Web
site. Our system is able to extract relevant product information from a wide
variety of online sellers, including buying groups, auctions, classified
advertisement sites and online merchants.

Our software automatically retrieves information from these sites at a
pre-determined frequency and stores the data on our computer servers. Because we
retrieve and store the information in advance of a user query, our software can
process the information to correct mistakes, remove irrelevant data, and present
the results in a clear, organized and easy-to-understand format. Searching sites
at pre-determined frequencies also means that we can capture up-to-date product
information without overwhelming the sellers' Web sites with real-time queries.

Ongoing deal notification

Our system design allows us to provide ongoing deal notification by
frequently monitoring the status of selected products at predetermined intervals
and notifying buyers by e-mail or other means when their tracking criteria are
met.

Wireless search and shopping capabilities

Our DealTime AnyTime service allows buyers the ability to perform
comparative shopping searches through wireless devices such as personal digital
assistants. Through their wireless devices, buyers can compare prices and
purchase products from a variety of merchants even while shopping in
conventional stores. We believe our system's ability to quickly filter and sort
search results, combined with our DoneDeal instant purchasing tool, makes it a
highly compelling and well-suited service for wireless devices where data
display space is extremely limited.

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<PAGE> 35

Integrated reviews and content

We help buyers make informed buying decisions by integrating product and
merchant information into our search results. Users can review, sort and filter
specifications of various products, based on their preferences, and conduct
side-by-side price or feature comparisons. Through our strategic relationship
with BizRate.com, an online merchant review service, we integrate merchant
ratings into our search results. Through our agreements with Epinions.com, a
provider of consumer product reviews, and Active Research, a product
recommendation service, we offer a robust package of product information. We
also offer DealTime shopping guides, which make purchasing recommendations for
holidays and special events. These tools and content offerings appeal not only
to buyers who know exactly what they wish to purchase, but also to casual buyers
who are looking for guidance before making a purchase.

Interactive consumer demand data

We transform online shopping from a one-way business-to-consumer model to a
business-to-consumer-to-business cycle. DealAgent, one of our proprietary
technological developments, provides merchants, manufacturers, industry analysts
and other potential clients with aggregated indication-of-interest data about
consumer buying activity. Using buyer demand data that we aggregate from buyers
using our Web site and continuously update, DealAgent permits subscribers to
analyze the data on the basis of various factors such as brand, specific product
model, product features and price range and then display the analyses in
graphical, tabular and comparative formats. Merchants and manufacturers can
react to the demand data by posting deals on our Web site or adjusting product
prices. We believe that this service provides significant value for both sellers
and buyers by improving market efficiency and by providing a useful tool for a
real-time pricing strategy.

STRATEGY

Our objective is to be the world's leading real-time interactive
information exchange and e-commerce enabler for buyers and sellers. Key elements
of our strategy are to:

Build the DealTime brand

We intend to establish DealTime as a leading consumer brand. Our current
branding efforts include online and offline advertising, public relations,
co-branded distribution and grassroots promotions. We intend to continue
expanding our branding activities:

- Online advertising -- In September 1999, we launched our online
advertising efforts. We use online advertising both to direct traffic to
our Web site and to build the DealTime brand in conjunction with our
offline efforts. We have entered into a strategic relationship with Be
Free, a creator of performance marketing programs, to build and grow our
affiliate marketing program. In addition, we have online distribution
arrangements with such portals as LookSmart and About.com. We plan to
increase our online advertising efforts in the future as part of an
integrated promotional effort.

- Offline advertising -- In October 1999, we launched an integrated offline
advertising campaign in seven U.S. markets. Our radio spots aired on talk
radio, classic rock and adult contemporary programs. Our print
advertisements appeared in several major newspapers as well as in
selected industry publications. Our television commercials aired in
primetime, news and late night programs. We plan to expand our offline
advertising efforts in 2000 in target markets.

- Public relations -- Since the launch of our Web site in June 1999, we
have conducted broad-based public relations efforts with the Internet,
business and consumer press in online, print and broadcast media. These
efforts further leverage and enhance our advertising and business
development efforts, and we plan to continue them in the future.

- Co-branded distribution -- Currently, we have co-branded distribution
arrangements with USA TODAY, Bloomberg, Epinions.com and Productopia, a
provider of expert product reviews, among others. We plan to enter into
other co-branded site arrangements with other strategic partners.
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- Grassroots promotions -- We have used grassroots campaigns in New York
City and San Francisco during holidays and special events. These
campaigns promote the advantages of shopping with us over offline
shopping alternatives. We plan to use grassroots campaigns in the future
as appropriate.

Expand business-to-consumer offerings

We intend to continue building customer loyalty and retention by improving
the functionality of our Web site. Currently, we offer online comparison
shopping for over five million buying opportunities ranging from perfume to
personal computers. In addition, our buyers may research product and merchant
ratings and receive notification of deals through e-mail. We plan to continue
expanding the content, categories, services, products and merchants featured on
our Web site. For example, we currently offer our buyers the option to purchase
warranties and we intend to focus on higher margin offerings in the future.

Our users may personalize their experience by determining the frequency and
duration of ongoing searches, by selecting the types of merchants to search, by
sorting and filtering the search results according to their own criteria and by
requesting deal notification. We recently enhanced the functionality and user-
friendliness of our Web site by adding key word search capabilities. We also
plan to further enhance it by introducing DoneDeal, our single-action purchasing
feature. DoneDeal will allow buyers to register with us so that they may
purchase products from any seller using a single command without having to
re-enter their credit card and shipping information each time and without
leaving our Web site. The ease of purchasing enabled by DoneDeal will further
facilitate the purchasing of products through the use of wireless devices.

Expand business-to-business offerings

We intend to build on our market leadership and become sellers' preferred
online shopping partner by expanding merchants' marketing opportunities and by
providing sellers with access to valuable aggregated buyer demand data.
Currently, merchants who participate in our preferred merchant program receive
prominent placement in search result listings. We intend to expand our
merchants' opportunities for targeted marketing to our users. We have begun to
capitalize on the buyer demand data that we collect and aggregate by offering
sellers access to this information for a fee through DealAgent. We plan to
market DealAgent aggressively to merchants, manufacturers, industry analysts and
other potential clients. We also seek to leverage our comparative shopping
service by licensing it to other Web sites looking to offer a private label
comparative shopping functionality.

Extend wireless search capabilities

We plan to extend the DealTime customer experience across a wide range of
wireless and other consumer electronic devices. DoneDeal, our single action
purchasing feature, will add to the attractiveness of our offerings to wireless
device users. Currently, users may download a DealTime application to the Palm
VII, and applications for other wireless devices will be available in the near
future. In addition, we plan to form partnerships with wireless equipment
manufacturers and wireless service carriers to expand access of our solution to
as many wireless users as possible.

Expand global presence

We plan to expand our operations into select international markets. Our
technology supports currency conversion and multiple language searching. We
recently launched our United Kingdom service, and in the near future, we plan to
launch our Japanese and German services. We intend to launch our services in
mainland Asia, France and Latin America by the end of 2000. We plan, where
appropriate, to partner with foreign companies to broaden our reach quickly and
localize the content of our foreign Web sites. For example, in Japan, we have
established a joint venture, DealTime.com K.K., with several key players in the
Japanese financial and media sectors such as Nippon Telephone and Telegraph,
JAFCO, a private equity fund, and Credit Saison, one of the largest credit card
issuers in Japan, to operate and expand our Japanese Web site. By expanding
internationally, we believe that we will not only increase the number of our
buyers, sellers

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and markets through our local sites but also increase the selection available
for all of our users through the creation of a unified global products and
services marketplace.

Extend technology leadership

We have and will continue to develop and incorporate new technologies in
order to expand various aspects of our service and product offerings. We intend
to maximize the scope and accuracy of our product searches by refining our
database architecture and by enhancing our proprietary product language
recognition and searching technologies. We intend to continue to invest
significantly in our technology to maintain and further extend our competitive
advantage.

THE DEALTIME SHOPPING EXPERIENCE

We aim to transform online shopping for buyers. We believe that our
e-commerce comparison shopping engine offers buyers the most convenient,
accurate, flexible and comprehensive online comparison shopping service. Our Web
site supports buyers at every stage of their shopping process, from browsing to
buying. Our home page features:

- clearly defined product categories;

- a quick search area that displays selected popular products;

- seasonal and special occasion shopping guides;

- links to special DealTime.com features;

- a simple tab-based navigational system; and

- a key-word search function.

Shopping process

Our users search for products by selecting a category or entering the
desired product in the key-word search box, clicking on the desired product and
then specifying their search criteria. Next, our rapidly growing database of
over 2,600 online merchants, buying groups, classified advertisement sites and
auction sites is searched to find deals that match the desired criteria. We also
search approximately 5,000 offline merchants through our relationship with
ShoppingList.com, an online resource of local shopping information.

Search results are then returned rapidly, listing all matching deals. Our
search results display, in a logical fashion, merchant name, merchant rating,
product description and price. Although our preferred merchants are listed
first, search results may be re-sorted according to a number of criteria. For
buyers who have not yet decided on a particular item, we provide product
recommendations and a feature comparison tool. Consumer reviews are available
through Epinions.com, and merchant ratings are provided by BizRate.com. In
addition, recommendations and advice from well-known experts will be available
in the near future.

In cooperation with Active Research, we provide product buying guides for a
range of electronics and appliances, such as digital cameras and air
conditioners. Users who need assistance in choosing which model best fits their
needs may complete interactive online questionnaires relating to the product.
The buying guide will then recommend the best models based on the user's
preferences.

When users click on a deal on our Web site, they are linked to the exact
page on the merchant's site where the product may be purchased. To avoid
confusion between our site and the merchant's site, we place a small frame above
the merchant's site reminding the users that they have left DealTime.com and are
now on the merchant's site. The frame also allows users quickly navigate back to
our search results page.

With the introduction of DoneDeal, users will be able to set up an account
with us, enter personal information, including credit card information and
shipping and billing addresses. Users will then be able to make purchases from
the online merchant without leaving our Web site and without having to fill in
lengthy

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merchant forms. This opens up the opportunity for us to offer after-sales and
service, including extended warranties and layaway plans.

Shoppers may use our tracking and notifying service to look for better
deals on available items. Users set the price at which they would like to be
alerted. When we find a matching deal, we alert users by e-mail. We track user
searches for up to two months, alerting users as often as they desire.

As part of our DealTime AnyTime strategy, Palm VII users can download an
application from our Web site. Shortly, we intend to have applications for
Web-enabled mobile phones and other wireless devices. The applications enable
buyers to compare online prices while shopping in a traditional store and
purchase the product through DoneDeal or by phoning the merchant directly.

We maintain a customer service team which provides support to users of our
services. Using our state-of-the-art customer relationship management tools, we
are able to provide personalized answers to e-mail inquiries, usually in no more
than one business day.

THE DEALTIME MERCHANT EXPERIENCE

We believe that we offer merchants access to highly motivated buyers and
targeted direct marketing opportunities. We also believe that we are the first
service to offer merchants the ability to analyze real-time aggregate buyer
demand data and react to it by posting new deals or adjusting product prices and
offerings.

Preferred merchant program

To those merchants who elect to participate in our preferred merchant
program, we offer a tiered pricing structure allowing them to choose the level
of services that they desire. Among the benefits that preferred merchants
receive are prominent placement on our Web site and in search results, which
includes the presentation of their logo, a text message in the search results,
discounts on advertising and inclusion in special sections of our Web site. We
believe that merchants who use our solution experience significant improvement
in their traffic, conversion rates and average order values. Since launching our
merchant program in August 1999, we have signed contracts with over 140
preferred merchants including Buy.com, Mercata, KBkids.com and Office Max.

DealAgent

DealAgent compiles buyers' indications of interest on selected products
over a specific time period in each shopping category. Our DealAgent technology
aggregates this data and enables merchants, manufacturers and other subscribers
to analyze the data on the basis of specific brands, models, prices, services or
keywords and then view the analyses in comparative graphical and tabular
formats. Merchants may respond immediately to these analyses by submitting a new
deal to our Web site or by modifying an existing deal. When our DoneDeal single
action purchasing feature is launched, DealAgent will also be able to provide
actual purchase statistics in addition to indication-of-interest statistics.

TECHNOLOGY AND INFRASTRUCTURE

We believe that our technology separates our service from other comparison
shopping services. We design and develop all of our technology and our Web site
ourselves and thus are able to control the development process and adapt to
evolving marketing strategies and user preferences. The primary elements that
distinguish us are our database-driven architecture, our rapid crawler
development tool and our product language recognition system. Some aspects of
our technology are subject to patent applications, and we expect to file shortly
additional patent applications on other aspects of our technology. See
"-- Intellectual Property" below.

Database-driven architecture

We have built a robust, scalable user interface that is based primarily on
internally-developed proprietary software. The backbone of our service is our
crawler and product identification system and our database
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architecture. Our crawlers search a variety of merchant and other deal sites on
a predetermined frequency and then store information concerning current deals.
Crawler frequency for a particular site is determined in accordance with the
characteristics of the site, with more dynamic merchant sites being queried more
frequently. This feature allows us to maintain a database of up-to-date product
and price information, while avoiding the creation of a large amount of false
traffic on merchant sites.

Because the data is stored in our database, we can correct errors and
substitute third-party information before the data is displayed to the user. Our
architecture supports an unlimited level of detail in our selection of search
parameters which enables us to use many different criteria to rank, sort and
compare deals. The level of specificity that this structure provides constitutes
a key differentiating characteristic of our service. The flexibility of our
design also facilitates the integration of our software with systems used by our
strategic partners.

Our database-driven technology provides rapid search results. Because we
crawl merchant sites at predetermined frequencies, we eliminate the need for the
user to wait for a real-time query, which is vulnerable to congestion in
Internet traffic flow. This system also allows us to scale with the growth in
online commerce by giving us the ability to provide reliably fast response times
as we add more merchants and products. In addition, real-time queries tend to
overload merchants with traffic, making the source of the traffic more
susceptible to blocking technologies. Merchants that become overwhelmed by false
traffic from other comparison shopping services may attempt to block these
sites. Our storing of data at predetermined intervals allows us to crawl Web
sites unobtrusively and therefore makes us less susceptible to blocking
technologies.

Rapid crawler development tool

We have created a proprietary tool for rapid crawler development that
enables us to develop a crawler for a new merchant site in less than two hours.
Our Web crawlers can capture product information from the merchant's Web site
regardless of the format or architecture of the site. The crawler then stores
the retrieved information in our database, where it is indexed and standardized
before being viewed by users. We are not currently limited in the number of
merchants that we can include in our comparison shopping database, and we have
historically been able to respond to the establishment of new merchant sites or
changes in existing sites quickly and cost effectively.

Product language recognition system

We have also developed a system that uses a combination of human and
artificial intelligence to minimize errors in search results. By identifying
product properties by name, our system sorts and filters deals offered on
merchant sites, online classified advertisement sites and person-to-person
auctions, presenting the results in a clear and standardized format. Because we
can sometimes present more detailed information on products than the merchant
sites that we crawl, we believe that our product language recognition system is
a key point of differentiation from our competitors.

Systems

Our systems are designed to provide access to our Web site 24 hours per
day, seven days a week. Physical hosting and communications systems are provided
by Digex, a provider of Web and application hosting solutions to businesses,
which provides redundant communications lines and emergency power backup. We
have designed our systems based on industry standard technologies and have
engineered them to minimize system interruptions in the event of outages or
catastrophic occurrences. We have implemented Cisco Load Director as our load
balancing system and have redundant servers to provide for fault tolerance. Our
database is Oracle 8i, installed on a Solaris E4500. Our crawlers run on a
Windows NT platform.

In response to capacity concerns, we have tripled the number of Web servers
that run our Web site. We intend to invest in additional technologies that will
handle growth in online traffic and have ordered two Solaris E6500 servers to
supplement our existing systems and provide full redundancy.

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RESEARCH AND DEVELOPMENT

Our research and development teams are located in Israel and the United
States. Our facility in Israel is engaged in technology development. We strive
to retain internal control over proprietary processes rather than depend on
third-party programmers and designers. Our research and development efforts are
focused on continuing to develop our advanced searching, sorting and
notification technologies. During the years ended December 31, 1998 and December
31, 1999, we expended $283,000 and $1.9 million, respectively, on research and
development. We expect to continue to devote significant resources to research
and development as we add new features and services to our Web site.

SALES AND MARKETING

We have designed our sales and marketing strategy to increase market
awareness of the DealTime brand and bring user traffic to our Web site. Our
sales strategy focuses on expanding our revenue opportunities through the sale
of advertising, merchant services and indication-of-interest data. We have
designed our marketing strategy to increase awareness of the DealTime brand
through a combination of traditional and online marketing efforts.

Sales

Our internal sales and marketing staff is currently located at the offices
of our U.S. subsidiary in New York. WinStar Interactive, an online advertising
representation firm, conducts our banner and sponsorship advertising sales
efforts in coordination with our in-house staff. We expect our internal staff to
handle all of our advertising sales efforts by mid-2001. We also expect to
increase our sales presence internationally by opening field sales offices.

In addition to advertising, we sell various services to merchants through
our internal sales and marketing staff. In order to provide a more comprehensive
search result for our users, we do not require fees from merchants to be listed
on our Web site. However, merchants who elect to participate in our preferred
merchant program pay a fee for each user who clicks through from one of our
affiliated sites, including our co-branded Bloomberg and USA TODAY Web sites, to
the merchant site. These merchants receive preferential placement and other
special services, such as single action purchasing features, branded graphic
logos and detailed product descriptions. We typically target merchants seeking
enhanced exposure of their online listings. We have entered into non-exclusive
merchant participation agreements with merchants, including Buy.com, Mercata,
KBkids.com and OfficeMax. While the terms of the merchant participation
agreements range from one month to six months, a term of three months is
typical. Generally, our merchant participation agreements are renewed
automatically unless either party gives 30 days' written notice to the other.

We also sell aggregated buyer demand data through our proprietary
technology, DealAgent. We charge merchants a variable fee to view the data,
subject to a minimum flat fee.

Marketing

Our marketing strategy involves a variety of traditional and online
marketing programs, as well as business development and promotional activities.
We have initiated an aggressive brand promotion campaign that utilizes print,
radio, television and street-level advertising. We advertise online through
high-profile, third-party Web sites. We also rely on relationship marketing such
as affiliate marketing, co-branded distribution, indirect promotions by
merchants with links to our Web site and word-of-mouth advertising arising
through shoppers' use of our services. We intend to introduce a number of other
brand awareness and shopper loyalty programs.

We have entered into strategic distribution, integration and advertising
relationships with Bloomberg and USA TODAY, leading Internet content-providers,
DoubleClick, an Internet advertising firm, BizRate.com, Active Research,
Point.com, an online merchant of wireless phone equipment and service,
Epinions.com and ShoppingList.com. Our strategy partnership relationships
typically include arrangements under which we share

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with our strategic partners a portion of the revenue that they bring to us. Most
of these agreements are for a one-year term, may be renewed automatically and
may be terminated by either party upon 90 days notice.

Our public relations efforts have enhanced our marketing efforts and have
helped raise awareness among the Internet community and consumers in general. We
have been written about in numerous Internet, business and consumer
publications, including The Wall Street Journal, The New York Times, Internet
World, and Time, just to name a few. We have an ongoing public relations program
and participate in industry conferences and trade shows.

COMPETITION

The online shopping market is rapidly evolving and intensely competitive.
Our current competitors can be divided into several groups:

- comparison shopping services that offer multiple merchant categories,
such as mySimon, BottomDollar, Jango, StoreRunner, PriceScan and
ShopOnline123;

- comparison shopping services that offer a limited number of product
categories, such as BuyBuddy, PriceWatch, PricePulse, PriceGrabber, 20-20
Consumer, EvenBetter and KillerApp;

- reverse auction sites, such as Priceline.com, Nextag and Respond.com;

- store guides, such as Yahoo! Shopping, ShopNow.com, Shopping.com, Lycos
Shop, eShop, Excite and 4anything.com;

- consumer buying guides, such as Ecompare, Comparenet, Deja.com,
Brandwise, BizRate.com and Gomez Advisors;

- downloadable shopping aids, such as iChoose, ClickTheButton, Dash,
FlySwat and RUSure;

- buying groups, such as Accompany and Mercata;

- individual online merchants, such as Buy.com, iMall, Amazon.com,
Furniture.com, eToys and Fogdog Sports; and

- auction sites, such as eBay, Yahoo! Auctions, ONSALE and Amazon.com.

We believe that the principal competitive factors in our market are brand
recognition, comprehensiveness of product category and merchant coverage, Web
site user-friendliness, quality of results and applicability to wireless use. In
addition, we compete based on the ability to provide ongoing deal notification
and the ability to output to different devices or platforms, including wireless
devices, and third-party and original content.

We expect to experience significant competition in the future from
companies that we have identified as well as new entrants. Other companies with
strong brand recognition, technical expertise and experience in online and
offline commerce and direct marketing may seek to compete in the comparison
shopping market. Many of our competitors have significantly longer operating
histories, larger and broader customer bases and greater technical expertise,
brand recognition and online commerce experience than we have. Some of our
competitors may be able to devote significantly greater resources than we have
available for marketing and promotional campaigns, attracting traffic to their
Web sites, hiring and retaining key employees and developing Web site and other
systems. In addition, barriers to entry for rudimentary price comparison
services are low, and new competitors may be able to offer competing products
and services at relatively low cost.

In January 2000, mySimon, one of our competitors, announced that it had
entered into an agreement to be acquired by CNET, Inc. for approximately $700
million. As a result of this transaction, mySimon may gain access to
significantly greater resources than we have available for marketing and
promotional campaigns, attracting traffic to its Web site, hiring and retaining
key employees and developing Web sites and other systems. mySimon may also be
able to attract more merchants and advertisers and may increase its reach. In
the future, there may be further consolidation among online comparison shopping
services that would increase competitive pressures on us.
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INTELLECTUAL PROPERTY

We have filed three patent applications in the United States. The invention
covered by the first patent application, entitled "E-Commerce Notification,"
relates to the ability to combine a comparison service with a time-sensitive
notification service that uses several notification platforms, including e-mail,
pagers and desktop computers. The invention covered by the second patent
application, entitled "E-Commerce Demand Aggregation," covers systems and
methods for a computer server that accepts requests from customers for goods and
services, aggregates the requests and allows a merchant viewing the aggregated
requests to make an offer satisfying one or more of the requests. The invention
covered by the third patent application, entitled "Method and System for Storing
and Implementing Purchaser Transactional Data for an Order via a Communications
Network," relates to providing a user with a single interface for purchasing
goods and services from multiple merchants. We have also filed Patent
Cooperation Treaty Applications, designating all contracting states, claiming
priority from the first and second United States patent applications listed
above. The deadline for filing a Patent Cooperation Treaty application based on
the third United States patent application listed above has not yet passed. We
have also applied to register numerous trademarks and service marks that we
believe are important to the conduct of our business, including several
variations on the name DealTime.com. We own the Internet domain name,
www.dealtime.com, and various other related domain names. If we are not
successful in procuring, protecting and enforcing our intellectual property
rights, we will not be able to realize the full value of these assets. See "Risk
Factors" above and " -- Legal Proceedings" below.

EMPLOYEES

As of March 1, 2000, we employed 168 full-time employees. Of these
employees, 105 work in our facility in Netanya, Israel, and 63 work at the
executive offices of our U.S. subsidiary in New York, New York. We have never
had a work stoppage, none of our employees are represented under collective
bargaining agreements and we consider our relations with our employees to be
good.

FACILITIES

We maintain a research and development facility in approximately 12,000
square feet of space in Netanya, Israel, which is held under a lease expiring in
April 2003. We have an option to extend this lease until March 2008. Our U.S.
subsidiary maintains executive offices in approximately 15,700 square feet of
space as of March 1, 2000 at 475 Fifth Avenue, 2nd Floor, New York, New York.
These premises are held under a lease which expires in July 2009. We expect that
we will need additional space as we expand our business and believe that we will
be able to obtain such space as needed.

LEGAL PROCEEDINGS

We have notified DealPilot AG, a German company, that we believe that its
use of the terms DealPilot and DealPilot.com constitute an infringement of our
trademark rights in DealTime and DealTime.com. We also have objected to the
registration by DealPilot's predecessor-in-interest of the Internet domain name
dealtimer.com. We have reached an agreement in principle with DealPilot pursuant
to which it will cease the actions we objected to, and we expect to finalize the
details of a written agreement shortly. Under the terms of the agreement in
principle, DealPilot AG has eight months to discontinue its use of DealPilot and
DealPilot.com. In addition, DealPilot AG will refrain from using any trademarks,
tradenames or service marks that contain in whole or in part the words "deal" or
"time" in connection with any comparison shopping services or other similar
services on the Internet. As of the date of this prospectus, DealPilot has
changed its name to EvenBetter.com and changed the design of its site.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information regarding our executive officers
and directors as of March 1, 2000:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Daniel T. Ciporin.................... 42 President, Chief Executive Officer and Director
Nahum Sharfman, Ph.D................. 52 Chairman of the Board and Co-Founder
Ignacio Fanlo........................ 38 Chief Operating and Financial Officer
Amir Ashkenazi....................... 29 Chief Technical Officer and Co-Founder
Lance Podell......................... 36 Chief Marketing Officer
Ezra Katzen.......................... 45 General Counsel and Secretary
John P. Connaughton.................. 34 Director
Michael Eisenberg.................... 28 Director
Christopher Saridakis................ 31 Director
Eric Semler.......................... 35 Director
Matthew A. Smith..................... 36 Director
</TABLE>

Daniel T. Ciporin has been President, Chief Executive Officer and Director
of DealTime since January 1999. From 1997 to 1999, Mr. Ciporin served as Senior
Vice President, Global Deposit Products, at MasterCard International. In that
capacity, Mr. Ciporin was responsible for the marketing and product management
of the deposit access business, and his efforts helped establish the company's
dominant market share in the global electronic debit market. Previously, he
served as Vice President of Debit Marketing of MasterCard from 1995 to 1997. He
holds a B.A. from Princeton University and an M.B.A. from the Yale School of
Management.

Nahum Sharfman, Ph.D., co-founded DealTime and has been Chairman of the
Board of Directors since January 1998. Dr. Sharfman co-founded Commtouch
Software Ltd. in 1991 and led the organization as Chief Executive Officer from
its original focus on corporate e-mail products and services to branded free
e-mail solutions for consumers. He remained with Commtouch until founding
DealTime in 1997. In addition, Dr. Sharfman spent 11 years with National
Semiconductor in a variety of development and management roles. He holds a Ph.D.
in high energy nuclear physics from Carnegie Mellon University and M.S. and B.S.
degrees in physics from the Technion-Israel Institute of Technology. Dr.
Sharfman also serves as a Director of Commtouch Software Ltd.

Ignacio Fanlo has been Chief Operating and Financial Officer of DealTime
since August 1999. During the period from 1998 to 1999, he managed a private
investment portfolio. From 1993 to 1998, Mr. Fanlo was Managing Director in
charge of all securitized debt trading and capital markets for Morgan Stanley
Dean Witter, with responsibility for a $20 billion balance sheet. Prior to
joining Morgan Stanley, Mr. Fanlo headed mortgage-backed trading at JP Morgan.
Mr. Fanlo holds a B.S.E. in chemical engineering from Princeton University.

Amir Ashkenazi co-founded DealTime in 1997 and has been Chief Technical
Officer since January 1998. He also served as DealTime's President from 1997 to
1999 and as a Director from inception to February 2000. As Chief Technical
Officer, Mr. Ashkenazi leads our product definition and development efforts.
From 1995 to 1997, Mr. Ashkenazi worked for Commtouch Software Ltd., where he
led the development of the company's first consumer product, a
multimedia-enabled e-mail package. Mr. Ashkenazi also worked for Interact
Multimedia in Israel from 1993 to 1995, where he was involved in the development
of multimedia CD-ROM titles, games, authoring tools and object-oriented
compilers. Mr. Ashkenazi studied computer science and economics at Tel Aviv
University.

Lance Podell joined DealTime in June 1999 as Vice President of Marketing
and Business Development and since November 1999 has served as Chief Marketing
Officer. Mr. Podell has 13 years of experience in

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business development, consumer marketing and high-level selling. From 1998 to
1999, Mr. Podell had an interactive consulting practice, in which he most
recently worked with Publishers' Clearing House as acting General Manager of
Interactive Services. During 1998, he also served as Vice President of Business
Development and Marketing for Savatar, an interactive advertising agency. Mr.
Podell also led business development and advertising for US West's Media One
Group Interactive Services Division from 1995 to 1997 and was the Director of
Business Development for Ogilvy & Mather Interactive prior to that time. Mr.
Podell holds a B.A. from Lafayette College and an M.B.A. from Harvard Business
School.

Ezra Katzen has been General Counsel and Secretary of DealTime since March
2000. From 1998 through March 2000, he was a partner in the law firm of Meitar,
Liquornik, Geva & Co. of Ramat Gan, Israel, where he specialized in corporate
law and corporate finance for high tech companies. From 1993 until 1998, Mr.
Katzen was a partner in the Tel Aviv law firm of I. Fischer & Co. Prior to that
time, he served as General Counsel to Teledata Communications Ltd. of Herzlia,
Israel. Mr. Katzen is a member of the bars of New York (since 1981) and Israel
(since 1990). He holds a B.A. from the University of Cincinnati and a J.D. from
the University of Chicago.

John P. Connaughton has been a Director of DealTime since February 2000.
Since 1989, he has been affiliated with Bain Capital, Inc., a private equity
firm that manages several pools of capital including private equity, high-yield
assets, mezzanine capital and public equity. He has served as a Managing
Director of Bain since 1997. Mr. Connaughton also serves as a Director of
Stericycle, Inc.

Michael Eisenberg has been a Director of DealTime since August 1998. Mr.
Eisenberg has been a partner in Israel Seed Partners since July 1997. From 1995
to 1997, he worked for Jerusalem Global, a leading Israeli technology investment
bank, as Vice President of investment banking. While at Jerusalem Global, he
completed numerous private placements for Israeli technology companies in the
Internet, software and communications areas. In addition, he initiated and was
the primary liaison for Jerusalem Global's partnership with Montgomery
Securities and was the primary liaison with the U.S. venture capital community.
From 1993 to 1995, he was Director of Israel Operations at Marttila & Kiley
Inc., a U.S. consulting firm.

Christopher Saridakis has been a Director of DealTime since October 1999.
Since 1997, Mr. Saridakis has served as Vice President and General Manager of
DoubleClick's DART technology division, where he is responsible for technology
sales and product innovations. From 1993 to 1997, Mr. Saridakis was Director of
new products and business development for enterprise solutions at Reuters
America, Inc. During his tenure at Reuters, Mr. Saridakis oversaw a global sales
team and managed 20 products in development. Mr. Saridakis worked at Lehman
Brothers Inc. from 1991 to 1993 as the Assistant Vice President for the central
funding desk. He started his career at Marsh & McLennan Co., Inc. in corporate
treasury and risk management.

Eric Semler has been a Director of DealTime since October 1999. Mr. Semler
joined Georgica Advisors LLC in May 1998. From 1997 to 1998, Mr. Semler was a
principal in the media and communications group at Montgomery Securities. From
1994 to 1997, Mr. Semler was an associate at BT Wolfensohn, a mergers and
acquisitions boutique.

Matthew A. Smith has been a Director of DealTime since January 1999. Mr.
Smith is Managing General Partner and a founder of Odeon Capital Partners, where
he has served since 1998. Previously, he was a general partner of Wheatley
Partners LP from 1996 to 1998, where he was responsible for identifying,
negotiating and managing investment positions in information technology
companies. Also, from 1994 to 1998, Mr. Smith served as an investment analyst
with Applewood Associates and 21st Century Communications Partners, LP, where he
specialized in information technology companies. He previously served as an
investment analyst for Woodland Partners, LP, specializing in software
investments.

BOARD OF DIRECTORS

External Directors

We are subject to the provisions of the new Israeli Companies Law,
5739-1999, which became effective on February 1, 2000. Under the Companies Law,
companies incorporated under the laws of Israel whose

38
<PAGE> 45

shares have been offered to the public in or outside of Israel are required to
appoint two external directors. The Companies Law provides that a person may not
be appointed as an external director if the person or the person's relative,
partner, employer or any entity under the person's control, has, as of the date
of the person's appointment to serve as external director, or had, during the
two years preceding that date, any affiliation with the company, any entity
controlling the company or any entity controlled by the company or by the
controlling entity of the company. The term affiliation includes:

- an employment relationship;

- a business or professional relationship maintained on a regular basis;

- control; and

- service as an office holder.

In addition, no person can serve as an external director if the person's
position or other business creates, or may create, conflict of interests with
the person's responsibilities as an external director or may otherwise interfere
with the person's ability to serve as an external director. Until the lapse of
two years from termination of office, a company may not engage an external
director to serve as an office holder and cannot employ or receive services from
that person, either directly or indirectly, including through a corporation
controlled by that person.

External directors are to be elected by a majority vote at a shareholders'
meeting, provided that either: (a) the majority of shares voted at the meeting,
including at least one third of the shares of non-controlling shareholders voted
at the meeting, vote in favor of the election; or (b) the total number of shares
of non-controlling shareholders voted against the election of the external
director does not exceed one percent of the aggregate voting rights in the
company.

The initial term of an external director is three years and may be extended
for an additional three years. External directors may be removed only by the
same percentage of shareholders as is required for their election, or by a
court, and then only if the external directors cease to meet the statutory
qualifications for their appointment or if they violate their duty of loyalty to
the company. Each committee of a company's board of directors is required to
include at least one external director.

An external director is entitled to compensation as provided in regulations
adopted under the Companies Law and is otherwise prohibited from receiving any
other compensation, directly or indirectly, in connection with service provided
as an external director.

Under the provisions of the Companies Law, we are required to elect the
initial external directors at our shareholders meeting within three months of
the effective date of this prospectus. We intend to elect two directors as
external directors.

Independent Directors

Upon consummation of this offering, our ordinary shares will be listed for
quotation on Nasdaq National Market and we will be subject to the rules of the
Nasdaq National Market applicable to listed companies. Under the Nasdaq rules,
we are required to appoint a minimum of three independent directors. The
independence standard under the Nasdaq rules excludes any person who is a
current or former employee of a company or of any of its affiliates, as well as
any immediate family member of an executive officer of a company or of any of
its affiliates. Three of our current directors meet the independence standard of
the Nasdaq rules.

Election of Directors

Our articles of association provide that our board of directors will have
no more than nine directors. Prior to this offering, several of our directors
were appointed by specific classes of our existing preferred shares pursuant to
the Amended and Restated Shareholders Rights Agreement dated February 8, 2000
and our articles of association. The rights of specific classes of our existing
preferred shares will terminate upon closing of this offering. Following this
offering directors will be elected by plurality of the votes cast represented at
a shareholders meeting.

39
<PAGE> 46

Our articles of association provide that a director may appoint, by written
notice to us, any individual, whether or not the person is then a member of the
board of directors, to serve as an alternate director. Any alternate director
will have all of the rights and obligations of the director appointing him,
except the power to appoint an alternate, unless otherwise specifically provided
for in the appointment of the alternate. The alternate director may not act at
any meeting at which the director appointing him is present. The alternate
director may act as an alternate for several directors and have the
corresponding number of votes. Unless the time period or scope of any
appointment is limited by the appointing director, the appointment is effective
for all purposes and for an indefinite time.

Audit Committee Under Israeli Law and Nasdaq Rules

Under the Companies Law, the board of directors of any company that is
required to nominate external directors must also appoint an audit committee,
comprised of at least three directors including all of the external directors,
but excluding:

- the chairman of the board of directors;

- any controlling shareholder or a relative of a controlling shareholder;
and

- any director employed by the company or who provides services to the
company on a regular basis.

The role of the audit committee under the Companies Law is to detect
defects in the management of the company's business through, among other things,
consultation with the Company's internal or external auditor and to suggest to
the board methods to correct those defects. In addition, the approval of the
audit committee is required to effect specified actions and transactions with
office holders, controlling shareholders and third parties in which they have a
personal interest.

An audit committee may not approve an action or a transaction with an
office holder or a controlling shareholder or a third party in which they have a
personal interest unless at the time of approval the two external directors are
serving as members of the audit committee. In addition, at least one of the
external directors must be present at the meeting in which an approval was
granted. We intend to appoint the external directors elected under the Companies
Law to our audit committee. See "Board Committees" below for information
relating to our audit committee.

Nasdaq requires that our board of directors contain an audit committee
consisting of at least three independent directors, all of whom are financially
literate and one of whom has accounting or related financial management
expertise. The responsibilities of the audit committee under the Nasdaq rules
include, among other things, an evaluation of the degree of independence of the
company's outside auditors. Our current audit committee complies with Nasdaq
rules. In addition, we have adopted an audit committee charter in compliance
with Nasdaq rules.

Internal Auditor

The Companies Law also requires us to appoint an internal auditor nominated
by the audit committee. The role of the internal auditor is to examine, among
other matters, whether the company's actions comply with the law and orderly
business procedure. Under the Companies Law, the internal auditor may not be an
interested party, an office holder, or an affiliate, or a relative of an
interested party, an office holder or affiliate, nor may the internal auditor be
the company's independent accountant or its representative. We intend to appoint
an internal auditor in accordance with the requirements of the Companies Law.

APPROVAL OF SPECIFIED RELATED PARTY TRANSACTIONS UNDER ISRAELI LAW

The Companies Law imposes a duty of care and a duty of loyalty on all of a
company's office holders as defined below, including directors and executive
officers. The duty of care requires an office holder to act with the level of
care which a reasonable office holder in the same position would have acted
under the same circumstances. The duty of loyalty generally requires an office
holder to act in good faith and for the good of the company. An "office holder"
as defined in the Companies Law is a director, a general manager, a chief

40
<PAGE> 47

executive officer, a deputy general manager, a vice general manager, other
managers directly subordinate to the general manager and any person who fills
one of the above positions without regard to title. Each person listed in the
table under "Directors and Executive Officers" above is an office holder under
Israeli law.

The Companies Law requires that an office holder of a company promptly
disclose any personal interest that he may have and all related material
information known to him, in connection with any existing or proposed
transaction by the company. Once an office holder complies with these disclosure
requirements, the board of directors may approve a transaction between the
company and the office holder, or a third party in which an office holder has a
personal interest, unless the articles of association provide otherwise. A
transaction that is adverse to the company's interest cannot be approved. If the
transaction is an extraordinary transaction under the Companies Law, then, in
addition to any approval stipulated by the articles of association, it also
requires audit committee approval before board approval and, in specified
circumstances, subsequent shareholder approval.

Under the Companies Law, the disclosure requirements which apply to an
office holder also apply to a controlling shareholder of a public company. A
controlling shareholder includes a shareholder that holds 25% or more of the
voting rights in a public company if no other shareholder owns more than 50% of
the voting rights in the company. Extraordinary transactions with a controlling
shareholder or in which a controlling shareholder has a personal interest, and
the terms of compensation of a controlling shareholder who is an office holder,
require the approval of the audit committee, the board of directors and the
shareholders of the company. The shareholder approval requires that: (a) the
majority of shares voted at the meeting, including at least one third of the
shares of disinterested shareholders voted at the meeting, vote in favor of the
transaction; or (b) the total number of shares of disinterested shareholders
voted against the transaction does not exceed one percent of the aggregate
voting rights in the company.

For information concerning the direct and indirect personal interests of
certain of our office holders and principal shareholders in specified
transactions with us, see the section of this prospectus entitled "Related Party
Transactions."

EXCULPATION, INSURANCE AND INDEMNIFICATION OF DIRECTORS AND OFFICERS

Under the Companies Law, an Israeli company may not exempt an office holder
from liability with respect to a breach of his duty of loyalty, but may exempt
in advance an office holder from his liability to the company, in whole or in
part, with respect to a breach of his duty of care. Under the Companies Law, a
company may not indemnify an office holder, nor enter into an insurance contract
which would provide coverage for any monetary liability incurred as a result of
any of the following:

- a breach by the office holder of his duty of loyalty unless the office
holder acted in good faith and had a reasonable basis to believe that the
act would not prejudice the company;

- a breach by the office holder of his duty of care if such breach was done
intentionally or in disregard of the circumstances of the breach or its
consequences;

- any act or omission done with the intent to derive an illegal personal
benefit; or

- any fine levied against the office holder as a result of a criminal
offense.

Office Holder Insurance

Our articles of association provide that, subject to the provisions of the
Companies Law, we may enter into a contract for the insurance of the liability
of any of our office holders with respect to:

- a breach of his duty of care to us or to another person;

- a breach of his duty of loyalty to us, provided that the office holder
acted in good faith and had reasonable cause to assume that his act would
not prejudice our interests; or

- a financial liability imposed upon him in favor of another person
concerning an act performed by him in his capacity as an office holder.

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<PAGE> 48

Indemnification of Office Holders

Our articles of association provide that we may indemnify an office holder
against:

- a financial liability imposed on him in favor of another person by any
judgment, including a settlement or an arbitrator's award approved by a
court concerning an act performed in his capacity as an office holder;
and

- reasonable litigation expenses, including attorneys' fees, expended by
the office holder or charged to him by a court, in proceedings we
institute against him or instituted on our behalf or by another person,
or in a criminal charge from which he was acquitted, or a criminal charge
in which he was convicted for a criminal offense that does not require
proof of intent, in each case relating to an act performed in his
capacity as an office holder.

Our articles of association will be amended to include:

- a provision authorizing us to grant in advance an undertaking to
indemnify an office holder, provided that the undertaking is limited to
types of events which the board of directors deems to be anticipated and
limited to an amount determined by the board of directors to be
reasonable under the circumstances; and

- a provision authorizing us to retroactively indemnify an office holder.

Required Approvals

In addition, under the Companies Law, indemnification of, and procurement
of insurance coverage for, our office holders must be approved by our audit
committee and our board of directors and, in specified circumstances, by our
shareholders.

We have obtained directors and officers liability insurance.

BOARD COMMITTEES

Our compensation committee consists of Messrs. Eisenberg and Smith. The
compensation committee makes recommendations to the board of directors regarding
the various incentive compensation and benefit plans and determines salaries for
the executive officers and incentive compensation for employees.

Our audit committee consists of Messrs. Connaughton, Semler and Smith. The
audit committee makes recommendations to the board of directors regarding the
selection of independent public accountants, reviews the results and scope of
the audit and other services provided by our independent public accountants and
reviews and evaluates our control functions.

COMPENSATION OF DIRECTORS

Members of our board of directors who are not executive officers do not
currently receive any cash compensation for serving on the board of directors or
any committee of the board. Our directors, however, are reimbursed for the
expenses they incur in attending meetings of the board or board committees.

Under the Companies Law, the board of directors must approve all
compensation arrangements of office holders who are not directors. Director's
compensation arrangements also require audit committee approval before board
approval and subsequent shareholder approval. In December 1999, we issued
options to purchase 45,000 ordinary shares to Christopher Saridakis. These
options have an exercise price of $1.00 per share, vest over a three year period
and expire in December 2009.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No interlocking relationship exists between our board of directors and the
board of directors or compensation committee of any other company, nor has any
such interlocking relationship existed in the past.

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<PAGE> 49

EXECUTIVE COMPENSATION

The following table sets forth information for the fiscal year ended
December 31, 1999 concerning the compensation we paid to our Chief Executive
Officer and four highest paid executive officers, the Named Officers.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- -------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- --------------------------- -------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Daniel T. Ciporin...................... $190,750 $100,000 $ -- 1,621,510 $ --
President and Chief Executive Officer
Nahum Sharfman, Ph.D................... 132,445 -- 41,987(3) -- --
Chairman and Co-Founder
Ignacio Fanlo.......................... 69,375 26,458 -- 650,000 --
Chief Operating and Financial Officer
(1)
Amir Ashkenazi......................... 128,024 -- 48,782(4) -- 38,968(5)
Chief Technology Officer and
Co-Founder
Lance Podell........................... 83,750 30,000 -- 400,000 --
Chief Marketing Officer (2)
</TABLE>

- ---------------
(1) Mr. Fanlo started employment with us in August 1999.

(2) Mr. Podell started employment with us in June 1999.

(3) Amount represents a car allowance and contributions to executive benefits
plan.

(4) Amount represents reimbursed housing and car allowances and contributions to
executive benefits plan.

(5) Amount represents reimbursed relocation expenses.

OPTION INFORMATION

Option Grants in Last Fiscal Year

The following table contains information concerning the stock option grants
made to each of the Named Officers in 1999. Unless otherwise noted, 25% of each
stock option grant vests on the first anniversary of the grant date and the
remaining balance vests in equal monthly installments over the next 36 months
and has a term of ten years. The per share exercise price of all options granted
to our Named Officers represents the fair market value of our ordinary shares on
the grant date.

43
<PAGE> 50

Amounts described in the following table under the heading "Potential
Realizable Value at Assumed Rates of Share Price Appreciation for Option Term"
represent hypothetical gains that could be achieved for the options if exercised
at the end of the option term. These gains are based on assumed rates of stock
appreciation of 5% and 10% compounded annually from the date the options were
granted to their expiration date. Actual gains, if any, on share option
exercises will depend on the future performance of the ordinary shares and the
date on which the options are exercised. No gain to the optionees is possible
without an appreciation in share price, which will benefit all shareholders
commensurately.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF SHARE
SECURITIES % OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED FOR OPTION TERM
OPTIONS TO EMPLOYEES EXERCISE EXPIRATION ----------------------
GRANTED IN 1999(1) PRICE PER SHARE DATE 5% 10%
---------- --------------- --------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Daniel T. Ciporin......... 1,521,510(2)(3) 36.8% $0.06 1/8/09 $60,860 $152,151
100,000(3) 2.4 0.75 11/30/09 47,000 120,000
Nahum Sharfman, Ph.D...... -- -- -- -- -- --
Ignacio Fanlo............. 500,000(3)(4) 12.1 0.26 8/15/09 80,000 205,000
150,000(3) 3.6 0.75 11/30/09 70,500 180,000
Amir Ashkenazi............ -- -- -- -- -- --
Lance Podell.............. 300,000(3) 7.3 0.26 6/15/09 48,000 123,000
50,000 1.2 0.50 11/2/09 15,500 40,000
50,000 1.2 0.50 11/18/09 15,500 40,000
</TABLE>

- ------------
(1) Based on a total of 4,133,167 options granted under our stock option plan.

(2) Under the terms of his option grant, Mr. Ciporin is entitled to a special
one-time vesting of 190,188 options upon the later of January 8, 2000 or the
effective date of our initial public offering. Thereafter, any remaining
unvested options vest at a rate of 31,698 per month.

(3) 50% of these options will vest immediately upon a change of control or if we
are merged into another company.

(4) Under the terms of his option grant, Mr. Fanlo is entitled to a special
one-time vesting of 62,502 options upon the later of August 15, 2000 or the
effective date of our initial public offering. Thereafter, any remaining
unvested options vest at a rate of 10,417 per month.

44
<PAGE> 51

Year-End Option Values

No options were exercised by the executive officers during the fiscal year
ended December 31, 1999. The following table provides certain information
concerning options granted by us as of December 31, 1999, with respect to each
of the executive officers.

OPTION GRANTS IN 1999

<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS HELD AT IN-THE-MONEY OPTIONS HELD AT
DECEMBER 31, 1999 DECEMBER 31, 1999(1)
-------------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C>
Daniel T. Ciporin.................... -- 1,621,510 -- $1,455,219
Nahum Sharfman, Ph.D. ............... -- -- -- --
Ignacio Fanlo........................ -- 650,000 -- 407,500
Amir Ashkenazi....................... -- -- -- --
Lance Podell......................... -- 400,000 -- 272,000
</TABLE>

- ------------
(1) Based on the fair market value of our ordinary shares as determined by our
board of directors at the end of 1999 of $1.00 per share, less the exercise
price payable for such shares.

Option Plan

We currently maintain a stock option plan for the benefit of our employees,
directors and consultants. The purpose of our option plan is to afford an
incentive to employees, directors and consultants of DealTime and our
subsidiaries to acquire a proprietary interest in our share capital, to continue
as officers, directors, employees and consultants, to increase their efforts on
behalf of us and to promote the success of our business.

Pursuant to our stock option plan, we have reserved 6,100,000 ordinary
shares for issuance. We intend to increase to 8,000,000 the number of ordinary
shares reserved for issuance under the stock option plan. Options to purchase
4,117,667 ordinary shares are outstanding under our option plan, and we expect
that 3,882,333 additional ordinary shares will be available for grants of
additional options. The average exercise price of options outstanding under our
stock option plan is $0.27.

Our stock option plan is administered by the compensation committee of our
board of directors, or by our board of directors if we cease to have a
compensation committee. The exercise price of incentive stock options is
determined by our board of directors but may not be less than the fair market
value of the ordinary shares. The vesting schedule of the options is also
determined by our board of directors, but generally the options vest over a
four-year period. Each option granted under the option plan is exercisable until
ten years after the date of grant.

EMPLOYMENT AGREEMENTS

We have entered into employment agreements with our President and Chief
Executive Officer and our Chief Operating and Financial Officer. These
agreements include provisions relating to the assignment of intellectual
property rights to us, non-competition and confidentiality. The agreements with
Messrs. Ciporin and Fanlo provide for payment of 50% of the annual salary and
bonuses (i) upon termination without cause or resignation for good reason under
specified conditions and (ii) upon termination without cause prior to the end of
a 120-day period after our initial public offering of securities. We also have
entered into an employment agreement with our Chief Marketing Officer. Our
agreement with Mr. Podell provides for payment of 25% of his total compensation
upon termination without cause or for good reason.

RELATED PARTY TRANSACTIONS

In connection with our employment agreement with Daniel T. Ciporin, our
President and Chief Executive Officer, we loaned $100,000 to Mr. Ciporin on
January 8, 1999. This loan bears interest at a rate of 7% per annum and is due
upon the sooner of December 31, 2001 and the termination of Mr. Ciporin's
employment. However, we have agreed to forgive repayment of this loan as of
March 31, 2000.

We have granted registration rights to holders of preferred shares
outstanding prior to consummation of this offering and to our co-founders, Nahum
Sharfman and Amir Ashkenazi. See "Description of Ordinary Shares -- Registration
Rights" for additional details.

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<PAGE> 52

PRINCIPAL SHAREHOLDERS

The following table sets forth information known to us regarding the
beneficial ownership, as of March 1, 2000, of our share capital for (i) each
person or group who beneficially owns more than 5% of our ordinary shares on an
as-converted basis, (ii) each of our directors and executive officers and (iii)
all of our directors and executive officers as a group. The address of each
named holder, director and executive officer is c/o DealTime.com Ltd., 1 Zoran
Street, Netanya, Israel. We base the number of shares to be owned after the
offering upon expressions of interest received from our existing shareholders
that may change prior to the closing of this offering.

<TABLE>
<CAPTION>
ORDINARY AND
ORDINARY SHARES ORDINARY-EQUIVALENT
BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THE OWNED AFTER THE
OFFERING OFFERING
----------------------- --------------------
NAME NUMBER PERCENT(1) NUMBER PERCENT
---- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Odeon Capital Partners L.P. ................................ 4,050,660 12.7%
Israel Seed II L.P. ........................................ 3,600,391 11.3
Nomura International plc.................................... 3,558,989 11.0
WaterView Partners L.P. .................................... 1,790,264 5.6
Bain Capital Integral Investors LLC......................... 1,730,104 5.4
Daniel T. Ciporin(2)........................................ 507,170 1.6
Nahum Sharfman, Ph.D........................................ 2,707,970 8.5
Ignacio Fanlo............................................... -- --
Amir Ashkenazi.............................................. 2,232,720 7.0
Lance Podell................................................ -- --
Ezra Katzen(3).............................................. 64,246 *
John P. Connaughton(4)...................................... 1,730,104 5.4
Michael Eisenberg(5)........................................ 3,600,391 11.3
Christopher Saridakis(2).................................... -- --
Eric Semler(6).............................................. 1,790,264 5.6
Matthew A. Smith(7)......................................... 4,072,090 12.7
All executive officers and directors as a group (11
persons).................................................. 16,749,955.. 51.2
</TABLE>

- ------------
* Represents beneficial ownership of less than 1% of the outstanding ordinary
shares.

(1) Applicable percentage ownership in the following table is based on
31,809,941 ordinary-equivalent shares outstanding immediately prior to the
consummation of this offering. Beneficial ownership of ordinary shares is
determined in accordance with the rules of the Securities and Exchange
Commission and generally includes any ordinary shares over which a person
exercises sole or shared voting or investment power, or as to which a person
has the right to acquire ownership at any time within 60 days after the date
of determination. Shares that a person or group has the right to acquire
within 60 days after the date of this Prospectus pursuant to the exercise of
options or warrants are deemed to be outstanding for the purpose of
computing the percentage ownership of such person or group but are not
deemed outstanding for the purpose of computing the percentage ownership of
any other person or group listed in this table. Except as otherwise
indicated, and subject to applicable community property laws, we believe
that the persons named in the table have sole voting and investment power
with respect to all ordinary shares held by them.

(2) This number represents options to purchase ordinary shares.

(3) Mr. Katzen beneficially owns 64,246 shares through M.L. Trust Company Ltd.

(4) Mr. Connaughton is affiliated with Bain Capital Integral Investors LLC. As
such, he may be deemed to share voting power with respect to the shares
owned by Bain Capital Integral Investors LLC. Mr. Connaughton expressly
disclaims beneficial ownership of the shares owned by Bain Capital Integral
Investors LLC.

(5) Mr. Eisenberg is affiliated with Israel Seed II L.P. As such, he may be
deemed to share voting power with respect to the shares owned by Israel Seed
II L.P. Mr. Eisenberg expressly disclaims beneficial ownership of the shares
owned by Israel Seed II L.P.

(6) Mr. Semler is affiliated with WaterView Partners, L.P. As such, he may be
deemed to share voting power with respect to the shares owned by WaterView
Partners, L.P. Mr. Semler expressly disclaims beneficial ownership of the
shares owned by WaterView Partners L.P.

(7) Mr. Smith owns 21,430 shares directly. Mr. Smith is affiliated with Odeon
Capital Partners L.P. As such he may be deemed to share voting power with
respect to the 4,050,660 shares owned by Odeon Capital Partners L.P. prior
to the offering and which we expect that Odeon Capital Partners L.P. will
own immediately after closing of this offering.

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<PAGE> 53

DESCRIPTION OF ORDINARY SHARES

Prior to consummation of this offering, our authorized share capital
consisted of 28,304,770 ordinary shares, 4,738,080 Series A convertible
preferred shares, 4,457,150 Series B convertible preferred shares, 12,500,000
Series C convertible preferred shares and 10,200,000 Series D convertible
preferred shares, all of which have a par value of NIS 0.01 per share.

We are currently subject to the provisions of the Companies Law which
became effective on February 1, 2000.

All of our issued and outstanding shares are, and the ordinary shares when
issued and paid for will be, duly authorized and validly issued, fully paid and
non-assessable. Neither our articles of association, nor the laws of the State
of Israel, restrict in any way the ownership or voting of ordinary shares by
non-residents of Israel, except with respect to citizens of countries which are
in a state of war with Israel.

The Series A shares, Series B shares, Series C shares and Series D shares
will automatically convert into ordinary shares upon the consummation of this
offering.

TRANSFER OF SHARES

Fully paid ordinary shares are issued in registered form and may be freely
transferred pursuant to our articles of association unless such transfer is
restricted or prohibited by another instrument.

ELECTION OF DIRECTORS

Our ordinary shares do not have cumulative voting rights in the election of
directors. As a result, the holders of a majority of the voting power
represented at a shareholders' meeting have the power to elect all of our
directors.

DIVIDEND AND LIQUIDATION RIGHTS

We may declare a dividend to be paid to the holders of ordinary shares
according to their rights and interests in our profits. In the event of our
liquidation, after satisfaction of liabilities to creditors, our assets will be
distributed to the holders of ordinary shares in proportion to the nominal value
of their respective holdings. Such right may be affected by the grant of
preferential dividend or distribution rights to the holders of a class of shares
with preferential rights that may be authorized in the future. The board of
directors may declare interim dividends and propose the final dividend with
respect to any fiscal year only out of our profits under the Companies Law.
Declaration of a final dividend requires approval by an ordinary shareholders'
resolution, which may decrease but not increase the amount proposed by the board
of directors. Under the Companies Law, the declaration of a dividend does not
require the approval of the shareholders of the company, unless the company's
articles of association require otherwise.

NOTICES

Each shareholder of record is entitled to receive at least seven days'
prior notice of an ordinary shareholders' meeting and at least 21 days' prior
notice of any shareholders' meeting in which a special resolution is to be
adopted. Under the Companies Law, unless otherwise provided in the company's
articles of association or by applicable law, all shareholders' meetings require
prior notice of at least 21 days.

VOTING, SHAREHOLDER MEETINGS AND RESOLUTIONS

Holders of ordinary shares have one vote for each ordinary share held on
all matters submitted to a vote of shareholders. This right may be affected if
shares with special or preferential voting rights are authorized in the future.
The quorum required for an ordinary meeting of shareholders consists of at least
four shareholders representing each class of shares present in person or by
proxy who hold or represent between them at least 51% of the issued share
capital. A meeting adjourned for lack of a quorum generally is adjourned to the
same day in the following week at the same time and place or any time and place
as the

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chairman of the meeting may determine with the consent of the holders of a
majority of the voting power represented at such meeting. At such reconvened
meeting the required quorum consists of any two members present in person or by
proxy.

Most shareholder resolutions, including resolutions for the election of
directors, the declaration of dividends, the appointment of auditors or the
approval of transactions with office holders, will be deemed adopted if approved
by the holders of a majority of the voting power represented at the meeting, in
person or by proxy, and voting on the resolution.

Our Articles of Association provide that actions such as amending the
Memorandum or Articles of Association, changing our name, making changes in our
capital structure (such as a reduction of capital, increase of capital or share
split), merger or consolidation, voluntary winding-up, authorizing a new class
of shares or changing special rights of a class of shares require adoption of a
special resolution. Passing a special resolution requires approval by the
holders of not less than 75% of the voting power of our share capital
represented in person or by proxy at the meeting and voting on the resolution.
Under the Companies Law, many of these actions (including, amending the articles
of association, making changes in the capital structure, approving various
interested party transactions and approving merger transactions) may be effected
at a shareholder meeting by a simple majority of the voting power represented at
the meeting and voting on the matter. In order for the shareholder voting
requirements contained in the Companies Law to apply to us, we must specifically
amend our Articles of Association to that effect by approval of 75% of the
voting power represented at the shareholders meeting.

Under the Companies Law, a shareholder has a duty to act in good faith
towards the company and other shareholders and to refrain from abusing his power
in the company, including among other things when voting at the general meeting
of shareholders on the following matters:

- any amendment to the articles of association;

- an increase of the authorized share capital of the company;

- a merger; or

- approval of some of the acts and transactions which require shareholder
approval.

In addition, a shareholder has the general duty to refrain from depriving
other shareholders of their rights. Furthermore, any controlling shareholder,
any shareholder who knows that he possesses the power to determine the outcome
of a shareholder vote and any shareholder who, pursuant to the articles of
association, has the power to appoint an office holder is under a duty to act in
fairness towards the company. The Companies Law does not describe the substance
of this duty.

The chairman of the board of directors presides at each of our general
meetings. The chairman of the board of directors is not entitled to vote at a
general meeting, except that if he is a shareholder he may cast his votes in the
same manner as any other shareholder.

MODIFICATION OF CLASS RIGHTS

Our Articles of Association provide that the rights attached to any class
of shares, such as voting rights and rights to dividends, may be modified or
abrogated only by a special resolution subject to the consent in writing of the
holders of the all issued shares of the affected class, or with the adoption of
a special resolution passed at a separate general meeting of the shareholders of
such class. Under the Companies Law, changes to the rights of a particular class
of shares may be modified or abrogated by effecting the necessary amendment to
the articles of association, provided that the affected shareholders approve the
change by a class meeting in which a majority of the voting power of the class
represented at the meeting and voting on the matter approve the change. In order
for the shareholder voting requirements contained in the Companies Law to apply
to us, we must specifically amend our Articles of Association to that effect by
approval of 75% of the voting power represented at a shareholder meeting or a
meeting of the holders of a particular class of shares. We have currently chosen
not to adopt this amendment.

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<PAGE> 55

REGISTRATION RIGHTS

We have agreed to cause a registration statement to be filed with the SEC
upon the demand of the holders of 20% of the preferred shares outstanding prior
to this offering made on or after the 120th day following the effective date of
this offering. We are obligated to use our best efforts to cause this
registration statement to become effective within 61 days of that demand and, if
effected in connection with an underwritten public offering, to keep it
effective until the distribution of shares in that offering is complete, or for
180 days if effected otherwise. We have the right, exercisable by the 31st day
after that demand, to nullify it in order to file a registration statement for
an offering of our equity securities for our own account.

We can also be obligated to effect two other demand registrations. The
second and third demands will not be effective, however, unless the holders of
at least 10% of the ordinary shares issued upon conversion of the Series D
shares, other than those holders who also held Series A shares, Series B shares
or Series C shares, join in the request. The second and third demands will not
be effective if we have filed a registration statement for an offering of our
equity securities for our own account within the preceding 180 days, or for the
account of others within the preceding 90 days.

Holders of ordinary shares issued upon conversion of our preferred shares
will also be entitled, during any 12-month period, to two shelf registrations
once we become eligible to use Form S-3 under the Securities Act of 1933, so
long as the aggregate net proceeds from the sale of the ordinary shares to be
included in the registration is at least $5 million.

If all demand registrations have been utilized and the holders of at least
75% of the unregistered ordinary shares issued upon conversion of (1) our Series
A shares and Series B shares, (2) our Series C shares or (3) our Series D shares
have not participated in any of the demand registrations, then these groups of
holders will each be entitled to an additional shelf registration provided that
we are eligible to use Form S-3.

In addition, our co-founders, Nahum Sharfman and Amir Ashkenazi, have the
right to require us to register their ordinary shares after we have effected at
least two registrations on behalf of holders of ordinary shares issued upon
conversion of our preferred shares.

These registration rights will terminate three years after the consummation
of this offering.

MERGERS AND ACQUISITIONS UNDER ISRAELI LAW

The Companies Law requires that each company that is party to a merger
approve the transaction by the vote of its board of directors. The law also
requires approval by the majority of each of the merging companies' outstanding
shares, excluding shares held by the other merging company or any person holding
at least 25% of the other merging company, at a shareholders' meeting called on
at least 21 days' prior notice. The Companies Law does not require court
approval of a merger other than in specified situations. However, upon the
request of a creditor of either merging company to a proposed merger, the court
may delay or prevent the merger if it believes that a reasonable concern exists
that as a result of the merger the surviving company will be unable to satisfy
the obligations of any of the parties to the merger. In addition, a merger may
not be completed unless at least 70 days have passed from the time that the
requisite proposals for approval of the merger have been filed with the Israeli
Registrar of Companies. Our articles of association require a vote of at least
75% of the shareholders to approve a merger. Notwithstanding the approval
requirements set forth in the Companies Law, companies like ours that were
incorporated prior to the Companies Law coming into effect must specifically
amend their articles of association to provide for the shareholder voting
requirements contained in the Companies Law. The Companies Law provides that
adoption of this amendment requires approval of 75% of the voting power
represented at the shareholders' meeting at which the matter is considered.

The Companies Law also provides that an acquisition of shares in a public
company must be made by means of a tender offer if as a result of the
acquisition the purchaser would become a 25% shareholder of the company. This
rule does not apply if there is already another 25% shareholder of the company.
Similarly, the Companies Law provides that an acquisition of shares in a public
company must be made by means of a
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<PAGE> 56

tender offer if as a result of the acquisition the purchaser would become a 45%
shareholder of the company, unless there is a 50% shareholder of the company.
These rules do not apply if the acquisition is made by way of a merger.
Regulations promulgated under the Companies Law provide that these tender offer
requirements do not apply to companies whose shares are listed for trading
outside of Israel if, according to the law in the country in which the shares
are traded, including the rules and regulations of the stock exchange on which
the shares are traded, there is either a limitation on acquisition of any level
of control of the company, or the acquisition of any level of control requires
the purchaser to do so by means of a tender offer to the public. However, under
the Companies Law, if following any acquisition of shares, the acquirer holds
90% or more of the company's shares or of a class of shares, the acquisition
must be made by means of a tender offer for all of the target company's shares
or all the shares of the class, as applicable. An acquirer who wishes to
eliminate all minority shareholders must acquire 95% of all shares not held by
or for the benefit of the acquirer prior to the acquisition.

Finally, Israeli tax law treats certain acquisitions, such as a
stock-for-stock swap between an Israeli company and a foreign company, less
favorably than does U.S. tax law. For example, Israeli tax law may subject a
shareholder who exchanges his ordinary shares for shares in a foreign
corporation to immediate taxation.

LISTING

We intend to apply to have our ordinary shares quoted on the Nasdaq
National Market under the symbol "DEAL."

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our ordinary shares will be American
Stock Transfer and Trust Company. Its address is 40 Wall Street, New York, New
York 10005 and its telephone number at this location is (212) 936-5100.

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of our ordinary shares in the public market
could adversely affect prevailing market prices of our ordinary shares.
Furthermore, since no shares will be available for sale shortly after this
offering because of contractual and legal restrictions on resale described
below, sales of substantial amounts of ordinary shares in the public market
after these restrictions lapse could adversely affect the prevailing market
price and our ability to raise equity capital in the future.

Upon completion of this offering, we will have outstanding an aggregate of
ordinary shares, assuming no exercise of the underwriters'
over-allotment option. Of these shares, (i) all of the shares sold in this
offering will be freely tradeable without restriction or further registration
under the Securities Act, unless such shares are purchased by "affiliates" as
that term is defined in Rule 144 of the Securities Act, and (ii) all of the
shares outstanding prior to this offering will be "restricted securities" (as
defined in Rule 144) which may only be sold in the public market if registered
under the Securities Act or in accordance with an exemption from the
registration requirements of the Securities Act or an exemption from
registration under Rule 144 or Rule 701 of the Securities Act, which rules are
summarized below. The restricted securities will be available for sale in the
public market, subject to the volume limitations and other conditions of Rule
144, immediately upon the expiration of the 180-day lock-up period.

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The following table indicates approximately when the
ordinary shares that are not being sold in this offering, but which will be
outstanding at the time this offering is complete, will be eligible for sale
into the public market.

ELIGIBILITY OF RESTRICTED SHARES FOR SALE IN PUBLIC MARKET

<TABLE>
<S> <C>
90 days after the date of this prospectus...................
180 days after the date of this prospectus..................
</TABLE>

LOCK-UP AGREEMENTS

All of our officers and directors have signed lock-up agreements under
which they agreed not to transfer, dispose of or hedge any shares of ordinary
shares or any securities convertible into or exchangeable for shares of ordinary
shares for a period of 180 days from the date of this prospectus. Transfers or
dispositions can be made sooner with the prior written consent of FleetBoston
Robertson Stephens Inc. See "Underwriting."

RULE 144 OF THE SECURITIES ACT

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of
ordinary shares for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:

- 1% of the number of shares of ordinary shares then outstanding, which
will equal approximately shares immediately after this
offering; or

- the average weekly trading volume of the ordinary shares on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale.

Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about us.

RULE 701 OF THE SECURITIES ACT

In general, under Rule 701, any of our employees, directors, officers,
consultants or advisors who purchases shares of our ordinary shares from us in
connection with a compensatory share or option plan or other written agreement
before the effective date of this offering is entitled to resell these shares 90
days after the effective date of this offering in reliance on Rule 144, without
having to comply with certain restrictions, including the holding period,
contained in Rule 144.

The Securities and Exchange Commission has indicated that Rule 701 will
apply to typical options granted by an issuer before it becomes subject to the
reporting requirements of the Securities Exchange Act of 1934, along with the
shares acquired upon exercise of these options (including exercises after the
date of this prospectus). Securities issued in reliance on Rule 701 are
restricted securities and, subject to the contractual restrictions described
above, beginning 90 days after the date of this prospectus, may be sold by
persons other than affiliates subject only to the manner of sale provisions of
Rule 144 and by affiliates under Rule 144 without compliance with its one year
minimum holding period requirement.

SHARE OPTIONS

We intend to file a registration statement on Form S-8 under the Securities
Act covering shares of our ordinary shares reserved for issuance under our 1999
Omnibus Stock Option Plan & Restricted Stock Incentive Plan. The registration
statement on Form S-8 will become effective automatically upon filing. As of
December 31, 1999, options to purchase 4,117,667 ordinary shares were issued and
outstanding and an additional 1,982,333 ordinary shares were available for
grant.

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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following discussion is a summary of the material United States federal
income and withholding tax consequences to a purchaser of our ordinary shares in
the offering that is a U.S. holder. For purposes of the summary, a "U.S. holder"
is:

- a citizen or resident of the United States;

- a corporation created or organized in the United States or under the laws
of the United States or of any state;

- an estate, the income of which is includible in gross income for United
States federal income tax purposes regardless of its source; or

- a trust, if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more U.S.
persons have the authority to control all substantial decisions of the
trust.

The summary is for general information purposes only and is not intended as
tax advice to any particular holder. It does not purport to be a comprehensive
description of all of the tax considerations that may be relevant to a person's
decision to purchase our ordinary shares. The summary considers only U.S.
holders that will own ordinary shares as capital assets. Certain United States
federal income and withholding tax consequences to non-U.S. holders are also
discussed below.

The summary is based on current provisions of the Internal Revenue Code of
1986, as amended, current and proposed Treasury regulations promulgated
thereunder, and administrative and judicial decisions as of the date hereof, all
of which are subject to change, possibly on a retroactive basis. It does not
address all aspects of United States federal income taxation that may be
relevant to any particular U.S. holder based on such holder's individual
circumstances.

In addition, this discussion does not address the U.S. federal income tax
consequences to U.S. holders that are subject to special treatment, including
taxpayers who:

- are broker-dealers or insurance companies;

- have elected mark-to-market accounting;

- are tax-exempt organizations;

- are financial institutions or "financial services entities";

- hold ordinary shares as a part of a "straddle," "hedge" or "conversion"
transaction with other investments;

- are individual retirement or other tax-deferred accounts;

- are subject to the alternative minimum tax;

- own directly, indirectly or by attribution at least 10% of our voting
power; and

- do not use the U.S. dollar as their functional currency.

The summary does not address any aspect of United States federal gift or
estate tax, or state, local or non-United States tax laws. Additionally, the
summary does not consider the tax treatment of persons who hold ordinary shares
through a partnership or other pass-through entity.

Each prospective investor is therefore urged to consult such person's own
tax advisor with respect to the specific tax consequences to such person of
purchasing, holding or disposing of our ordinary shares.

TAXATION OF ORDINARY SHARES

Taxation of Dividends Paid on Ordinary Shares. We have never paid
dividends and we currently do not intend to pay dividends in the future. In the
event that we were to pay a dividend and subject to the
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<PAGE> 59

discussion of the passive foreign investment company rules below, a U.S. holder
would be required to include in gross income as ordinary income the amount of
any distribution paid on ordinary shares, including any Israeli taxes withheld
from the amount paid, on the date of the distribution is received to the extent
the distribution is paid out of our current or accumulated earnings and profits
as determined for United States federal income tax purposes. Distributions in
excess of such earnings and profits will be applied against and will reduce the
U.S. holder's basis in the ordinary shares and, to the extent in excess of such
basis, will be treated as capital gain. U.S. corporate holders will not be
allowed a deduction for dividends received in respect of distributions on
ordinary shares.

If a dividend distribution is paid in NIS, the amount includible in the
income of a U.S. holder will be the U.S. dollar value, on the date of receipt,
of the NIS amount distributed, regardless of whether the payment is actually
converted into U.S. dollars at that time. A U.S. holder who receives NIS and
converts the NIS into U.S. dollars subsequent to receipt will have foreign
exchange gain or loss based on any appreciation or depreciation in the value of
the NIS against the U.S. dollar. U.S. holders should consult their own tax
advisors regarding the treatment of a foreign currency gain or loss.

U.S. holders will generally have the option of claiming the amount of any
Israeli income taxes withheld at the source either as a deduction from gross
income or as a dollar-for-dollar credit against their U.S. federal income tax
liability, subject to specified conditions and limitations. Individuals who do
not claim itemized deductions but instead utilize the standard deduction, may
not claim a deduction for the amount of the Israeli income taxes withheld, but
these individuals generally may still claim a credit against their U.S. federal
income tax liability. The amount of foreign income taxes that may be claimed as
a credit in any year is subject to complex limitations and restrictions, which
must be determined on an individual basis by each holder. The total amount of
allowable foreign tax credits in any year cannot exceed the pre-credit U.S.
federal income tax liability for the year attributable to some foreign source
taxable income. A U.S. holder will be denied a foreign tax credit with respect
to Israeli income tax withheld from dividends received on the ordinary shares to
the extent such holder has not held the ordinary shares for at least 16 days of
the 30-day period beginning on the date which is 15 days before the ex-dividend
date or to the extent that such holder is under an obligation to make related
payments with respect to substantially similar or related property. Instead a
deduction may be allowed. Any days during which a U.S. holder has substantially
diminished his risk of loss on the ordinary shares are not counted toward
meeting the 16-day holding period. A dividend distribution included in ordinary
income will be treated as foreign source income and will generally be classified
as "passive income" for U.S. foreign tax credit purposes. The rules relating to
the determination of the foreign tax credit are complex and prospective
investors should consult their own tax advisors with respect thereto.

Taxation of the Disposition of Ordinary Shares. Subject to the discussion
of the PFIC rules below, upon the sale, exchange or other disposition of
ordinary shares, a U.S. holder will recognize capital gain or loss in an amount
equal to the difference between such U.S. holder's adjusted tax basis in the
ordinary shares, which is usually the cost of such shares as adjusted, and the
amount realized on the disposition. Capital gain from the sale, exchange or
other disposition of ordinary shares held more than one year is long-term
capital gain and is eligible for a maximum 20% rate of taxation for noncorporate
taxpayers. Gain or loss recognized by a U.S. holder on a sale, exchange or other
disposition of ordinary shares generally will be treated as United States source
income or loss for United States foreign tax credit purposes. However, a loss of
this type generally will be treated as a foreign source loss to the extent that
dividends were received by the U.S. holder within the 24-month period preceding
the date on which the loss was recognized. The deductibility of a capital loss
recognized on the sale, exchange or other disposition of ordinary shares is
subject to limitations. A U.S. holder who receives NIS upon the disposition of
ordinary shares and converts the NIS into U.S. dollars subsequent to receipt
will have foreign exchange gain or loss based on any appreciation or
depreciation in the value of the NIS against the U.S. dollar. U.S. holders
should consult their own tax advisors regarding the treatment of a foreign
currency gain or loss.

TAX CONSEQUENCES IF WE ARE A PASSIVE FOREIGN INVESTMENT COMPANY

We will be deemed to be a PFIC if, in general, 75% or more of our gross
income in a taxable year, including the pro rata share of the gross income of
any company, U.S. or foreign, in which we are considered
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to own 25% or more of the shares by value, is passive income. Alternatively, we
will be considered to be a PFIC if, in general, 50% or more of our assets in a
taxable year, averaged over the year and ordinarily determined based on fair
market value and including the pro rata share of the assets of any company in
which we are considered to own 25% or more of the shares by value, are held for
the production of, or produce, passive income. Passive income includes amounts
derived by reason of the temporary investment of funds raised in this offering.
If we were deemed to be a PFIC, and a U.S. holder did not make an election to
treat us as a "qualified electing fund" and no mark-to-market election were
made, each as described below, then:

- Excess distributions by us to a U.S. holder would be taxed in a special
way. "Excess distributions" are amounts received by a U.S. holder with
respect to our shares in any taxable year that exceed 125% of the average
distributions received by the U.S. holder from us in the shorter of
either the three previous years or such holder's holding period of the
ordinary shares before the present taxable year. Excess distributions
must be allocated ratably to each day that a U.S. holder has held our
shares. A U.S. holder must include amounts allocated to the current
taxable year and to any non-PFIC years in gross income as ordinary income
for that year. A U.S. holder must pay tax on amounts allocated to each
prior taxable PFIC year at the highest rate in effect for that year on
ordinary income and the tax is subject to an interest charge at the rate
applicable to deficiencies for income tax.

- The entire amount of gain that is realized by a U.S. holder upon the sale
or other disposition of ordinary shares (including in certain
circumstances any disposition that would otherwise be tax-free) will also
be considered an excess distribution and will be subject to tax as
described above.

- A U.S. holder's tax basis in shares that were acquired from a decedent
will not receive a step-up to fair market value as of the date of the
decedent's death, but instead will be equal to the decedent's basis, if
lower.

A U.S. holder of a PFIC can avoid many of the special PFIC tax rules if the
holder makes an election to treat us as a "qualified electing fund" for the
first taxable year that we are a PFIC in which such holder owns ordinary shares
and if we comply with reporting requirements. Instead, a shareholder of a
qualified electing fund is required for each taxable year to include in income a
pro rata share of the ordinary earnings of the qualified electing fund as
ordinary income and a pro rata share of the net capital gain of the qualified
electing fund as long-term capital gain, whether or not such amounts were
distributed, subject to a separate election to defer payment of taxes, which
deferral is subject to an interest charge. We have agreed to supply U.S. holders
with the information needed to report income and gain pursuant to this election
in the event that we are classified as a PFIC. The election is made on a
shareholder-by-shareholder basis and may be revoked only with the consent of the
Internal Revenue Service ("IRS"). A shareholder makes the election by attaching
a completed IRS form 8621, including the PFIC annual information statement, to a
timely filed U.S. federal income tax return and by filing the form with the IRS
Service Center in Philadelphia, Pennsylvania. Even if an election is not made, a
shareholder in a PFIC who is a U.S. holder must file a completed IRS form 8621
every year.

Alternatively, if we were a PFIC, U.S. holder of ordinary shares may elect
to mark the shares to market annually, recognizing as ordinary income or loss
each year an amount equal to the difference as of the close of the taxable year
between the fair market value of the PFIC shares and the U.S. holder's adjusted
tax basis in the PFIC shares. Losses would be allowed only to the extent of net
mark-to-market gain previously included by the U.S. holder under the election
for prior taxable years. If the mark-to-market election were made, then the
rules set forth above would not apply for periods covered by the election. A
mark-to-market election is subject to complex and specific rules and
requirements.

We believe that we were not a PFIC for 1999 and, based on our current
business plans, we do not expect to become a PFIC in the foreseeable future. The
tests for determining PFIC status, however, are applied annually and it is
difficult to make accurate predictions of future income, assets and activities
which are relevant to this determination. Accordingly, we cannot be sure that we
will not be deemed to be a PFIC. A U.S. holder who holds ordinary shares during
a period in which we are a PFIC will be subject to the PFIC rules, even if we
cease to be a PFIC. If we were determined to be a PFIC with respect to a year in
which we
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had not thought that we would be so treated, we would not have provided the
information to enable U.S. holders to make a qualifying fund election.

U.S. holders are strongly urged to consult their own tax advisors regarding
the PFIC rules and the advisability of making a qualifying electing fund
election or a mark-to-market election in the event we are classified as a PFIC.

TAX CONSEQUENCES FOR NON-U.S. HOLDERS OF ORDINARY SHARES

A non-U.S. holder of ordinary shares will generally not be subject to U.S.
federal income or withholding tax (other than backup withholding) on the payment
of dividends on, and the proceeds from the disposition of, ordinary shares,
unless:

- such item is effectively connected with the conduct by the non-U.S.
holder of a trade or business in the United States and, in the case of a
resident of a country which has a treaty with the United States, such
item is attributable to a permanent establishment or, in the case of an
individual, a fixed place of business, in the United States;

- the non-U.S. holder is an individual who holds the ordinary shares as a
capital asset and is present in the United States for 183 days or more in
the taxable year of the disposition and does not qualify for an
exemption; or

- the non-U.S. holder is subject to tax pursuant to the provisions of
United States tax laws applicable to U.S. expatriates.

INFORMATION REPORTING AND BACKUP WITHHOLDING

U.S. holders generally are subject to information reporting requirements
with respect to dividends paid in the United States on ordinary shares. Under
existing regulations, such dividends are not subject to back-up withholding.
Treasury regulations effective January 1, 2001 would impose back-up withholding
at a rate of 31% on our dividends that are paid in the United States unless the
U.S. holder provides an IRS Form W-9 or otherwise establishes an exemption. U.S.
holders are subject to information reporting and back-up withholding at a rate
of 31% on proceeds from the disposition of ordinary shares unless the U.S.
holder provides an IRS form W-9 or otherwise establishes an exemption.

A non-U.S. holder may be subject to backup withholding at a rate of 31% on
dividends and proceeds from the disposition of ordinary shares unless the
non-U.S. holder provides a taxpayer identification number, certifies to such
holder's foreign status or otherwise establishes an exemption.

The amount of any back-up withholding will be allowed as a credit against
U.S. federal income tax liability and may entitle the holder to a refund,
provided the required information is furnished to the IRS.

55
<PAGE> 62

ISRAELI TAXATION AND INVESTMENT PROGRAMS

The following is a summary of the principal tax laws applicable to
companies in Israel, with reference to the effect of these laws on DealTime.com,
and Israeli government programs benefiting us or which may benefit us. This
section also contains a discussion of Israeli tax consequences to persons
acquiring shares in this offering. This summary does not discuss all
acts of Israeli tax law that may be relevant to you in light of your personal
investment circumstances or to some types of investors subject to special
treatment under Israeli law, such as businesses in Israel or persons who own,
directly or indirectly, 10% or more of our outstanding voting share capital. To
the extent that the discussion is based on new tax legislation that has not been
subject to judicial or administrative interpretation, the views expressed in
this discussion may not be accepted by the tax authorities. The discussion
should not be construed as legal or professional tax advice and is not
exhaustive of all possible tax considerations.

You are urged to consult your tax advisor as to the Israeli or other tax
consequences of the purchase, ownership and disposition of shares in this
offering, as well as the effect of any federal, state or local taxes in other
relevant countries.

GENERAL CORPORATE TAX STRUCTURE

The general corporate tax rate in Israel is currently 36%. However, the
effective tax rate payable by a company that derives income from an approved
enterprise may be considerably less. See "-- Law for the Encouragement of
Capital Investments, 1959" below.

Under the Law for the Encouragement of Industry (Taxes), 1969, which is
referred to as the Industry Encouragement Law, a company qualifies as an
industrial company if it is resident in Israel and at least 90% of its income in
a given tax year, determined in NIS, exclusive of income from some loans,
marketable securities, capital gains, interest and dividends, is derived from
industrial enterprises owned by it. An "industrial enterprise" is defined as an
enterprise whose major activity in a given tax year is industrial manufacturing.
It is unclear whether we qualify as an industrial company.

Pursuant to the Industry Encouragement Law, an industrial company is
entitled to amortize the purchase price of know-how, patents or patent rights
over eight years, beginning with the year in which the rights were first used,
and is also entitled to amortize expenses incurred in connection with the
issuance of publicly traded shares over a period of three years from the year in
which the expenses were incurred.

Moreover, industrial enterprises that receive approved enterprise status
may choose between the regular depreciation rates and accelerated rates of
depreciation applied on a straight-line basis in respect of property and
equipment, generally ranging from 200%, in respect of equipment, to 400%, in
respect of buildings, of the ordinary depreciation rates during the first five
years of service, subject to a ceiling of 20% per year with respect to
depreciation of buildings.

Qualification as an industrial company under the Industry Encouragement Law
is not conditioned upon the receipt of prior approval from any Israeli
government authority. We cannot assure you that we will qualify as an industrial
company or will be able to avail ourselves of any benefits available to
companies so qualifying.

LAW FOR THE ENCOURAGEMENT OF CAPITAL INVESTMENTS, 1959

The Law for the Encouragement of Capital Investments, 1959, which is
referred to as the Capital Investments Law, provides that capital investments by
an industrial company in a production facility or other eligible facilities may,
upon application to the Israeli Investment Center of the Ministry of Industry
and Trade, be designated as an approved enterprise. Each certificate of approval
for an approved enterprise relates to a specific investment program in the
approved enterprise, delineated both by the financial scope of the investment
and by the physical characteristics of the facility or the equipment. An
approved enterprise is entitled to benefits, including in some circumstances
Israeli government cash grants and tax benefits.

Taxable income derived from an approved enterprise is subject to a reduced
corporate tax rate of 25% for the benefit period. This income is eligible for
further reductions in tax rates depending on the percentage of the foreign
investment in the company's share capital, conferring rights to shares, profits,
voting and appointment of directors, and the percentage of the combined share
and loan capital owned by non-Israeli

56
<PAGE> 63

residents. The tax rate is 20% if the foreign investment is 49% or more but less
than 74%, 15% if the foreign investment is 74% or more but less than 90% and 10%
if the foreign investment is 90% or more. The lowest level of foreign investment
during the year will be used to determine the relevant tax rate for that year.
These tax benefits are granted for a limited period not exceeding seven years,
or 10 years for a company whose foreign investment level exceeds 25%, commencing
on the year in which the approved enterprise first generates taxable income. The
period of benefits may in no event, however, exceed the lesser of 12 years from
the year in which the production commenced and 14 years from the year of receipt
of approved enterprise status.

An approved enterprise approved after April 1, 1986 may elect to forego any
entitlement to the grants otherwise available under the Capital Investments Law
and, in lieu of the foregoing, may participate in an alternative benefits
program under which the undistributed income from the approved enterprise is
fully exempt from corporate tax for a defined period of time. The period of tax
exemption ranges between two and 10 years, depending upon the location within
Israel of the approved enterprise, commencing on the first year in which the
company generates taxable income. Grants as well as a tax exemption period of
two years are available in National Priority Region A. On expiration of the
exemption period, or upon distribution of a dividend, the approved enterprise
would be eligible for the otherwise applicable beneficial tax rates under the
Capital Investments Law for the remainder of the otherwise applicable benefits
period. We cannot assure you that the current benefit programs will continue to
be available under Israeli law or that we will qualify for benefits under the
current programs.

We have applied for approved enterprise status under the Capital
Investments Law for our investment program, under the alternative benefits
program. We have not yet received approval for this status, and the policy of
the Investment Center regarding approved enterprise status for companies whose
primary business is operating an Internet site is unclear. If approved, income
derived from our alternative benefit program would be exempt from tax for two
years, commencing on the first year in which we generate taxable income from the
approved enterprise. We cannot assure you that our applications will be approved
or that we will receive any tax benefits.

A company that has elected to participate in the alternative benefits
program and that subsequently pays a dividend out of the income derived from the
approved enterprise during the tax exemption period will be subject to corporate
tax in respect of the amount distributed, including withholding tax thereon, at
the rate that would have been applicable had the company not elected the
alternative benefits program. The dividend recipient is taxed at the reduced
rate of 15%, applicable to dividends from approved enterprises if the dividend
is distributed during the tax benefits period or within 12 years after the
benefits period. The withholding tax rate will be up to 25% after such period.
In the case of a company with an over 25% foreign investment level, the 12-year
limitation on reduced withholding tax on dividends does not apply. This tax
should be withheld by the company at the source, regardless of whether the
dividend is converted into foreign currency.

From time to time, the Israeli government has discussed reducing the
benefits available to companies under the Capital Investments Law. The
termination or substantial reduction of any of the benefits available under the
Capital Investments Law could materially impact the cost of our future
investments.

Each application to the Investment Center is reviewed separately, and a
decision as to whether or not to approve the application is based, among other
things, on the then prevailing criteria set forth in the Capital Investments
Law, on the specific objectives of the company as set forth in the application
and on financial criteria. Accordingly, we cannot assure you that any
application will be approved. In addition, the benefits available to an approved
enterprise are conditioned upon the fulfillment of conditions stipulated in the
Capital Investments Law and its regulations and the criteria set forth in the
specific certificate of approval. In the event that our applications are
approved and these conditions are violated, in whole or in part, we will be
required to refund the amount of tax benefits, together with linkage differences
tied to the Israeli consumer price index and interest.

57
<PAGE> 64

TAXATION UNDER INFLATIONARY CONDITIONS

The Income Tax (Inflationary Adjustment) Law, 1985, which is referred to as
the Inflationary Adjustment Law, attempts to overcome some of the problems
presented to a traditional tax system by an economy experiencing rapid
inflation, which was the case in Israel at the time the law was enacted.
Generally, the Inflationary Adjustment Law provides significant tax adjustments
to taxable income and depreciation methods, as well as tax loss carry-forwards
to compensate for loss of value resulting from an inflationary economy. Our
taxable income is subject to the provisions of this law.

The Israeli Income Tax Ordinance and the Inflationary Adjustments Law allow
"foreign-invested companies," which maintain their accounts in dollars in
compliance with regulations published by the Israeli Minister of Finance, to
base their tax returns on their operating results as reflected in the dollar
financials statements or to adjust their tax returns based on exchange rate
changes, rather than changes in the Israeli consumer price index, in lieu of the
principles set forth by the Inflationary Adjustments Law. For these purposes, a
"foreign-invested company" is a company, more than 25% of whose share capital,
in terms of rights to shares, profits, voting and appointment of directors, and
of whose combined share and loan capital is held by persons who are not
residents of Israel. A company that elects to measure its results for tax
purposes based on the dollar exchange rate may not change that election for a
period of three tax years following the election. We believe that we qualify as
a foreign investment company within the meaning of the Inflationary Adjustment
Law. We have not yet elected to measure our results for tax purposes based on
the dollar exchange rate but may do so in the future.

TAX BENEFITS OF RESEARCH AND DEVELOPMENT

Israeli tax law permits, under certain conditions, a tax deduction in the
year incurred for capital and other expenditures in scientific research and
development projects, if the expenditures are approved by the relevant
government ministry and if the research and development is for the promotion of
the enterprise and is carried out by, or on behalf of, a company seeking the
deduction. Expenditures not so approved are deductible over a three-year period.
Expenditures made out of proceeds made available to us through government grants
are not deductible. To date, none of our research and development programs have
been approved by the Israeli Chief Scientist, and accordingly we have been able
to deduct a portion of our research and development expenses.

WITHHOLDING AND CAPITAL GAINS TAXES APPLICABLE TO NON-ISRAELI SHAREHOLDERS

Nonresidents of Israel are subject to income tax on income accrued or
derived from sources in Israel or received in Israel. These sources of income
include passive income, such as dividends, royalties and interest, as well as
non-passive income from business conducted in Israel. We are generally required
to withhold income tax at the rate of 25%, or 15% for dividends generated by an
approved enterprise, on all distributions of dividends.

Israeli law imposes a capital gains tax on the sale of securities and other
capital assets. Under current law, however, sales of our ordinary shares offered
by this prospectus are exempt from Israeli capital gains tax for so long as

- the shares are quoted on Nasdaq or listed on a stock exchange recognized
by the Israeli Ministry of Finance,

- we continue to qualify as an industrial company or industrial holding
company, and

- the shares are not held for business purposes.

Furthermore, under the income tax treaty between the United States and
Israel, a holder of our shares who is a U.S. resident will be exempt from
Israeli capital gains tax on the sale, exchange or other disposition of any such
shares unless the holder owns, directly or indirectly, 10% or more of the voting
power of our share capital at any time within the 12-month period preceding the
sale, exchange or other disposition, subject to particular conditions.

58
<PAGE> 65

A nonresident of Israel who receives interest, dividend or royalty income
derived from or accrued in Israel, from which tax was withheld at the source, is
generally exempt from the duty to file tax returns in Israel with respect to the
income, provided that the income was not derived from a business conducted in
Israel by the taxpayer and that the taxpayer has no other sources of income in
Israel.

Israel presently has no estate or gift tax.

FOREIGN EXCHANGE REGULATIONS

Dividends (if any) paid to the holders of the ordinary shares offered
hereby, and any amounts payable with respect to our ordinary shares upon our
dissolution, liquidation or winding up, as well as the proceeds of any sale in
Israel of the ordinary shares to an Israeli resident, may be paid in non-Israeli
currency or, if paid in Israeli currency, may be converted into freely
repatriable U.S. dollars at the rate of exchange prevailing at the time of
conversion.

59
<PAGE> 66

UNDERWRITING

The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., Bear, Stearns & Co. Inc., Warburg Dillon
Read LLC and Nomura International plc, have severally agreed with us, subject to
the terms and conditions in the underwriting agreement, to purchase from us the
number of ordinary shares set forth below opposite their respective names. The
underwriters are committed to purchase and pay for all ordinary shares if any
are purchased.

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- ---------
<S> <C>
FleetBoston Robertson Stephens Inc. ........................
Bear, Stearns & Co. Inc. ...................................
Warburg Dillon Read LLC.....................................
Nomura International plc....................................
--------
Total..................................................
========
</TABLE>

The representatives have advised us that the underwriters propose to offer
the ordinary shares to the public at the public offering price set forth on the
cover page of this prospectus and to certain dealers at that price less a
concession of not in excess of $ per share, of which $ may be
reallowed to other dealers. After this offering, the public offering price,
concession and reallowance to dealers may be reduced by the representatives. No
such reduction shall change the amount of proceeds to be received by us as set
forth on the cover page of this prospectus. The ordinary shares are offered by
the underwriters as stated herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part.

Prior to this offering, there has been no public market for the ordinary
shares. Consequently, the public offering price for the ordinary shares offered
by this prospectus has been determined through negotiations among the
representatives and us. Among the factors considered in such negotiations were
prevailing market conditions, certain of our financial information, market
valuations of other companies that we and the representatives believe to be
comparable to us, estimates of our business potential, the present state of our
development and other factors deemed relevant.

The underwriters have advised us that they do not expect sales to
discretionary accounts to exceed five percent of the total number of shares
offered.

Over-allotment Option

We have granted to the underwriters an option, exercisable during the
30-day period after the date of this prospectus, to purchase up to
additional ordinary shares to cover over-allotments, if any, at the
public offering price less the underwriting discount set forth on the cover page
of this prospectus. If the underwriters exercise their over-allotment option to
purchase any of the additional ordinary shares, the underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof as the number of shares to be purchased by each of them
bears to the total number of ordinary shares offered in this offering. If
purchased, these additional shares will be sold by the underwriters on the same
terms as those on which the shares offered hereby are being sold. We will be
obligated, under the over-allotment option, to sell shares to the underwriters
to the extent the over-allotment option is exercised. The underwriters may
exercise the over-allotment option only to cover over-allotments made in
connection with the sale of the ordinary shares offered in this offering.

60
<PAGE> 67

The following table summarizes the compensation to be paid to the
underwriters by us:

<TABLE>
<CAPTION>
TOTAL
----------------------
WITHOUT WITH
PER OVER- OVER-
SHARE ALLOTMENT ALLOTMENT
------ --------- ---------
<S> <C> <C> <C>
Underwriting Discounts and Commissions payable by us... $ $ $
</TABLE>

We estimate that expenses payable by us in connection with this offering,
other than the underwriting discounts and commissions referred to above, will be
approximately $ .

Indemnity

The underwriting agreement contains covenants of indemnity among the
underwriters and us against certain civil liabilities, including liabilities
under the Securities Act, and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.

Lock-up Agreement

Each of our executive officers and directors has agreed, subject to
specified exceptions, not to offer to sell, contract to sell, or otherwise
dispose of, loan, pledge or grant any rights with respect to any ordinary shares
or any options or warrants to purchase any ordinary shares, or any securities
convertible into or exchangeable for ordinary shares owned as of the date of
this prospectus or thereafter acquired directly by those holders or with respect
to which they have the power of disposition, without the prior written consent
of FleetBoston Robertson Stephens Inc. This restriction terminates after the
close of trading of the shares on the 180th day of (and including) the day the
shares commenced trading in the Nasdaq National Market. However, FleetBoston
Robertson Stephens Inc. may, in its sole discretion and at any time or from time
to time before the termination of the 180-day period, without notice, release
all or any portion of the securities subject to the lock-up agreements. There
are no agreements between the representatives and any of our shareholders who
have executed a lock-up agreement providing consent to the sale of shares prior
to the expiration of the lock-up period.

In addition, we have agreed that during the lock-up period we will not,
without the prior written consent of FleetBoston Robertson Stephens Inc.,
subject to certain exceptions, consent to the disposition of any shares held by
shareholders subject to lock-up agreements prior to the expiration of the
lock-up period, or issue, sell, contract to sell, or otherwise dispose of any
ordinary shares, any options or warrants to purchase any ordinary shares or any
securities convertible into, exercisable for or exchangeable for ordinary
shares, other than our sale of ordinary shares in the offering, the issuance of
ordinary shares upon the exercise of outstanding options or warrants and the
issuance of options under existing stock option and incentive plans.

Stabilization

The representatives have advised us that, pursuant to Regulation M under
the Securities Act of 1933, some persons participating in the offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, that may have the effect of
stabilizing or maintaining the market price of the ordinary shares at a level
above that which might otherwise prevail in the open market. A "stabilizing bid"
is a bid for or the purchase of ordinary shares on behalf of the underwriters
for the purpose of fixing or maintaining the price of the ordinary shares. A
"syndicate covering transaction" is the bid for or purchase of ordinary shares
on behalf of the underwriters to reduce a short position incurred by the
underwriters in connection with the offering. A "penalty bid" is an arrangement
permitting the representatives to reclaim the selling concession otherwise
accruing to an underwriter or syndicate member in connection with the offering
if the ordinary shares originally sold by such underwriter or syndicate member
are purchased by the representatives in a syndicate covering transaction and
have therefore not been effectively placed by such underwriter or syndicate
member. The representatives have advised us that such transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.

61
<PAGE> 68

Private Placements

In June through October 1999, we issued an aggregate of 8,523,102 shares of
our Series C convertible preferred shares and warrants to purchase an aggregate
of 1,263,154 shares of our Series C convertible preferred shares at a per share
price of $2.2538 in a private placement. Nomura International plc acted as the
placement agent in this private placement for shares sold outside of the United
States and it waived its customary fee for its services. As part of this private
placement, Nomura International plc purchased 3,094,773 shares of our Series C
convertible preferred shares and a warrant to purchase 464,216 shares of our
Series C convertible preferred shares that will convert into an equivalent
number of our ordinary shares upon the closing of this offering.

In February 2000, we issued an aggregate of 8,940,867 shares of our Series
D convertible preferred shares at per share price of $5.78 in a private
placement. Warburg Dillon Read LLC acted as the placement agent in this private
placement, and it received a customary fee for its services. In addition,
Warburg Dillon Read LLC received a warrant to purchase 227,077 shares of our
Series D convertible preferred shares that will convert into an equivalent
number of our ordinary shares upon the closing of this offering.

Directed Share Program

At our request, certain of the underwriters have reserved up to 10% of the
ordinary shares (the "Directed Shares") for sale at the initial public offering
price to persons who are our directors, officers or employees, or who are
otherwise associated with us and our affiliates, and who have advised us of
their desire to purchase such shares. The number of ordinary shares available
for sale to the general public will be reduced to the extent of sales of the
Directed Shares to any of the persons for whom they have been reserved. Any
shares not so purchased will be offered by the Underwriters on the same basis as
all other ordinary shares offered hereby. We have agreed to indemnify those
certain Underwriters against certain liabilities and expenses, including
liabilities under the Securities Act, in connection with the sales of directed
shares.

Agreements by the Underwriters

The underwriters have agreed that:

- they will not offer the ordinary shares in Israel to more than
thirty-five persons in the aggregate other than entities as classified as
accredited investors under Israeli law;

- they will deliver to us and to the Israel Securities Authority the names
and addresses of these offerees within seven days of the closing of the
offering; and

- they will obtain representation from each of these offerees that he is
purchasing ordinary shares for investment purposes only, and not for
purpose of resale.

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<PAGE> 69

LEGAL MATTERS

The validity of the ordinary shares being offered hereby and certain other
legal matters in connection with this offering with respect to Israeli law will
be passed upon for the Company by Meitar, Liquornik, Geva & Co., Ramat Gan,
Israel. Members of Meitar, Liquornik, Geva & Co. beneficially own 256,984
ordinary shares. Ezra Katzen, our General Counsel and Secretary, was formerly a
partner in the law firm of Meitar, Liquornik, Geva & Co. until he joined us in
March 2000. Legal matters in connection with this offering with respect to U.S.
law will be passed upon for the Company by Chadbourne & Parke LLP, New York, New
York. Certain legal matters in connection with this offering will be passed upon
for the underwriters by Morrison & Foerster LLP, New York, New York, with
respect to U.S. law and Naschitz, Brandes & Co., Tel Aviv, Israel, with respect
to Israeli law.

EXPERTS

Kost Forer & Gabbay, a member of Ernst & Young International, independent
auditors, have audited our consolidated financial statements at December 31,
1998 and 1999, and for each of the two years in the period ended December 31,
1999, as set forth in their report. We have included our consolidated financial
statements in the prospectus and elsewhere in the registration statement in
reliance on the report of Kost Forer & Gabbay, a member of Ernst & Young
International, given on their authority as experts in accounting and auditing.

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<PAGE> 70

ENFORCEABILITY OF CIVIL LIABILITIES

Service of process upon us and our directors and officers and the Israeli
experts named in this prospectus, substantially all of whom reside outside the
United States, may be difficult to obtain within the United States. Furthermore,
since substantially all of our assets and a significant number of our directors
and officers and the Israeli experts named in this prospectus are located
outside the United States, any judgment obtained in the United States against us
or our directors, officers or Israeli experts predicated upon the civil
liability provisions of the federal securities laws of the United States may not
be collectible within the United States.

We have been informed by our legal counsel in Israel, Meitar, Liquornik,
Geva & Co., that there is doubt concerning the enforceability of civil
liabilities under United States securities laws in original actions instituted
in Israel. However, subject to time limitations, Israeli courts may enforce
United States final executory judgments in civil matters, including a monetary
or compensatory judgment in a non-civil matter obtained after due process before
a court of competent jurisdiction. The rules of private international law
currently prevailing in Israel do not prohibit the enforcement of judgment of
Israeli courts, provided that:

- the judgment is enforceable in the state in which it was given;

- adequate service of process has been effected and the defendant has had a
reasonable opportunity to present his arguments and evidence;

- the judgment and the enforcement of the judgment are not contrary to the
law, public policy, security or sovereignty of the state of Israel;

- the judgment was not obtained by fraud and does not conflict with any
other valid judgment in the same matter between the same parties; and

- an action between the same parties in the same matter is not pending in
any Israeli court at the time the lawsuit is instituted in the foreign
court.

We have irrevocably appointed DealTime.com, Inc., our wholly-owned
subsidiary, as our agent to receive service of process in any action against us
in any federal court or state court in the State of New York arising out of this
offering or any purchase or sale of securities in connection with this offering.
We have not given our consent for any agent to accept service of process in
connection with any other claim. These appointments are irrevocable, provided
that we shall have the right to appoint a successor agent for service, if the
successor is acceptable to the representatives of the underwriters, in their
reasonable judgment.

Foreign judgments enforced by Israeli courts will generally be payable in
Israeli currency and will be freely convertible into dollars or other foreign
currency and may be transferred out of Israel.

The usual practice in an action before an Israeli court to recover an
amount in a non-Israeli currency is for the Israeli court to render judgment for
the equivalent amount in Israeli currency at the rate of exchange in force on
the date of the judgment. Under existing Israeli law, a foreign judgment payable
in foreign currency may be paid in Israeli currency at the rate of exchange of
the foreign currency on the date of payment. Pending collection, the amount of
the judgment of an Israeli court stated in Israeli currency ordinarily will be
linked to the Israeli consumer price index plus interest at the annual statutory
rate set by Israeli regulations at that time. Judgment creditors must bear the
risk of unfavorable exchange rates fluctuations.

64
<PAGE> 71

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1, including the exhibits, schedules and amendments thereto,
under the Securities Act of 1933, as amended, with respect to the ordinary
shares to be sold in the offering. This prospectus does not contain all the
information set forth in the Registration Statement. We refer you to the
Registration Statement for further information with respect to us and the
ordinary shares to be sold in the offering. Statements contained in this
prospectus as to the contents of any contract, agreement or other document
referred to herein are not necessarily complete, and in each instance reference
is made to the copy of the contract, agreement or other document filed as an
exhibit to the Registration Statement. Each such statement is qualified in all
respects by reference to the exhibit.

You may read and copy all or any portion of the Registration Statement or
any other information we file at the Securities and Exchange Commission's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
request copies of these documents, upon payment of a duplicating fee, by writing
to the Securities and Exchange Commission. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for further information on the operation
of the public reference rooms. The Company's Securities and Exchange Commission
filings, including the Registration Statement, are also available to you on the
Securities and Exchange Commission's Web site, www.sec.gov.

As a result of the offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934, as amended, and,
in accordance the Exchange Act, we will file periodic reports, proxy statements
and other information with the Securities and Exchange Commission. Upon approval
of the ordinary shares for the quotation on the Nasdaq National Market, any of
these reports, proxy and information statements and other information may also
be inspected at the offices of Nasdaq Operations, 1735 K Street, N.W.,
Washington, D.C. 20006.

REPORTS TO SHAREHOLDERS

We intend to furnish our shareholders annual reports containing audited
financial statements and will make available copies of quarterly reports for the
first three quarters of each year containing unaudited interim financial
information.

65
<PAGE> 72

DEALTIME.COM LTD.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets as of December 31, 1998 and
1999...................................................... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1998 and 1999................................ F-4
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1998 and 1999.................... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998 and 1999................................ F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE> 73

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of
DealTime.com Ltd.

We have audited the accompanying consolidated balance sheets of
DealTime.com Ltd. and its subsidiaries as of December 31, 1998 and 1999, and the
related consolidated statements of operations, changes in shareholders' equity
and cash flows for each of the two years in the period ended December 31, 1999.
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.

We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance as to whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by the Company's management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
DealTime.com Ltd. and its subsidiaries as of December 31, 1998 and 1999 and the
consolidated results of their operations, changes in shareholders' equity and
cash flows for each of the two years in the period ended December 31, 1999 in
conformity with generally accepted accounting principles in the United States.

KOST FORER & GABBAY
A Member of Ernst and Young
International

Tel Aviv, Israel
February 15, 2000

F-2
<PAGE> 74

DEALTIME.COM LTD.

CONSOLIDATED BALANCE SHEETS
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
SHAREHOLDERS'
DECEMBER 31, EQUITY AT
------------------ DECEMBER 31,
1998 1999 1999
------ -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 631 $ 5,750
Accounts receivable, net of allowance for doubtful
accounts of $0 and $15 at December 31, 1998 and 1999,
respectively........................................... 15 399
Prepaid expenses and other current assets................. 37 197
------ --------
Total current assets.............................. 683 6,346
Property and equipment, net................................. 46 1,088
Restricted cash............................................. -- 308
Other assets................................................ 9 163
------ --------
TOTAL ASSETS...................................... $ 738 $ 7,905
====== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 175 $ 4,026
Payroll and benefit related liabilities................... 61 460
Other current liabilities................................. 49 7
------ --------
Total current liabilities......................... 285 4,493
Accrued severance liability................................. 15 128
------ --------
TOTAL LIABILITIES................................. 300 4,621
------ --------
Commitments (Note 10)
Shareholders' equity:
Series A Convertible Preferred Shares, NIS 0.01 par value;
4,738,080 shares authorized; 3,738,080 and 4,738,080
shares issued and outstanding at December 31, 1998 and
1999, respectively; none issued or outstanding pro
forma (Liquidation preference of $1,180 at December 31,
1999).................................................. 9 12 $ --
Series B Convertible Preferred Shares, NIS 0.01 par value;
4,457,150 shares authorized, 4,314,293 shares issued
and outstanding at December 31, 1999; none issued or
outstanding pro forma (Liquidation preference of
$3,020)................................................ -- 11 --
Series C Convertible Preferred Shares, NIS 0.01 par value;
12,500,000 shares authorized, 8,554,781 shares issued
and outstanding at December 31, 1999; none issued or
outstanding pro forma (Liquidation preference of
$19,645)............................................... -- 20 --
Ordinary shares, NIS 0.01 par value; 2,920,000 and
28,304,770 shares authorized, 6,261,920 and 5,261,920
shares issued and outstanding as of December 31, 1998
and 1999, respectively; 22,869,074 shares issued and
outstanding pro forma.................................. 16 13 56
Additional paid-in capital................................ 1,009 22,890 22,890
Accumulated deficit....................................... (596) (19,662) (19,662)
------ -------- --------
Total shareholders' equity........................ 438 3,284 $ 3,284
------ -------- ========
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $ 738 $ 7,905
====== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 75

DEALTIME.COM LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. DOLLARS IN THOUSANDS (EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1998 1999
------ --------
<S> <C> <C>
Revenues.................................................... $ 41 $ 525
------ --------
Operating expenses:
Research and development.................................. 283 1,938
Selling and marketing..................................... 178 15,904
General and administrative................................ 191 2,042
------ --------
Total operating expenses............................... 652 19,884
------ --------
LOSS FROM OPERATIONS................................... (611) (19,359)
Interest income, net........................................ 15 293
------ --------
NET LOSS............................................... (596) (19,066)
Preferred share deemed dividend........................ -- (600)
------ --------
NET LOSS ATTRIBUTABLE TO ORDINARY SHAREHOLDERS......... $ (596) $(19,666)
====== ========
BASIC AND DILUTED NET LOSS PER SHARE................... $(0.10) $ (3.22)
====== ========
Weighted average number of ordinary shares used in
computing basic and diluted net loss per share........ 6,074 6,114
====== ========
PRO FORMA BASIC AND DILUTED NET LOSS PER ORDINARY SHARE
(UNAUDITED)............................................... $ (1.17)
========
Weighted average number of ordinary shares used in computing
pro forma basic and diluted net loss per share
(unaudited)............................................... 16,774
========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 76

DEALTIME.COM LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SERIES A CONVERTIBLE SERIES B CONVERTIBLE SERIES C CONVERTIBLE
PREFERRED SHARES PREFERRED SHARES PREFERRED SHARES ORDINARY SHARES ADDITIONAL
-------------------- -------------------- -------------------- ------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
---------- ------- ---------- ------- ---------- ------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Founders' shares
issued at
inception........... -- $-- -- $-- -- $-- 5,940,690 $15 $ --
Issuance of ordinary
shares.............. -- -- -- -- -- -- 321,230 1 4
Issuance of Series A
Shares.............. 3,738,080 9 -- -- -- -- -- -- 1,005
Net loss.............. -- -- -- -- -- -- -- -- --
--------- --- --------- --- --------- --- ---------- --- -------
Balance at December
31, 1998............ 3,738,080 9 -- -- -- -- 6,261,920 16 1,009
Reclassification of
shares.............. 1,000,000 3 -- -- -- -- (1,000,000) (3) --
Issuance of Series B
Shares.............. -- -- 3,957,150 10 -- -- -- -- 2,688
Exercise of stock
option.............. -- -- 357,143 1 -- -- -- -- 249
Issuance of Series C
Shares.............. -- -- -- -- 3,074,481 7 -- -- 6,948
Conversion of Bridge
Notes............... -- -- -- -- 5,480,300 13 -- -- 11,989
Issuance of
non-employee
options............. -- -- -- -- -- -- -- -- 7
Net loss.............. -- -- -- -- -- -- -- -- --
--------- --- --------- --- --------- --- ---------- --- -------
Balance at December
31, 1999............ 4,738,080 $12 4,314,293 $11 8,554,781 $20 5,261,920 $13 $22,890
========= === ========= === ========= === ========== === =======

TOTAL
ACCUMULATED SHAREHOLDERS'
DEFICIT EQUITY
----------- -------------
<S> <C> <C>
Founders' shares
issued at
inception........... $ -- $ 15
Issuance of ordinary
shares.............. -- 5
Issuance of Series A
Shares.............. -- 1,014
Net loss.............. (596) (596)
-------- --------
Balance at December
31, 1998............ (596) 438
Reclassification of
shares.............. -- --
Issuance of Series B
Shares.............. -- 2,698
Exercise of stock
option.............. -- 250
Issuance of Series C
Shares.............. -- 6,955
Conversion of Bridge
Notes............... -- 12,002
Issuance of
non-employee
options............. -- 7
Net loss.............. (19,066) (19,066)
-------- --------
Balance at December
31, 1999............ $(19,662) $ 3,284
======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 77

DEALTIME.COM LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. DOLLARS IN THOUSANDS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1999
-------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (596) $(19,066)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation........................................... 5 71
Non-cash charge for issuance of stock options.......... -- 7
Allowance for doubtful accounts........................ -- 15
Increase in accounts receivable........................ (15) (399)
Increase in prepaid expenses and other current
assets................................................ (37) (160)
Increase in accounts payable........................... 175 3,851
Increase in payroll and benefit related liabilities.... 61 399
Increase (decrease) in other liabilities............... 49 (42)
Increase in accrued severance liability, net........... 6 37
------ --------
Net cash used in operating activities................ (352) (15,287)
------ --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....................... (51) (1,113)
Increase in restricted cash............................... -- (308)
Increase in security deposits............................. -- (78)
------ --------
Net cash used in investing activities................ (51) (1,499)
------ --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds on sale of ordinary shares, net.................. 5 --
Proceeds on sale of Series A Convertible Preferred Shares,
net.................................................... 1,029 --
Proceeds on sale of Series B Convertible Preferred Shares,
net.................................................... -- 2,698
Proceeds on sale of Series C Convertible Preferred Shares,
net.................................................... -- 6,955
Proceeds from Bridge Notes, net of expenses............... -- 12,002
Proceeds from exercise of stock options................... -- 250
------ --------
Net cash provided by financing activities............ 1,034 21,905
------ --------
Net increase in cash and cash equivalents................... 631 5,119
Cash and cash equivalents, beginning of period.............. -- 631
------ --------
Cash and cash equivalents, end of period.................... $ 631 $ 5,750
====== ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES
Conversion of Bridge Notes to Series C Convertible
Preferred Shares....................................... $ -- $ 12,002
====== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 78

DEALTIME.COM LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE AND PER SHARE DATA)

1. ORGANIZATION AND OPERATIONS

DealTime.com Ltd., formerly Papricom Technologies Ltd., (the "Company") was
incorporated in 1997 under the laws of the State of Israel and commenced
operations in January 1998. The Company is engaged in providing a
next-generation e-commerce solution that allows consumers to search, sort and
select products while providing merchants with the means to analyze and respond
in real-time to consumer demand data. The Company's website gives shoppers the
ability not only to compare prices but to access third-party reviews of
merchants, the Company's own shopping guides and advanced features such as
continuous searches and offline deal notification. DealTime.com, Inc., the
Company's wholly owned subsidiary, was incorporated in December 1998 under the
laws of the State of Delaware for the purpose of marketing and selling the
Company's products and services in the United States.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

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 at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results can differ from those estimates.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the financial statements of
the Company and its wholly owned subsidiary, DealTime.com, Inc. All significant
intercompany transactions and balances have been eliminated in consolidation.

FUNCTIONAL CURRENCY

Substantially all of the Company's revenues are generated outside of
Israel. All revenues are denominated in U.S. dollars and most marketing costs
are incurred outside of Israel, primarily in transactions denominated in U.S.
dollars. Accordingly, the currency of the primary economic environment in which
the Company's operations are conducted is the U.S. dollar, which is used as the
Company's functional and reporting currency.

Transactions and balances originally denominated in U.S. dollars are
presented at their original amounts. Transactions and balances in other
currencies are remeasured into dollars, in accordance with Statement of
Financial Accounting Standards No. 52, Foreign Currency Translation. All
transaction gains and losses from remeasurement of monetary balance sheet items
denominated in non-dollar currencies are reflected in the consolidated statement
of operations as finance income or expense, as appropriate. Amounts in the
financial statements representing the U.S. dollar equivalents of balances
denominated in other currencies do not necessarily represent their real or
economic value in U.S. dollars.

CASH EQUIVALENTS

Cash equivalents consist of investments in highly liquid short-term
instruments with original maturities of three months or less and are stated at
cost. Interest is accrued as earned.

F-7
<PAGE> 79
DEALTIME.COM LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is provided on a
straight-line basis over the estimated useful lives of the related assets, at
the following annual rates:

<TABLE>
<S> <C>
Computers and peripheral equipment.......... 33%
Office furniture and equipment.............. 6-10%
Leasehold improvements...................... Over the term of the lease
Motor vehicles.............................. 15%
</TABLE>

Maintenance, repairs and minor replacements are charged to expense as
incurred. The Company periodically assesses the recoverability of the carrying
amount of property and equipment and provides for any possible impairment loss
based on the difference between the carrying amount and the fair value of such
assets. The Company has not recorded any impairment losses since its inception.

RESTRICTED CASH

Restricted cash is primarily invested in certificates of deposit, which
mature within one year and is used as security for the Company's office lease in
New York.

REVENUE RECOGNITION

Advertising revenues are derived principally from short-term advertising
contracts. Advertising revenues are recognized ratably in the period in which
the advertisement is displayed, provided that no significant Company obligations
remain and collection of the receivable is deemed probable. Merchant fees are
generated based on the numbers of times a user clicks through to a merchant's
Web site from the Company's site. Merchant fees are recognized in the period in
which the user clicks through to the merchant's Web site.

RESEARCH AND DEVELOPMENT

Costs incurred in connection with the research and development of the
Company's products are expensed as incurred.

ADVERTISING COSTS

Advertising costs included in selling and marketing expenses are expensed
as incurred and amounted to $0 and $12,333 for the years ended December 31, 1998
and 1999, respectively.

STOCK-BASED COMPENSATION

The Company measures compensation cost for stock-based compensation issued
to employees based on the methodology prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). Under APB
25, when the exercise price of an employee stock option is equivalent to or
above the market price of the underlying shares on the date of grant, no
compensation expense is recognized. In accounting for options granted to persons
other than employees, the provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock Based Compensation" ("FAS 123") are
applied. The fair value of these options is estimated on the grant date using
the Black-Scholes option-pricing model, as discussed in Note 8.

INCOME TAXES

The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes ("FAS 109"),
which requires use of the asset and liability

F-8
<PAGE> 80
DEALTIME.COM LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

method. Deferred income taxes are recorded for temporary differences between
financial statement carrying amounts and the tax bases of assets and
liabilities. Deferred tax assets and liabilities reflect the tax rates expected
to be in effect for the years in which the differences are expected to reverse.
A valuation allowance is provided if it is more likely than not that some or all
of the deferred tax asset will not be realized.

STOCK SPLITS AND SHARE DIVIDENDS

In August 1998, the Company approved a 5,840.7 to 1 stock split, which was
effected in the form of a 10 to 1 stock split and an additional share dividend.
In July 1999, the Company approved a 10 to 1 stock split, which was effected in
the form of a share dividend. All share and stock option data information in the
accompanying consolidated financial statements have been retroactively restated
for all periods to reflect the stock splits and share dividends.

NET LOSS PER SHARE

Basic loss per share ("Basic EPS") is computed by dividing net loss
available to common shareholders by the weighted average number of ordinary
shares outstanding during the period. Diluted earnings per share ("Diluted EPS")
gives effect to all dilutive potential ordinary shares outstanding during the
period. The computation of Diluted EPS does not assume conversion, exercise or
contingent exercise of securities that would have an anti-dilutive effect on
earnings. The dilutive effect of outstanding convertible preferred shares and
stock options is computed using the treasury method.

As of December 31, 1998 and 1999, the Company had outstanding convertible
preferred shares, warrants to purchase convertible preferred shares and options
to purchase an aggregate 3,738,080 and 23,032,975 Ordinary Shares, respectively,
which were not included in the calculation of Diluted EPS due to the anti-
dilutive nature of these instruments. The pro forma basic and diluted net loss
per share for the year ended December 31, 1999 assumes the conversion of the
outstanding Series A Convertible Preferred Shares, Series B Convertible
Preferred Shares and Series C Convertible Preferred Shares into Ordinary Shares
as of the date of original issuance.

PRO FORMA SHAREHOLDERS' EQUITY (UNAUDITED)

The pro forma shareholders' equity as of December 31, 1999 reflects the
automatic conversion of the outstanding Series A Convertible Preferred Shares,
Series B Convertible Preferred Shares and Series C Convertible Preferred Shares
into Ordinary Shares upon the closing of a Qualified IPO (see Note 7).

FINANCIAL INSTRUMENTS

All current assets and liabilities are carried at cost, which approximates
fair value, due to the short-term nature of these instruments.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of cash and cash equivalents and trade
receivables. Cash and cash equivalents are maintained by major financial
institutions in Israel and the United States. The Company does not generally
require collateral from its customers and substantially all of its trade
receivables are unsecured. The risk of collection associated with trade
receivables is mitigated by the variety and number of customers.

3. RELATED PARTY TRANSACTIONS

In January 1999, the Company loaned $100 to its president and chief
executive officer. This loan bears interest at a rate of 7% per annum and is due
upon the earlier of December 31, 2001 or the termination of
F-9
<PAGE> 81
DEALTIME.COM LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

his employment. The Company has agreed to forgive repayment of this loan upon
the earlier of (a) a change in control of the Company, (b) the termination of
the executive's employment upon death or disability, by the Company without
cause, or by the executive for good reason, or (c) March 31, 2000. The loan is
being amortized over the expected term and accordingly, the loan balance,
including accrued interest thereon, has been classified as a current asset as of
December 31, 1999.

In August 1999, the Company loaned $25 to its chairman. This loan, which is
denominated in NIS and linked to the Israeli consumer price index, bears
interest at a rate of 2% per annum and is due upon the earlier of June 1, 2000
or the termination of his employment.

4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1998 1999
---- ------
<S> <C> <C>
Computers and peripheral equipment.......................... $34 $ 510
Office furniture and equipment.............................. 9 306
Leasehold improvements...................................... 8 334
Motor vehicles.............................................. -- 14
--- ------
51 1,164
Less: accumulated depreciation.............................. (5) (76)
--- ------
PROPERTY AND EQUIPMENT, NET............................... $46 $1,088
=== ======
</TABLE>

5. ACCRUED SEVERANCE LIABILITY

The Company's liability for severance pay for its Israeli employees is
calculated pursuant to Israeli severance pay law based on the most recent salary
of the employees multiplied by the number of years of employment as of the
balance sheet date. The Company's Israeli employees are entitled to one month's
salary for each year of employment or a portion thereof. The Company's liability
is fully provided by monthly deposits with severance pay funds, insurance
policies and by an accrual.

The deposited funds include profits accumulated up to the balance sheet
date. The deposited funds may be withdrawn only upon the fulfillment of the
obligation pursuant to Israeli severance pay law or labor agreements. The value
of these policies is recorded as an asset and is included in other assets as of
December 31, 1998 and 1999. Severance pay expenses for the years ended December
31, 1998 and 1999 were approximately $21 and $129, respectively.

Although not required by law, the Company grants its Israeli employees
savings and education fund accounts. Savings account expenses for the years
ended December 31, 1998 and 1999 were approximately $9 and $57, respectively.
Education fund account expenses for the years ended December 31, 1998 and 1999
were $9 and $43, respectively.

6. BRIDGE FINANCING

In August 1999, the Company completed a bridge financing the gross proceeds
of which were $12,002. In connection with the bridge financing, the Company
issued promissory notes in the aggregate principal amount of $12,002 (the
"Bridge Notes"). Under the terms of the Bridge Notes, if the closing of the
Series C Placement (see Note 7) had been completed on or before October 15,
1999, the principal amount due under the Bridge Notes was convertible into
Series C Convertible Preferred Shares ("Series C Shares") and warrants to
purchase Series C Shares and no interest would have accrued thereon.

F-10
<PAGE> 82
DEALTIME.COM LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

On October 6, 1999, the Company completed the closing of the Series C
Placement (see Note 7) and issued 5,480,300 Series C Shares and warrants to
purchase 822,045 Series C Shares, in full satisfaction of the outstanding
principal balance due under the Bridge Notes.

7. SHAREHOLDERS' EQUITY

The Company's authorized capital consists of 4,738,080 Series A Convertible
Preferred Shares, NIS 0.01 par value ("Series A Shares"), 4,457,150 Series B
Convertible Preferred Shares, NIS 0.01 par value ("Series B Shares"), 12,500,000
Series C Convertible Preferred Shares, NIS 0.01 par value ("Series C Shares")
and 28,304,770 ordinary shares, NIS 0.01 par value ("Ordinary Shares").

The Series A Shares, Series B Shares and Series C Shares are convertible,
at the option of the holder, into Ordinary Shares at any time after the date of
issuance on a one-for-one basis, subject to certain anti-dilution protection
rights. The Series A Shares, Series B Shares and Series C Shares are
automatically convertible into Ordinary Shares upon consummation of an initial
public offering of the Company's shares that raises net proceeds of at least $30
million in the aggregate at a price per share of $11.27 if effective prior by
December 31, 2000, or $16.90 if effective after January 1, 2001 (an "Qualified
IPO"). In addition, preferred shares of any series automatically convert into
Ordinary Shares upon the affirmative vote of at least 75% of the preferred
shareholders of such series. The Series A Shares, Series B Shares and Series C
Shares carry voting rights equal to one vote per share, on an as-converted
basis. Holders of the Series A Shares, Series B Shares and Series C Shares are
entitled to receive dividends as and when dividends are declared on the Ordinary
Shares, on an as-converted basis.

In the event of a liquidation, dissolution or winding up of the Company (a
"Liquidation Event"), holders of the Series C Shares are entitled to receive,
prior to any distribution to other shareholders, an amount per share equal to
the original purchase price plus 8% per annum, compounded annually from the date
of purchase until the Liquidation Event. Thereafter, any remaining funds and
assets of the Company legally available for distribution to the shareholders
shall be distributed among the holders of the Series A Shares and Series B
Shares, on a pro-rata basis equal to (a) the original purchase price per share
for each Series A Share plus 8% per annum, compounded on an annual basis from
the date of issuance until the Liquidation Event and (b) the greater of (1) the
pro-rata portion of the holders of the Series B Shares in the division of the
remaining funds on an as-converted basis and (2) the original purchase price per
share for each Series B Share (in each case including all declared and unpaid
dividends thereon), prior to any distributions to the holders of Ordinary
Shares. Thereafter, the remaining assets and funds of the Company legally
available for distribution to the shareholders shall be distributed to the
holders of the Series A Shares, Series C Shares and Ordinary Shares on a
pro-rata, as-converted basis.

ISSUANCE OF SERIES A SHARES

In August 1998, the Company completed a private placement of its Series A
Shares, pursuant to which the Company issued 3,738,080 Series A Shares for
aggregate net proceeds of approximately $1,029, after deducting offering related
expenses of $34. In connection therewith, the Company's founders provided an
option to one of the investors to acquire 1,000,000 Ordinary Shares and convert
such shares into Series A Shares, which option was exercised in November 1999.
In connection therewith, the Company has recorded a deemed dividend of $600
during the year ended December 31, 1999.

ISSUANCE OF SERIES B SHARES

In January through February 1999, the Company completed a private placement
of its Series B Shares, pursuant to which the Company issued 3,957,150 Series B
Shares for aggregate net proceeds of approximately $2,698, after deducting
offering related expenses of $71.

F-11
<PAGE> 83
DEALTIME.COM LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

In August 1999, a director of the Company exercised an option to purchase
357,143 Series B Shares at $0.70 per share, which had been granted in February
1999.

ISSUANCE OF SERIES C SHARES

In June through October 1999, the Company completed a private placement of
its Series C Shares, pursuant to which the Company issued 3,074,481 Series C
Shares and warrants to purchase 441,109 Series C Shares (the "Series C
Warrants") for aggregate net proceeds of approximately $6,955, after deducting
offering related expenses of $849 (the "Series C Placement"). In connection
therewith, all of the outstanding Bridge Loans were converted into 5,480,300
Series C Shares and 822,045 Series C Warrants, as discussed in Note 6. The
Series C Warrants are exercisable at approximately $2.25 per share and expire in
October 2000. As of December 31, 1999, none of the Series C Warrants were
exercised.

8. STOCK OPTIONS

In January 1999, the Company adopted the 1999 Omnibus Stock Option Plan and
Restricted Stock Incentive Plan (the "1999 Plan") pursuant to which stock
options or restricted stock awards to purchase up to 6,100,000 shares of the
Company's Ordinary Shares may be granted to officers, employees, directors and
consultants. The 1999 Plan is administered by the compensation committee of the
board of directors (the "Plan Administrator"). The exercise price of incentive
stock options granted under the 1999 Plan may not be less than the fair market
value of the underlying shares (110% of the fair market value in the case of a
10% voting shareholder) at the grant date. The exercise price of nonqualified
stock options granted under the 1999 Plan may not be less than 85% of the fair
market value of the underlying shares at the grant date. Stock options granted
under the 1999 Plan are exercisable for ten years from the date of grant (five
years in the case of a 10% voting shareholder). Vesting schedules for stock
options granted under the 1999 Plan are determined by the Plan Administrator on
the date of grant, generally over a four-year period.

Restricted stock awards issued under the 1999 Plan provide that shares
awarded may not be sold or otherwise transferred until restrictions established
by the underlying agreements have elapsed. Upon termination of employment,
shares upon which restrictions have not lapsed are deemed forfeited by the
grantee and transferred to and reacquired by the Company.

The following table summarizes stock option activity for the year ended
December 31, 1999:

<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
--------- ---------
<S> <C> <C>
OPTIONS OUTSTANDING AT JANUARY 1, 1999................. -- $ --
Granted.............................................. 4,133,167 0.27
Forfeited............................................ (15,500) (0.50)
---------
OPTIONS OUTSTANDING AT DECEMBER 31, 1999............... 4,117,667 $ 0.27
========= ======
OPTIONS AVAILABLE FOR FUTURE GRANT..................... 1,982,333
=========
</TABLE>

F-12
<PAGE> 84
DEALTIME.COM LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes information about stock options outstanding
under the 1999 Plan as of December 31, 1999:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------- ---------------------------
WEIGHTED-
NUMBER AVERAGE WEIGHTED- NUMBER WEIGHTED-
OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
EXERCISE PRICE 1999 LIFE (YEARS) PRICE 1999 PRICE
- -------------- -------------- ------------ --------- -------------- ---------
<S> <C> <C> <C> <C> <C>
$0.06-$0.20.................... 2,090,510 9.05 $0.06 36,792 $0.07
$0.26-$0.50.................... 1,347,500 9.63 0.33 -- --
$0.75-$1.00.................... 679,657 9.78 0.81 -- --
--------- ------
4,117,667 9.36 $0.27 36,792 $0.07
========= ==== ===== ====== =====
</TABLE>

Since the Company accounts for stock options granted to employees in
accordance with APB 25 and grants are made at fair value, no compensation has
been recorded with respect to stock options granted to employees. Had
compensation cost for stock options granted to employees been determined using
the fair value method prescribed by FAS 123, the Company's net loss on a pro
forma basis would have increased by approximately $25, or less than $0.01 per
share, for the year ended December 31, 1999 calculated with the use of the
Black-Scholes option-pricing model. The following weighted average assumptions
were used: (1) risk-free interest rate of 5.69%; (2) dividend yield of 0.00%;
(3) expected life of five years; and (4) volatility of 0.001% (minimum value
method). The minimum value method requires the use of highly subjective
assumptions. Changes in the subjective input assumptions can materially affect
the fair value estimate. In management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options. The weighted average fair value of the stock options granted
during the year ended December 31, 1999 was $0.01 as of the grant date.

During the year ended December 31, 1999, the Company granted options to
purchase 13,157 Ordinary Shares to non-employees in lieu of cash payment for
services rendered to the Company. The Company recognized expense of $7 related
to such issuances based on the fair value of the options issued using a
Black-Scholes option-pricing model and the following assumptions: risk-free
interest rate of 6.14%, dividend yield of 0.00%, volatility of 100% and expected
life of three years.

In December 1999, the Company granted non-plan options to purchase 45,000
Ordinary Shares at an exercise price of $1.00 per share to a non-employee
director. Since the options were issued at fair value on the date of grant, no
compensation charge was recorded in connection with these options.

9. INCOME TAXES

Deferred tax assets are comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998 1999
----- -------
<S> <C> <C>
Net operating loss carryforwards -- Israel................. $ 180 $ 1,137
Net operating loss carryforwards -- U.S. .................. -- 6,607
Depreciation and other..................................... -- 47
----- -------
180 7,791
Less: valuation allowance.................................. (180) (7,791)
----- -------
Net deferred tax asset..................................... $ -- $ --
===== =======
</TABLE>

F-13
<PAGE> 85
DEALTIME.COM LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FAS 109 requires that a valuation allowance be recorded when it is more
likely than not that deferred tax assets will not be realized. Since the Company
has incurred net losses since inception and future income is uncertain, the
Company has recorded a full valuation allowance against its deferred tax assets
as of December 31, 1998 and 1999.

There was no provision for income taxes for the years ended December 31,
1998 and 1999. Losses before U.S. and Israeli income taxes were as follows:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------
1998 1999
----- --------
<S> <C> <C>
United States............................................. $ -- $(16,623)
Israel.................................................... (596) (2,443)
----- --------
$(596) $(19,066)
===== ========
</TABLE>

The Company has incurred losses since inception which have generated U.S.
net operating loss carryforwards of approximately $16,518 at December 31, 1999
and are due to expire in 2014 for federal income tax purposes. Section 382 of
the Internal Revenue Code of 1986, as amended, (the "IRC") places a limitation
on the utilization of federal net operating loss carryforwards upon the
occurrence of an ownership change, as defined. As of December 31, 1999, the
Company has generated Israeli net operating loss carryforwards of approximately
$3,159, which do not expire.

The Company has applied for "approved enterprise" status in Israel under
the Law for the Encouragement of Capital Investments, 1959, for its investment
program and therefore may become eligible for Israeli tax benefits. Pursuant to
these benefits, if approved, the Company may enjoy a tax exemption from Israeli
taxes on income derived during the first two years in which each investment
program produces taxable income, provided that it does not distribute such
income as a dividend. The period of tax benefits detailed above, is subject to
limits of the earlier of 12 years from the commencement of production or 14
years from receiving the approval. In addition, the Company will enjoy a reduced
tax rate of 10% to 25% for the next five to eight years. The Company cannot be
certain that it will obtain approval for any of its investment programs or that
the provisions of the law will not change.

10. COMMITMENTS

LEASES

The Company leases office and equipment under noncancelable operating
leases with various expiration dates through 2009. Rent expense for the year
ended December 31, 1998 and 1999 amounted to approximately $67 and $164,
respectively.

Future minimum lease payments under noncancelable operating leases are as
follows:

<TABLE>
<S> <C>
Years ending December 31,
2000........................................................ $ 641
2001........................................................ 640
2002........................................................ 639
2003........................................................ 604
2004........................................................ 623
Thereafter.................................................. 2,643
------
Total minimum lease payments...................... $5,790
======
</TABLE>

F-14
<PAGE> 86
DEALTIME.COM LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. GEOGRAPHIC SEGMENT INFORMATION

The Company is active in one business segment: designing, developing,
selling and marketing its comparative shopping solution. The Company maintains
development operations in the United States and Israel. The Company's sales and
marketing operations are maintained in the United States. The Company attributes
geographic revenues based on the entity that records the revenue.

Geographic information for the years ended December 31, 1998 and 1999 are
as follows:

<TABLE>
<CAPTION>
1998 1999
---- ------
<S> <C> <C>
Net revenues
United States............................................. $ -- $ 484
Israel.................................................... 41 41
---- ------
$ 41 $ 525
==== ======
Long-lived assets
United States............................................. $ -- $ 768
Israel.................................................... 46 320
---- ------
$ 46 $1,088
==== ======
</TABLE>

12. SUBSEQUENT EVENTS

DEFINED CONTRIBUTION PLAN

In January 2000, the Company adopted a defined contribution plan, which
qualifies as a tax deferred savings plan under Section 401(k) of the IRC.
Eligible U.S. employees may contribute a percentage of their pretax salaries,
subject to certain IRC limitations. The plan provides for employer matching
contributions to be made at the discretion of the Board of Directors.

RECAPITALIZATION

In February 2000, the Company amended its articles of association, pursuant
to which the Company's authorized capital consists of 4,738,080 Series A Shares,
4,457,150 Series B Shares, 12,500,000 Series C Shares, 10,200,000 Series D
Convertible Preferred Shares, NIS 0.01 par value ("Series D Shares") and
18,104,770 Ordinary Shares.

The Series A Shares, Series B Shares, Series C Shares and Series D Shares
are convertible, at the option of the holder, into Ordinary Shares at any time
after the date of issuance on a one-for-one basis, subject to certain
anti-dilution protection rights. The Series A Shares, Series B Shares, Series C
Shares and Series D Shares are automatically convertible into Ordinary Shares
upon consummation of a Qualified IPO. In addition, preferred shares of any
series automatically convert into Ordinary Shares upon the affirmative vote of
at least 75% of the preferred shareholders of such series. The Series A Shares,
Series B Shares, Series C Shares and Series D Shares carry voting rights equal
to one vote per share, on an as-converted basis. Holders of the Series A Shares,
Series B Shares, Series C Shares and Series D Shares are entitled to receive
dividends as and when dividends are declared on the Ordinary Shares, on an
as-converted basis.

In the event of a Liquidation Event, holders of the Series D Shares are
entitled to receive, prior to any distribution to other shareholder, an amount
per share equal to $5.78 plus 8% per annum, compounded annually from February 8,
2000 until the Liquidation Event. Thereafter, the holders of Series C Shares are
entitled to receive, prior to any distribution to other shareholders, an amount
per share equal to $2.2538 plus 8% per annum, compounded annually from October
6, 1999 until the Liquidation Event. Thereafter, any remaining funds and assets
of the Company legally available for distribution to the shareholders shall be

F-15
<PAGE> 87
DEALTIME.COM LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

distributed among the holders of the Series A Shares and Series B Shares, on a
pro-rata basis equal to (a) the original purchase price per share for each
Series A Share plus 8% per annum, compounded on an annual basis from the date of
issuance until the Liquidation Event and (b) the greater of (1) the pro-rata
portion of the holders of the Series B Shares in the division of the remaining
funds on an as-converted basis and (2) the original purchase price per share for
each Series B Share (in each case including all declared and unpaid dividends
thereon) prior to any distributions to the holders of Ordinary Shares.
Thereafter, the remaining assets and funds of the Company legally available for
distribution to the shareholders shall be distributed to the holders of the
Series A Shares, Series C Shares, Series D Shares and Ordinary Shares on a
pro-rata, as-converted basis.

ISSUANCE OF SERIES D SHARES

In February 2000, the Company completed a private placement of its Series D
Shares, pursuant to which the Company issued 8,940,867 Series D Shares for
aggregate net proceeds of approximately $48,897, after deducting commissions and
offering related expenses of $2,781. In connection therewith, the Company issued
a warrant to purchase an aggregate 227,077 Series D Shares to the placement
agent. The warrant may not be exercised until February 2001 and expires in
February 2004. The exercise price of the warrant is $5.78 per share.

LINE OF CREDIT

In January 2000, the Company obtained a bank credit facility under which it
may borrow up to $2 million and, in the event that total revenues exceed $1
million during the twelve months ending September 30, 2000, up to $3 million.
Borrowings under this facility will bear interest at an annual rate of LIBOR
plus 1.5%. The credit facility is secured by a lien on all of the Company's
assets. Any amounts borrowed under this credit facility must be repaid by
December 31, 2000.

In connection with the credit facility, the Company issued to an affiliate
of the lender a warrant to purchase Series D Shares. Under this warrant, such
affiliate may acquire between 38,447 and 173,010 Series D Shares, depending on
the extent to which the Company utilizes the credit facility. The warrant is
exercisable until the earlier of January 3, 2003 and the date on which the
Company completes an initial public offering of its shares or is acquired by or
merges with another entity. In addition, the warrant expires if the Company does
not renew the credit facility upon its expiration on December 31, 2000. The
exercise price of the warrant is approximately $5.20 per share. The Company will
recognize a charge of approximately $96 representing the value of the warrant
over the term of the credit facility. This charge was computed based on the fair
value of the warrant on the date of grant using a Black-Scholes pricing model
and the following assumptions: risk-free rate of 5%, volatility of 100% and
expected term of one year.

INVESTMENT IN DEALTIME.COM K.K.

On February 10, 2000, the Company and a third party formed DealTime.com
K.K. ("DealTime-Japan") to market and sell the Company's products and services
in Japan. The Company acquired a 90% interest in DealTime-Japan in exchange for
an initial investment of 9 million Yen (approximately $84) and the third party
acquired a 10% interest in DealTime-Japan in exchange for an initial investment
of 1 million Yen (approximately $9).

DealTime-Japan is in the process of completing a private placement in which
it will issue up to an aggregate 2,100 of its Series A Convertible Preferred
Shares for aggregate proceeds of approximately $10 million. Upon closing, the
Company's ownership of DealTime-Japan will be diluted to 54%.

F-16
<PAGE> 88

[LOGO]
<PAGE> 89

[INTERNATIONAL COVER PAGE]
SUBJECT TO COMPLETION, DATED , 2000

[LOGO]

DEALTIME.COM LTD.
[ ] SHARES

ORDINARY SHARES

DealTime is offering ordinary shares. This is our initial public
offering and no public market currently exists for our shares. We have applied
for approval for quotation of our ordinary shares on the Nasdaq National Market
under the symbol "DEAL." We anticipate that the initial public offering price
will be between $ and $ per ordinary share.

------------------------------

INVESTING IN OUR ORDINARY SHARES INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.

------------------------------

<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- ----------
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to DealTime.com Ltd................................ $ $
</TABLE>

We have granted the underwriters a 30-day option to purchase up to
additional ordinary shares to cover any over-allotments.

Until , 2000, all dealers that buy, sell or trade our ordinary
shares, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.

FleetBoston Robertson Stephens, Inc. expects to deliver the ordinary shares
on or about , 2000.

------------------------------

ROBERTSON STEPHENS INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
WARBURG DILLON READ
NOMURA INTERNATIONAL

THE DATE OF THIS PROSPECTUS IS [ ], 2000
<PAGE> 90

UNDERWRITING

INTERNATIONAL UNDERWRITER
- ------------------------------------------------------------
FleetBoston Robertson Stephens International Limited........
Bear, Stearns International Limited.........................
UBS AG, acting through its division Warburg Dillon Read.....
Nomura International plc....................................
--------
Total..................................................
========
</TABLE>

The underwriters have advised us that they do not expect sales to
discretionary accounts to exceed five percent of the total number of shares
offered.

Over-allotment Option

60
<PAGE> 91

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The expenses, other than underwriting commissions, expected to be incurred
by the Company in connection with the issuance and distribution of the
securities being registered under this Registration Statement are estimated to
be as follows:

<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
---------
<S> <C>
Securities and Exchange Commission Registration Fee.........
National Association of Securities Dealers, Inc. Filing
Fee.......................................................
Nasdaq National Market Filing Fee...........................
Printing and Engraving......................................
Legal Fees and Expenses.....................................
Accounting Fees and Expenses................................
Transfer Agent Fees.........................................
Miscellaneous...............................................
Total.................................................. $
------
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

- a breach by the office holder of his duty of loyalty unless the office
holder acted in good faith and had a reasonable basis to believe that the
act would not prejudice the company;

- a breach by the office holder of his duty of care if such breach was done
intentionally or in disregard of the circumstances of the breach or its
consequences;

- any act or omission done with the intent to derive an illegal personal
benefit; or

- any fine levied against the office holder as a result of a criminal
offense.

Office Holder Insurance

Our articles of association provide that, subject to the provisions of the
Companies Law, we may enter into a contract for the insurance of the liability
of any of our office holders with respect to:

- a breach of his duty of care to us or to another person;

- a breach of his duty of loyalty to us, provided that the office holder
acted in good faith and had reasonable cause to assume that his act would
not prejudice our interests; or

- a financial liability imposed upon him in favor of another person
concerning an act performed by him in his capacity as an office holder.

II-1
<PAGE> 92

Indemnification of Office Holders

Our articles of association provide that we may indemnify an office holder
against:

- a financial liability imposed on him in favor of another person by any
judgement, including a settlement or an arbitrator's award approved by a
court concerning an act performed in his capacity as an office holder;
and

Our articles of association will be amended to include:

- a provision authorizing us to retroactively indemnify an office holder.

Required Approvals; Insurance

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Described below are unregistered securities sold by DealTime during the
three years preceding the filing of this Registration Statement. The share
figures below reflect the share split and share dividend effected August 1998
and the share dividend effected July 1999.

In August 1998, we issued and sold 321,230 ordinary shares to R.S.T.
Hi-Tech Consulting Ltd. for an aggregate purchase price of $5,000.

In June 1998, we issued and sold 404,750 Series A Convertible Preferred
Shares to M.L. Trust Company Ltd. for an aggregate purchase price of $63,000.

In August 1998, we issued and sold 3,333,330 Series A Convertible Preferred
Shares to Israel Seed II L.P., Unicycle Trading Company L.P., and David Jackson
for an aggregate purchase price of $999,999. In connection therewith, Nahum
Sharfman and Amir Ashkenazi (the "Founders") granted these investors an option
to purchase 1,000,000 ordinary shares from the Founders at a price per share of
$0.70 and convert such shares into Series A Convertible Preferred Shares. This
option was exercised in November 1999 and the option shares were converted.

From January through February 1999, we issued and sold an aggregate
3,957,150 Series B Convertible Preferred Shares in a private placement to Israel
Seed II L.P., Unicycle Trading Company L.P., Odeon Capital Partners, L.P., Eli
Levitin, Aaron Wolfson, Chana Sasha Foundation, Inc., Abraham Wolfson, Meredith
and Charles von Arentschildt, M.J. Capital Corp., Walter Buckley, Jeffrey
Finkle, Matthew Smith, Raman Khanna, Randy Whiting, Deborah and Peter Rieman and
Ira Machefsky, at an aggregate purchase price of approximately $2,770,000.

In August 1999, we issued and sold an aggregate 357,143 Series B
Convertible Preferred Shares to Robert McNulty for an aggregate purchase price
of $250,000.

In June through October 1999, we issued and sold an aggregate 8,523,102
Series C Convertible Preferred Shares and warrants to purchase an aggregate
1,263,154 Series C Convertible Preferred Shares at an exercise
II-2
<PAGE> 93

price of $2.2538 per share in a private placement to Odeon Capital Partners,
L.P., South Ferry #2 LP, Aaron Wolfson, Chana Sasha Foundation, Inc., Abraham
Wolfson, Levitin Charitable Trust, Meredith and Charles von Arentschildt, Nomura
International plc, WaterView Partners, L.P., Axiom Venture Partners, L.P.,
Israel Infinity Venture Capital Fund (Delaware) LP, Advanta Partners, L.P.,
Israel Infinity Venture Capital Fund (Israel) LP, Israel Infinity Venture
Capital Fund (Cayman II) LP, Zafa III LLC, Israel Infinity Venture Capital Fund
(Cayman I) LP, Barbara W. Klazmer, Robert Bayer, Edward H. Bases and Lauer & Co.
(for the benefit of Bernard Klazmer) for the aggregate purchase price of
approximately $19,734,000.

In August 1999, we issued an aggregate 31,679 Series C Convertible
Preferred Shares to Margeotes, Fertitta & Partners, Inc. and CKC Communications,
Inc. in lieu of cash payment for services rendered to DealTime.

In January 2000, we issued a warrant to Hapoalim Nechasim (Menayot) Ltd.,
Hapoalim, to purchase Series D Convertible Preferred Shares in connection with
the extension of a credit facility to us by Bank Hapoalim. Under this warrant,
Hapoalim may acquire between 38,447 and 173,010 Series D Convertible Preferred
Shares at an exercise price of approximately $5.20 per share depending on the
extent to which we utilize the credit facility.

In February 2000, we issued and sold an aggregate 8,940,867 Series D
Convertible Preferred Shares to Israel Seed II L.P., Unicycle Trading Company
L.P., David A. Jackson, Odeon Capital Partners, L.P., Meredith and Charles von
Arentschildt, Waterview Partners, L.P., Israel Infinity Venture Capital Fund
(Delaware) LP, Advanta Partners, L.P., Israel Infinity Venture Capital Fund
(Israel) LP, Israel Infinity Venture Capital Fund (Cayman II) LP, Israel
Infinity Venture Capital Fund (Cayman I) LP, Barbara W. Klazmer, Edward H.
Bases, Lauer & Co. (for the benefit of Bernard Klazmer), Bain Capital Integral
Investors LLC, Hollinger Capital LLC, America Online, Inc., TWI -- DealTime
Holdings, Inc., UBS Capital Jersey Ltd., Bank of America Corporation, Grey
Ventures, Inc., Axalon (Offshore) I, L.P., Clal Electronics Industries Ltd., CSK
Venture Capital Co. Ltd., DealTime Investors L.P., DealTime.com Trust and
SingTel Ventures (Singapore) Pte. Ltd. for an aggregate purchase price of
approximately $51,678,000. In connection therewith, we issued a warrant to
purchase up to 227,077 Series D Convertible Preferred Shares at an exercise
price of $5.78 per share to Warburg Dillon Read LLC.

Each of the securities referred to above was sold (i) pursuant to
exemptions from registration under Section 4(2) of the Securities Act and/or
(ii) to persons who were neither nationals nor residents of the United States
and no facilities or instrumentalities of United States interstate commerce were
used in connection with any offer or sale thereof. No underwriter or
underwriting discount or commission was involved in any of such sales. The
recipients of securities in each such transaction represented their intentions
to acquire the securities for investment only and not with a view to or for sale
in connection with any distribution thereof and appropriate legends were affixed
to the share certificates and warrants issued in such transactions. All
recipients had adequate access, through their relationship with us, to
information about us.

II-3
<PAGE> 94

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
NUMBER
- ------ DESCRIPTION
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Memorandum of Association (English translation accompanied
by Hebrew Original) of the Registrant dated .
3.2* Articles of Association dated of the Registrant.
4.1 Specimen of ordinary share certificate.
4.2 Amended and Restated Shareholders Agreement, dated February
8, 2000.
4.3* Warrant to Purchase Series D Convertible Preferred Shares
issued to Warburg Dillon Read LLC, dated February 9, 2000.
4.4* Warrant to Purchase Series D Convertible Preferred Shares
issued to Hapoalim Nechasim (Menayot) Ltd., dated January 3,
2000.
5.1* Opinion of Meitar, Liquornik, Geva & Co., Israeli counsel to
the Registrant, regarding the legality of the ordinary
shares registered hereunder.
10.1 1999 Omnibus Stock Option Plan and Restricted Stock
Incentive Plan.
10.2* Employment Agreement of Daniel T. Ciporin, dated January 8,
1999.
10.3* Employment Agreement of Ignacio Fanlo, dated August 15,
1999.
10.4* Employment Agreement of Lance Podell, dated May 27, 1999.
10.5 Debenture, dated January 3, 2000, issued to Bank Hapoalim
B.M.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Kost Forer & Gabbay, a member of Ernst & Young
International.
23.2* Consent of Meitar, Liquornik, Geva & Co., Israeli counsel to
the Registrant (included in Exhibit 5.l).
24.1 Power of Attorney (included in signature page to
Registration Statement).
27.1 Financial Data Schedule.
</TABLE>

- ------------
* To be filed by amendment.

(b) Financial Statement Schedules.

None

ITEM 17. UNDERTAKINGS.

(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

II-4
<PAGE> 95

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and this offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-5
<PAGE> 96

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 23rd day of March, 2000.

DEALTIME.COM LTD.

By: /s/ DANIEL T. CIPORIN
------------------------------------
Name: Daniel T. Ciporin
Title: President, Chief Executive
Officer and Director

POWER OF ATTORNEY

We, the undersigned directors and officers of DealTime.com Ltd. (the
"Company") and each of us, do hereby constitute and appoint Ignacio Fanlo and
Ezra Katzen, or either of them, our true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution, to do any and
all acts and things in our names and on our behalf in our capacities as
directors and officers and to execute any and all instruments for us and in our
names in the capacities indicated above, which said attorneys or agents, or
either of them, may deem necessary or advisable to enable the Company to comply
with the Securities Act of 1933, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission, and any and all
amendments (including post-effective amendments) to this Registration Statement,
in connection with the public offering of the ordinary shares of the Company,
including specifically but without limitation, power and authority to sign for
us or any of us in our names in the capacities indicated below, any and all
amendments (including post-effective amendments) to such Registration Statement;
and we do hereby ratify and confirm all that the said attorneys and agents, or
their substitute or substitutes, or either of them, shall do or cause to be done
by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DANIEL T. CIPORIN President, Chief Executive March 23, 2000
- --------------------------------------------------- Officer and a Director
Daniel T. Ciporin

/s/ NAHUM SHARFMAN, PH.D. Chairman of the Board and March 23, 2000
- --------------------------------------------------- Co-Founder
Nahum Sharfman, Ph.D.

/s/ IGNACIO FANLO Chief Operating and March 23, 2000
- --------------------------------------------------- Financial Officer
Ignacio Fanlo

/s/ AMIR ASHKENAZI Chief Technical Officer and March 23, 2000
- --------------------------------------------------- Co-Founder
Amir Ashkenazi

/s/ LANCE PODELL Chief Marketing Officer March 23, 2000
- ---------------------------------------------------
Lance Podell
</TABLE>

II-6
<PAGE> 97

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ EZRA KATZEN General Counsel and March 23, 2000
- --------------------------------------------------- Secretary
Ezra Katzen

/s/ JOHN P. CONNAUGHTON Director March 23, 2000
- ---------------------------------------------------
John P. Connaughton

Director
- ---------------------------------------------------
Michael Eisenberg

/s/ CHRISTOPHER SARIDAKIS Director March 23, 2000
- ---------------------------------------------------
Christopher Saridakis

Director
- ---------------------------------------------------
Eric Semler

/s/ MATTHEW A. SMITH Director March 23, 2000
- ---------------------------------------------------
Matthew A. Smith
</TABLE>

II-7
<PAGE> 98

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
NUMBER
- ------
DESCRIPTION
- ---------------------------------------------------------------------

<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Memorandum of Association (English translation accompanied
by Hebrew original) of the Registrant dated .
3.2* Articles of Association dated of the Registrant.
4.1 Specimen of ordinary share certificate.
4.2 Amended and Restated Shareholders Agreement, dated February
8, 2000.
4.3* Warrant to Purchase Series D Convertible Preferred Shares
issued to Warburg Dillon Read LLC, dated February 9, 2000.
4.4* Warrant to Purchase Series D Convertible Preferred Shares
issued to Hapoalim Nechasim (Menayot) Ltd., dated January 3,
2000.
5.1* Opinion of Meitar, Liquornik, Geva & Co., Israeli counsel to
the Registrant, regarding the legality of the ordinary
shares registered hereunder.
10.1 1999 Omnibus Stock Option Plan and Restricted Stock
Incentive Plan.
10.2* Employment Agreement of Daniel T. Ciporin, dated January 8,
1999.
10.3* Employment Agreement of Ignacio Fanlo, dated August 15,
1999.
10.4* Employment Agreement of Lance Podell, dated May 27, 1999.
10.5 Debenture, dated January 3, 2000, issued to Bank Hapoalim
B.M.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Kost Forer & Gabbay, a member of Ernst & Young
International.
23.2* Consent of Meitar, Liquornik, Geva & Co., Israeli counsel to
the Registrant (included in Exhibit 5.l).
24.1 Power of Attorney (included in signature page to
Registration Statement).
27.1 Financial Data Schedule.
</TABLE>

- ------------
* To be filed by amendment.

<PAGE> 1
- 1 -

Exhibit 4.1

SHARE CERTIFICATE

ORDINARY SHARES CERTIFICATE NO. [---]

DEALTIME.COM LTD.
COMPANY NO. 51-246003-1

Incorporated under the Laws of the State of Israel

Authorized Capital: NIS 500,000

THIS IS TO CERTIFY

That ___________].

is the registered holder of

___________ ORDINARY SHARES
par value NIS 0.01, fully paid
in the above named Company,
subject to the provisions of the Memorandum and
Articles of Association of the Company.

Given this __th day of __________, 2000

_______________________________
Director

THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER SUCH ACT, THE SALE IS MADE OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT OR THE ISSUER RECEIVES AN OPINION OF COUNSEL FOR THE
HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE ISSUER, STATING THAT
SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
<PAGE> 2
- 2 -

THE TRANSFERABILITY OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED
BY CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES OF ASSOCIATION AND BY THE TERMS
OF A CERTAIN SHAREHOLDERS' RIGHTS AGREEMENT DATED FEBRUARY 8, 2000, COPIES OF
WHICH MAY BE EXAMINED AT THE OFFICES OF THE COMPANY.

<PAGE> 1
Exhibit 4.2

AMENDED AND RESTATED
SHAREHOLDERS RIGHTS AGREEMENT

dated February 8, 2000

by and among

DEALTIME.COM LTD.

and

CERTAIN OF ITS SHAREHOLDERS
<PAGE> 2
TABLE OF CONTENTS

1. DEFINITIONS; REPRESENTATIONS; EFFECT OF AGREEMENT.........................

2. INCIDENTAL REGISTRATION...................................................

3. DEMAND REGISTRATION.......................................................

4. DESIGNATION OF UNDERWRITER................................................

5. EXPENSES..................................................................

6. INDEMNIFICATION AND CONTRIBUTION..........................................

7. OBLIGATIONS OF THE COMPANY................................................

8. CONDITIONS TO REGISTRATION OBLIGATIONS....................................

9. ASSIGNMENT OF REGISTRATION RIGHTS.........................................

10. LOCK-UP AND OTHER REQUIREMENTS OF THE HOLDERS.............................

11. RULE 144..................................................................

12. OTHER REGISTRATION RIGHTS; TERM...........................................

13. AFFIRMATIVE COVENANTS.....................................................

14. NEGATIVE COVENANTS........................................................

15. BOARD OF DIRECTORS........................................................

16. PRE-EMPTIVE RIGHT.........................................................

17. FOUNDER SALES.............................................................

18. RIGHT OF FIRST REFUSAL....................................................

19. INVESTOR TAG-ALONG RIGHTS.................................................

20. BRING-ALONG...............................................................
<PAGE> 3
21. INTENTIONALLY DELETED.....................................................

22. AMENDMENT.................................................................

23. MISCELLANEOUS.............................................................
<PAGE> 4
SHAREHOLDERS RIGHTS AGREEMENT

THIS AGREEMENT (this "AGREEMENT") made as of the 8th day of February, 2000, by
and among

DEALTIME.COM LTD., a company organized under the laws of the State of Israel,
registered under number 51-246003-1, with offices at 6 Hatzoren Street, Netanya,
Israel (the "COMPANY"); and

NAHUM SHARFMAN, Israel I.D. 005567110 ("SHARFMAN") and AMIR ASHKENAZI, Israel
I.D. 027757806 ("ASHKENAZI") (Sharfman and Ashkenazi are each referred to as a
"FOUNDER" and are collectively referred to as the "FOUNDERS"); and

M.L. TRUST COMPANY LTD. , a company organized under the laws of the State of
Israel ("ML"); and

ISRAEL SEED II L.P., a limited partnership organized under the laws of Jersey,
by its general partner, Seed Venture Partners Limited, a company organized under
the laws of the British Virgin Islands, with offices at Lord Coutanche House,
66-68 Esplanade, St. Helier, Jersey JE4 8SZ, Channel Islands ("ISLP"); and

UNICYCLE TRADING COMPANY, L.P., a limited partnership organized under the laws
of the State of Nevada ("UNICYCLE"); and

ODEON CAPITAL PARTNERS, L.P., a limited partnership organized under the laws of
the State of Delaware ("ODEON"); and

NOMURA INTERNATIONAL PLC, a company registered under the laws of England and
Wales ("NOMURA"); and

HOLDERS OF THE COMPANY'S PREFERRED D SHARES (as defined below) purchased
pursuant to the Subscription Agreement by and between the Company and each such
Purchaser dated February 8, 2000 (the "Series D Investors")

THE COMPANIES, INDIVIDUALS AND/OR ENTITIES IDENTIFIED IN SCHEDULE A attached
hereto .

WITNESSETH:

WHEREAS, concurrently with the execution of this Agreement, the Company and
certain Investors (as defined therein) shall enter into a Subscription Agreement
(the "SA"), according to which such Investors shall purchase Preferred D Shares
of the Company; and

WHEREAS, in connection with the execution of the SA and the investment in the
Company contemplated therein, the parties desire to amend the existing
Shareholders' Rights Agreement,
<PAGE> 5
dated August 23, 1999, as amended by Amendment No. 1, dated December 16, 1999 to
(the "EXISTING SRA"), by replacing the Existing SRA with this Agreement (the
"SRA").

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
herein, the parties hereby agree as follows:

1. DEFINITIONS; REPRESENTATIONS; EFFECT OF AGREEMENT.

1.1. Definitions. As used herein, the following terms have the
following meanings:

"Control" means direct or indirect ownership of more than 50%
of the equity or voting capital of an entity, or possession of
the right and power to direct the policy and management of
such entity.

"Form S-3" means Form S-3 or Form F-3 under the Securities
Act, as in effect on the date hereof or any registration form
under the Securities Act subsequently adopted by the
Securities and Exchange Commission (the "SEC") which permits
inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the
SEC.

"Founder Registrable Shares" means all Ordinary Shares held by
the Founders and/or issued by the Company in respect of such
shares, including bonus shares and share dividends, and all
Ordinary Shares the Founders may purchase pursuant to their
first refusal rights and preemptive rights.

"Holder" means any holder of outstanding Registrable Shares.

"Initiating Founders" means each of the Founders holding at
least 50% of the Founders Registrable Shares.

"Initiating Holders" means Investor Holders holding 20% of the
unregistered Investor Registrable Shares.

"IIF Investors" means Israel Infinity Venture Capital Fund
(Israel) LP, Israel Infinity Venture Capital Fund (Delaware)
LP, Israel Infinity Venture Capital Fund (Cayman I) LP and
Israel Infinity Venture Capital Fund (Cayman II) LP, and any
permitted transferee of any of the above.

"Investor" means a holder of either Preferred A Shares,
Preferred B Shares, Preferred C Shares or Preferred D Shares.

"Investor Holder" means any holder of outstanding Investor
Registrable Shares.

-5-
<PAGE> 6
"Investor Registrable Shares" shall mean the Series A Investor
Registrable Shares, the Series B Investor Registrable Shares,
the Series C Registrable Shares and the Series D Registrable
Shares, collectively.

"IPO" means the Company's initial underwritten public offering
of its Ordinary Shares pursuant to an effective registration
statement under the Securities Act or equivalent law of
another jurisdiction.

"Ordinary Registrable Shares" means all Ordinary Shares now
held by the Founders and the Ordinary Share Investors, all
Ordinary Shares issued by the Company in respect of such
shares, including bonus shares and share dividends, and all
Ordinary Shares that the Founders or Ordinary Share Investors
may hereafter purchase or acquire pursuant to their preemptive
rights or rights of first refusal or otherwise.

"Qualified IPO" means an IPO (i) that raises net proceeds for
the Company of a minimum of $30 million and (ii) if effective
by December 31, 2000, in which the Ordinary Shares offered
thereby are offered at a price per share equal to 500% or more
of the then effective Conversion Price for the Preferred C
Shares under the Company's Articles of Association, or if
effective after January 1, 2001, the Ordinary Shares offered
thereby are offered at a price per share equal to 750% or more
of the then effective Conversion Price for the Preferred C
Shares under the Company's Articles of Association.

"Permitted Transferee" shall mean a person or entity which
receives shares pursuant to one of the following permitted
transfers:

(a) the transfer of all or any of the shares held by
the shareholder (the "TRANSFEROR") to: (i) a company
Controlled by the transferor; or (ii) a company that
Controls the transferor; or (iii) an entity under
common Control with the transferor (which for these
purposes shall be deemed to include any transfer to
any company under the Control of UBS AG (a "UBS Group
Company") and/or any transfer to any partnership or
unincorporated association under the Control of any
UBS Group Company which includes, without prejudice
to the generality of the foregoing, any limited
partnership the general partner of which is a UBS
Group Company), or (iv) in the case of a transfer by
a partnership (including a limited partnership) or
limited liability company, to any partners or members
thereof, or any partnership (including a limited
partnership) or limited liability company managed by
the same management company or to the partners or
members thereof; or (v) in the case of a body
corporate, to its shareholders in the same proportion
as their ownership interest in the body corporate; or
(vi) in the case of a trustee, to the beneficiary or
beneficiaries for whom the trustee is holding shares;
provided that such Permitted Transferee has agreed in

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<PAGE> 7
writing to assume all obligations of the transferor
(in its capacity as a shareholder) under all
agreements involving the Company; and

(b) the transfer by a shareholder who is an
individual to his spouse, children, or grandchildren,
other than to minors and persons incapacitated as a
matter of law, and provided that such Permitted
Transferee has agreed in writing to assume all
obligations of the transferor (in its capacity as a
shareholder) under all agreements involving the
Company.

"Preferred A Shares" means Series A Preferred Shares of the
Company par value NIS 0.01 each.

"Preferred B Shares" means Series B Preferred Shares of the
Company par value NIS 0.01 each.

"Preferred C Shares" means Series C Preferred Shares of the
Company par value NIS 0.01 each.

"Preferred D Shares" means Series D Preferred Shares of the
Company par value NIS 0.01 each.

"Register", "registered" and "registration" refer to a
registration effected by filing a registration statement in
compliance with the Securities Act and the declation or
ordering by the SEC of effectiveness of such registration
statement, or the equivalent actions under the laws of another
jurisdiction.

"Registrable Shares" means all Investor Registrable Shares and
Ordinary Registrable Shares.

"Reserved Shares" means Ordinary Shares issuable upon
conversion of the Preferred Shares.

"Securities Act" means the United States Securities Act of
1933, as amended.

"Series A Investor Registrable Shares" means all Ordinary
Shares issuable upon conversion of the Preferred A Shares, all
Ordinary Shares issued by the Company in respect of such
shares, including bonus shares and share dividends, and all
Ordinary Shares that the holders of Preferred A Shares may
hereafter purchase or acquire, pursuant to their preemptive
rights or rights of first refusal or otherwise, or Ordinary
Shares issued on conversion of such other securities.

"Series B Investor Registrable Shares" means all Ordinary
Shares issuable upon conversion of the Preferred B Shares, all
Ordinary Shares issued by the Company in respect of such
shares, including bonus shares and share dividends, and all
Ordinary Shares that the holders of Preferred B Shares may
hereafter purchase or

-7-
<PAGE> 8
acquire, pursuant to their preemptive rights or rights of
first refusal or otherwise, or Ordinary Shares issued on
conversion of such other securities.

"Series C Investor Registrable Shares" means all Ordinary
Shares issuable upon conversion of the Preferred C Shares, all
Ordinary Shares issued by the Company in respect of such
shares, including bonus shares and share dividends, and all
Ordinary Shares or other securities convertible into Ordinary
Shares, that the holders of Preferred C Shares may hereafter
purchase or acquire, pursuant to their preemptive rights,
rights of first refusal, warrants or otherwise, or Ordinary
Shares issued on conversion of such other securities.

"Series A and B Registrable Shares" means the Series A
Investor Registrable Shares and the Series B Investor
Registrable Shares, collectively.

"Series D Investor Registrable Shares" means all Ordinary
Shares issuable upon conversion of the Preferred D Shares, all
Ordinary Shares issued by the Company in respect of such
shares, including bonus shares and share dividends, and all
Ordinary Shares or other securities convertible into Ordinary
Shares, that the holders of Preferred D Shares may hereafter
purchase or acquire, pursuant to their preemptive rights,
rights of first refusal, warrants or otherwise, or Ordinary
Shares issued on conversion of such other securities.

1.2. Representations

The Company and each of Sharfman, Ashkenazi, ML, ISLP,
Unicycle, Odeon, Nomura and the Series D Investors hereby
acknowledge that the amendment and restatement of the SRA as
set forth hereunder shall be binding upon all Shareholders,
including such Shareholders who are not a party to this
Agreement and that upon execution of this Agreement, its terms
shall be binding upon the Company and each and all of the
Shareholders, as if such parties would have been parties
hereto.

1.3. Effect of Agreement

By executing this Agreement, the Existing SRA is hereby
amended and replaced by this SRA. The provisions of this SRA
shall binding upon the shareholders of the Company, provided
however, that nothing herein contained shall derogate form the
rights and obligations of the shareholders of the Company
under the Existing SRA, insofar as same relates to the period
prior to the date hereof.

2. INCIDENTAL REGISTRATION.

2.1. If, at any time (i) the Company proposes to register any of
its securities (including in the event of the Company's IPO)
or (ii) the Company proposes to register any securities owned
by anyone other than the Investor Holders, other than (a) in a
registration under Section 3 of this Agreement or (b) a
registration on Form S-8 or Form F-4, the Company shall give
notice to the Holders of such

-8-
<PAGE> 9
intention, at least 45 days prior to the filing of the
registration statement in connection with such registration.
Upon the written request of any Holder given within twenty
(20) days after receipt of any such notice, the Company shall
include in such registration all of the Registrable Shares
indicated in such request(s) of the Investor Holders, so as to
permit the disposition of the shares so requested.

2.2. Notwithstanding any other provision of this Section 2, if the
managing underwriter advises the Company in writing that in
its opinion the number of securities requested to be included
in such registration exceeds the number that can be sold in
such offering without adversely affecting such underwriter's
ability to effect an orderly distribution of such securities,
the Company will include in such registration: (i) first, the
Company's Securities; (ii) second, the number of Investor
Registrable Shares requested to be included that, in the
opinion of such underwriters, can be sold, pro rata, among the
holders of such securities on the basis of the number of
Investor Registrable Shares requested to be included by such
holders in the registration; and (iii) third, the number of
Ordinary Registrable Shares requested to be included that, in
the opinion of such underwriters, can be sold, pro rata, among
the holders of such securities on the basis of the number of
Ordinary Registrable Shares requested to be included by such
holders in the registration; provided, however, that in any
event, all Investor Registrable Shares must be included in
such registration prior to the Ordinary Registrable Shares and
any other shares of the Company (with the exception of shares
to be issued by the Company to the public).

3. DEMAND REGISTRATION.

3.1. At any time following 120 days after the closing of the
Company's IPO, the Initiating Holders may request in writing
that all or part of their Investor Registrable Shares shall be
registered under the Securities Act. Within 20 days after
receipt of any such request, the Company shall give written
notice of such request to the other Holders, and shall include
in such registration all Registrable Shares held by all such
Holders who wish to participate in such demand registration
and provide the Company with written requests for inclusion
therein within 20 days after the receipt of the Company's
notice. Thereafter, the Company shall effect the registration
of all Registrable Shares as to which it has received requests
for registration (a "DEMAND") and in connection with the first
Demand after the Company's IPO (the "FIRST DEMAND"), use its
best efforts to have such First Demand effective by the 61st
day after the Initiating Holders make such First Demand.
Notwithstanding the foregoing, the Company shall have the
right, exercisable by the 31st day after such First Demand, to
nullify such Demand in order to file a registration statement
for the registration of its equity securities for its own
account. Subject to the provisions of this Section 3.1, no
Demand shall be binding on the Company if the Company has
filed any

-9-
<PAGE> 10
registration statement for the registration of its equity
securities for its own account within the previous one hundred
and eighty (180) days (other than a form S-8 or similar
registration for employee shares) or, if not for the Company's
account, within the previous ninety (90) days.

3.2. The Initiating Holders shall have the right to three (3)
Demands. Subsequent to the First Demand, no Demand shall be
effective unless Initiating Holders holding at least 10% of
the unregistered Series D Investor Registrable Shares (other
than any such Holders who are holding Preferred A, Preferred B
or Preferred C Shares or Investor Registrable Shares issued in
respect thereof) join in such Demand.

3.3. Any registration proceeding begun pursuant to Sections 3.1 or
3.2 that is subsequently withdrawn at the request of the
Initiating Holders (with respect to their Demand) shall count
toward the quota of registration statements which the Investor
Holders have the right to cause to effect pursuant to Section
3.2; provided further, however, that such withdrawn
registration shall not be so counted if such withdrawal is
based upon material adverse information relating to the
Company or its condition, business, prospects or general
securities market conditions which is different from that
generally known to the Initiating Holders at the time of their
request. In addition, in the event that the Company utilizes
its right under Section 3.1 to file a registration statement
for its own account by the 31st day subsequent to the making
of the First Demand, such Demand shall not count toward the
quota of registration statements which the Investor Holders
have the right to cause to effect pursuant to Section 3.2.
Only the Initiating Holders who make a Demand under Sections
3.1 and 3.2 shall have the right to withdraw registration
proceedings under Sections 3.1 and 3.2 (with respect to their
Demand).

3.4. Founder Demand. At any time at least 90 days following the
closing of the second of the Demand registrations to occur
under Section 3.1, the Initiating Founders may request in
writing that all or part of the Founder Registrable Shares
shall be registered under the Securities Act. Within 15 days
after receipt of any such request, the Company shall give
written notice of such request to the other Holders, and shall
include in such registration all Registrable Shares held by
all such Holders who wish to participate in such demand
registration (subject to the limitation below) and provide the
Company with written requests for inclusion therein within 20
days after the receipt of the Company's notice. Thereupon, the
Company shall effect the registration of all Registrable
Shares as to which it has received requests for registration
(subject to the limitation below). Notwithstanding the above,
the maximum number of Founder Registrable Shares that may be
included in a registration under this Section 3.4 shall be
three times the number of Founder Registrable Shares that the
two Founders would together be entitled under Rule 144 of the
Securities Act (as currently enacted) to sell during the three
month period beginning on the date of the request for
registration by the Initiating Founders, assuming that the

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<PAGE> 11
Founders are "affiliates" at the time of the registration and
that the initial minimum holding period for restricted
securities under Rule 144 has passed.

3.5. The Company shall not be required to effect more than one (1)
registration under Section 3.4, provided, however, that any
registration proceeding begun pursuant to Section 3.4 that is
subsequently withdrawn at the request of the Initiating
Founders shall count toward the one registration statement
pursuant to Section 3.4; provided further, however, that such
withdrawn registration shall not be so counted if such
withdrawal is based upon material adverse information relating
to the Company or its condition, business, or prospects which
is different from that generally known to the Initiating
Founders at the time of their request. Only the Initiating
Founders shall have the right to withdraw a registration
proceeding under Section 3.4.

3.6. Notwithstanding any other provision of this Section 3, if the
managing underwriter advises the Investor Holders in writing
that in the managing underwriter's opinion the number of
securities requested to be included in such registration
exceeds the number that can be sold in such offering without
adversely affecting such underwriter's ability to effect an
orderly distribution of such securities, the Company will
include in such registration:

1 first, the number of Investor Registrable
Shares requested to be included that, in the
opinion of such underwriters, can be sold,
provided that if, in the opinion of the
managing underwriter, less than all Investor
Registrable Shares requested to be included
can be included in such Demand registration,
then allocation among the Investor Holders
shall be made pro rata among the Investor
Holders participating in such Demand on the
basis of the number of Investor Registrable
Shares which each Investor Holder seeking to
participate in such Demand has requested be
included in such registration;

2 second, the number of Ordinary Registrable
Shares requested to be included that, in the
opinion of such underwriters, can be sold,
pro rata, among the holders of such
securities on the basis of the number of
Ordinary Registrable Shares which each
holder of Ordinary Registrable Shares
seeking to participate in such Demand has
requested to be included in such
registration; provided, however, that in any
event, all Investor Registrable Shares must
be included in such registration prior to
any other shares of the Company. The Company
shall not register securities for sale for
its own account in any registration
requested pursuant to this Section 3 unless
permitted to do so by the written consent of
Investor Holders who hold at least 75% of

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<PAGE> 12
the Investor Registrable Shares as to which
registration has been requested.

3.7. Subject to the provisions of Section 3.1, the Company may not
cause any other registration of securities for sale for its
own account (other than a registration effected solely to
implement an employee benefit plan) to be initiated after a
registration requested pursuant to Section 3 and to become
effective less than 90 days after the effective date of any
registration requested pursuant to Section 3.

3.8. F-3 Registration. Commencing as soon as legally permissible
after the closing of the IPO, in any case that the Company
shall receive from any Holder or Holders a written request or
requests that the Company effect a registration on Form F-3,
and any related qualification or compliance, with respect to
Investor Registrable Shares where the aggregate net proceeds
from the sale of such Investor Registrable Shares equals to at
least five million United States Dollars ($5,000,000), the
Company will within twenty (20) days after receipt of any such
request give written notice of the proposed registration and
any related qualification or compliance, to all other Holders,
and include in such registration all Investor Registrable
Shares held by all such Holders who wish to participate in
such registration and provide the Company with written
requests for inclusion therein within 15 days after the
receipt of the Company's notice. Thereupon, the Company shall
effect such registration and all such qualifications and
compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of
such Holder's or Holders' Investor Registrable Shares as are
specified in such request, together with all or such portion
of the Investor Registrable Shares of any other Holder or
Holders joining such request as are specified in a written
request given within fifteen (15) days after receipt of such
written notice from the Company; provided, however, that the
Company shall not be obligated to effect any such
registration, qualification, or compliance, pursuant to this
Section 3.8 if the Company has, within the twelve (12) month
period preceding the date of such request, already effected
two (2) registrations for the Holders pursuant to this Section
3.8. The Company undertakes that it will, once having
qualified for registration on Form F-3, use its best efforts
to comply with all necessary filings and other requirements so
as to maintain such qualification.

3.9. Additional F-3. The provisions of this Section 3
notwithstanding, in the event that all three (3) Demands
available pursuant to Section 3.1 are utilized and Holders of
at least 75% of either the (i) unregistered Series A and B
Investor Registrable Shares (the "DISSENTING SERIES A AND B
INVESTORS"), (ii) unregistered Series C Investor Registrable
Shares (the "DISSENTING SERIES C INVESTORS") or (iii)
unregistered Series D Investor Registrable Shares (the
"DISSENTING SERIES D INVESTORS") elect not to participate in
any such Demand then the Dissenting Series A and B Investors,
the Dissenting Series C Investors and/or the Dissenting Series
D Investors, as the case may be, shall each be entitled to an
additional demand for an F-3 registration, which F-3
registration

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<PAGE> 13
shall be effected in accordance with the terms of Section 3.8,
with such changes as the context may require.

3.10. The Company shall have the right, exercisable once in any 12
month period, to defer filing a registration statement (a
"REGISTRATION DEFERRAL") under the Securities Act pursuant to
this Section 3 for a period of up to 90 days if (i) the Board
of Directors of the Company shall determine that it would be
seriously detrimental to the Company to file such registration
statement at the date the filing would otherwise be required
under this Agreement, or (ii) the Board of Directors of the
Company determines in good faith that (A) the Company is in
possession of material, non-public information concerning an
acquisition, merger, recapitalization, consolidation,
reorganization or other material transaction by or of the
Company or concerning pending or threatened litigation and (B)
disclosure of such information would jeopardize any such
transaction or litigation or otherwise materially harm the
Company, or (iii) at the time of such request the Company is
engaged, or has formal plans to engage within 60 days of the
time of such request, in an underwritten public offering of
securities (including an offering contemplated by Section 3
hereof), provided that the Company's right to undertake a
registration for its own account contained in Section 3.1
shall not be deemed to be an exercise of the provisions of
this Section 3.10.

4. DESIGNATION OF UNDERWRITER.

4.1. In the case of any registration effected pursuant to Section
3, should the offering be underwritten, the Company and the
majority of the Initiating Holders that submitted the request
for the Demand registration shall confer as to the selection
of a managing underwriter. Should they fail to reach
agreement, the selection shall be made by the majority of the
Initiating Holders who submitted the Demand request.

4.2. In the case of any registration initiated by the Company, the
Company shall have the right to designate the managing
underwriter in any underwritten offering.

4.3. In an IPO, the Company shall use its best efforts to involve
Nomura and Nomura shall have the right to act as not less
than a co-manager in the underwriters' consortium, with a
right to distribute at least 10% of the shares which are
subject to the IPO.

5. EXPENSES.

All expenses incurred in connection with any registration under Sections 2 or 3,
including the reasonable fees of one legal counsel for the selling Holders,
shall be borne by the Company; provided, however, that each of the Holders
participating in such registration shall pay its pro rata portion of the
discounts or commissions payable to any underwriter.

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<PAGE> 14
6. INDEMNIFICATION AND CONTRIBUTION.

In the event of any registered offering of Ordinary Shares pursuant to this
Agreement:

6.1. The Company will indemnify and hold harmless, to the fullest
extent permitted by law, any Holder and any underwriter for
such Holder, and each person, if any, who controls the Holder
or such underwriter, from and against any and all losses,
damages, claims, liabilities, joint or several, costs and
expenses (including any amounts paid in any settlement
effected with the Company's prior written consent) to which
the Holder or any such underwriter or controlling person may
become subject under applicable law or otherwise, insofar as
such losses, damages, claims, liabilities (or actions or
proceedings in respect thereof), costs or expenses arise out
of or are based upon (i) any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or included in the prospectus, as
amended or supplemented, or (ii) the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in
the light of the circumstances in which they are made, not
misleading, and the Company will reimburse the Holder, such
underwriter and each such controlling person of the Holder or
the underwriter, promptly upon demand, for any reasonable
legal or any other expenses incurred by them in connection
with investigating, preparing to defend or defending against
or appearing as a third-party witness in connection with such
loss, claim, damage, liability, action or proceeding;
provided, however, that the Company will not be liable in any
such case to the extent that any such loss, damage, liability,
cost or expense arises out of or is based upon an untrue
statement or omission in such registration statement or
prospectus so made in conformity with information furnished to
the Company in writing by a Holder, such underwriter or such
controlling persons specifically for use in such registration
statement; provided, further, that this indemnity shall not be
deemed to relieve any underwriter of any of its due diligence
obligations; provided, further, that the indemnity agreement
contained in this Section 6.1 shall not apply to amounts paid
in settlement of any such claim, loss, damage, liability or
action if such settlement is effected without the consent of
the Company, which consent shall not be unreasonably withheld.
Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the
selling Shareholder, the underwriter or any controlling person
of the selling Shareholder or the underwriter, and regardless
of any sale in connection with such offering by the selling
Shareholder. Such indemnity shall survive the transfer of
securities by a selling Shareholder; or (iii) indemnification
of shareholders against any violation or alleged violation by
the Company of the Securities Act of 1933, Securities Exchange
Act of 1934 or the state securities laws of individual U.S.
states.

6.2. Each Holder participating in a registration hereunder will
indemnify and hold harmless the Company, any underwriter for
the Company, and each person, if any, who controls the Company
or such underwriter, from and against any and

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<PAGE> 15
all losses, damages, claims, liabilities, costs or expenses
(including any amounts paid in any settlement effected with
the selling Shareholder's consent) to which the Company or any
such controlling person and/or any such underwriter may become
subject under applicable law or otherwise, insofar as such
losses, damages, claims, liabilities (or actions or
proceedings in respect thereof), costs or expenses arise out
of or are based on (i) any untrue statement or alleged untrue
statement of any material fact contained in the registration
statement or included in the prospectus, as amended or
supplemented, or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading, and
each such Holder will reimburse the Company, any underwriter
and each such controlling person of the Company or any
underwriter, promptly upon demand, for any reasonable legal or
other expenses incurred by them in connection with
investigating, preparing to defend or defending against or
appearing as a third-party witness in connection with such
loss, claim, damage, liability, action or proceeding;
provided, however, notwithstanding the foregoing terms of this
Section 6.2, that the Holder shall be liable in any such case
only to the extent that any such loss, damage, liability, cost
or expense arises out of or is based upon an untrue statement
or omission in such registration or prospectus made in strict
conformity with written information furnished to the Company
by such Holder specifically for use in such registration
statement; and provided further that the liability of such
Holder under this Section 6.2, excluding liability for costs
and expenses arising out of any action or proceeding, shall
not exceed the product of the number of shares registered by
the Holder and the per share purchase price of the shares as
set forth in the registration; provided, further, that this
indemnity shall not be deemed to relieve any underwriter of
any of its due diligence obligations; provided, further, that
the indemnity agreement contained in this Section 6.2 shall
not apply to amounts paid in settlement of any such claim,
loss, damage, liability or action if such settlement is
effected without the consent of the Holders, as the case may
be, which consent shall not be unreasonably withheld. In no
event shall the liability of a Holder exceed the gross
proceeds from the offering received by such Holder.

6.3. Promptly after receipt by an indemnified party pursuant to the
provisions of Sections 6.1 or 6.2 of notice of the
commencement of any action involving the subject matter of the
foregoing indemnity provisions, but in any event no fewer than
ten (10) days before the date designated in such notice as the
date by which an answer must be served (or such extension
thereof, provided that the extension has been granted in
writing by the plaintiff and that no admission or consent to
jurisdiction or other waiver has been granted or implied by
the request for such an extension), such indemnified party
will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of said Sections
6.1 or 6.2, promptly notify the indemnifying party of the
commencement thereof In

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<PAGE> 16
case such action is brought against any indemnified party and
it notifies the indemnifying party of the commencement
thereof, the indemnifying party shall have the right to
participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to
assume the defense thereof with counsel reasonably
satisfactory to such indemnified party; provided, however,
that if the defendants in any action include both the
indemnified party and the indemnifying party and there is a
conflict of interests which would prevent counsel for the
indemnifying party from also representing the indemnified
party, the indemnified party or parties shall have the right
to select one separate counsel to participate in the defense
of such action on behalf of such indemnified party or parties.
After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified
party pursuant to the provisions of said Sections 6.1 or 6.2
for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof,
unless (i) the indemnified party shall have employed counsel
in accordance with the provision of the preceding sentence,
(ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after the
notice of the commencement of the action and within 15 days
after written notice of the indemnified party's intention to
employ separate counsel pursuant to the previous sentence, or
(iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the
indemnifying party. No indemnifying party will consent to
entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release
from all liability in respect to such claim or litigation.

6.4. Contribution. If for any reason the foregoing indemnity is
unavailable, or is insufficient to hold harmless an
indemnified party, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified
party as a result of such losses, claims, damages, liabilities
or expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the indemnifying
party on the one hand and the indemnified party on the other
from the registration or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, or
provides a lesser sum to the indemnified party than the amount
hereinafter calculated, in such proportion as is appropriate
to reflect not only the relative benefits received by the
indemnifying party on the one hand and the indemnified party
on the other but also the relative fault of the indemnifying
party and the indemnified party as well as any other relevant
equitable considerations; provided that in no event shall any
contribution by a Holder hereunder exceed the gross proceeds
from the offering received from such Holder. No person guilty
of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation.

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<PAGE> 17
7. OBLIGATIONS OF THE COMPANY.

Whenever required under this Agreement to effect the registration of any
Registrable Shares, the Company shall, as expeditiously as possible:

7.1. (i) prepare and file with the SEC a registration statement with
respect to such Registrable Shares and use its best efforts to
cause such registration statement to become effective, (ii) upon
the request of the holders of a majority of the Registrable
Shares registered thereunder, keep a registration statement
filed pursuant to Section 2 effective for a period of up to two
hundred seventy (270) days or, if sooner, until the
distribution contemplated in the Registration Statement has been
completed, and (iii) upon the request of the holders of a
majority of the Investor Registrable Shares registered
thereunder, keep a registration statement filed pursuant to
Section 3 above effective for a period of up to two hundred
seventy (270) days or, if sooner, until the distribution
contemplated in the Registration Statement has been completed,
provided, that the in the case of the First Demand, the Company
shall not be obligated to keep the registration statement filed
pursuant thereto effective for more than one hundred and eighty
(180) days or, in the event such First Demand is underwritten,
for more than the period within which the distribution
contemplated in the registration statement has been completed,
and further provided, that in the event that the First Demand is
not underwritten, no Holder may sell shares pursuant to the
registration statement effective pursuant to the First Demand
without first inquiring of the Company in writing as to whether
such sale would be permissible at such time in light of the then
current form of such registration statement. Failure by the
Company to respond in writing to an address or fax number
provided by the inquiring shareholder in its inquiry within
three days of the request shall be deemed to be assent to such
proposed sale. In the event that the Company does inform the
inquiring shareholder that the proposed sale of securities under
the relevant registration statement would not be permissible at
such time, then the Company shall use its best efforts to amend
or supplement such registration statement or the prospectus
included therein so that such shareholder can sell its
securities thereunder unless (i) the Board of Directors of the
Company determines that it would be seriously detrimental to the
Company to so amend or supplement such registration statement or
prospectus, or (ii) the Board of Directors of the Company
determines in good faith that (A) the Company is in possession
of material, non-public information concerning an acquisition,
merger, recapitalization, consolidation, reorganization or other
material transaction by or of the Company or concerning pending
or threatened litigation and (B) disclosure of such information
would jeopardize any such transaction or litigation or otherwise
materially harm the Company. In any such event, the Company
shall promptly notify the inquiring holder when the use of the
relevant registration statement or prospectus may be resumed or
supply such holder with copies of any amendment or supplement
made pursuant

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<PAGE> 18
to the preceding sentence and such inquiring holder shall not
dispose of its Registrable Shares under such registration statement
or prospectus until it is so advised in writing by the Company that
the use of the prospectus included in such registration statement
may be resumed or until such holder receives such copies of any
supplement or amendment to such registration statement or
prospectus, provided, however, that any such prohibition shall not
be in effect for more than 90 days in any 12 month period.

7.2. prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection
with such registration statement as may be reasonably necessary to
comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Shares covered by such
registration statement.

7.3. furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as
they may reasonably request in order to facilitate the disposition
of Registrable Shares owned by them.

7.4. in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering.
Each Holder participating in such underwriting shall also enter
into and perform its obligations under such an agreement.

7.5. notify each holder of Registrable Shares covered by such
registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of
the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of
the circumstances then existing, in which event each such holder
of Registrable Shares shall forthwith discontinue disposition of
its Registrable Shares pursuant to such prospectus until it is
advised in writing by the Company that the use of such
prospectus may be resumed or until such holder receives copies
of any supplement or amendment to such prospectus, provided,
however, that such suspensions shall not be in effect for more
than 90 days in any 12 month period.

7.6. cause all Registrable Shares registered pursuant hereunder to be
listed on each securities exchange (or Nasdaq) on which similar
securities issued by the Company are then listed.

7.7. provide a transfer agent and registrar for all Registrable Shares
registered pursuant hereunder and a CUSIP number for all such
Registrable Shares, in each case not later than the effective date
of such registration.

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<PAGE> 19
7.8. take such action under the securities laws of such states of the
United States as any participating Holder shall reasonably request;
provided, however, that the Company shall not be required to
qualify to do business as a foreign corporation, or to file any
general consent to service of process, in any state.

7.9. furnish, at the request of any Holder requesting registration of
Registrable Shares pursuant to this Agreement, on the date that
such Registrable Shares are delivered to the underwriters for
sale in connection with a registration pursuant to this
Agreement, if such securities are being sold through
underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with
respect to such securities becomes effective, (i) an opinion,
dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Shares and (ii) a
letter dated such date, from the independent certified public
accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to
the underwriters, if any, and to the Holders requesting
registration of Registrable Shares.

8. CONDITIONS TO REGISTRATION OBLIGATIONS.

The Company shall not be obligated to effect the registration of Registrable
Shares pursuant to this Agreement unless the Holder consents to the following
conditions:

8.1. conditions requiring the Holder to comply with all applicable
provisions of the Securities Act and the Securities and Exchange
Act including, but not limited to, the prospectus delivery
requirements of the Securities Act, and to furnish to the Company
information about sales made in such public offering; and

8.2. conditions prohibiting the Holder upon receipt of telegraphic or
written notice from the Company that it is required by law to
correct or update the registration statement or prospectus from
effecting sales of the Registrable Shares until the Company has
completed the necessary correction or updating.

8.3. conditions prohibiting the sale of Registrable Shares by such
Holder, as the case may be, during the process of the registration
until the Registration Statement is effective.

9. ASSIGNMENT OF REGISTRATION RIGHTS.

Any of the Holders may assign its rights to cause the Company to register
pursuant to this Agreement all or any part of its Registrable Shares. The
transferor shall, within twenty (20) days after such transfer, furnish the
Company with written notice of the name and address of such

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<PAGE> 20
transferee and the securities with respect to which such registration rights are
being assigned, and the transferee's written agreement to be bound by this
Agreement.

10. LOCK-UP AND OTHER REQUIREMENTS OF THE HOLDERS.

In connection with the Company's IPO all Holders agree, and in connection with
any underwritten registration of the Company's shares pursuant to Sections 2 or
3 above, all Holders participating in such underwritten offering agree that any
sales of Registrable Shares may be subject to a "lock-up" period restricting
such sales for up to one hundred and eighty (180) days, and all such Holders
will agree to abide by such customary "lock-up" period of up to one hundred and
eighty (180) days as is required by the underwriter in such a registration and
further agree to execute such further documents as may be required by the
underwriters to effectuate such "lock-up". In addition, no Holder may
participate in any underwritten registration hereunder unless such person (i)
agrees to sell such person's securities on the basis provided in any customary
underwriting arrangements and (ii) provides any relevant information and
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements, and other documents required under the terms of such
underwriting arrangements; provided that such underwriting arrangements shall
not provide for indemnification or contribution obligations on the part of the
holders greater than the obligations set forth in Article 6 above.

11. RULE 144.

At any time and from time to time after the earlier of the close of business on
such date as (a) a registration statement filed by the Company under the
Securities Act becomes effective, or (b) the Company registers a class of
securities under Section 12 of the United States Securities Exchange Act of
1934, as amended, or any federal statute or code which is a successor thereto
(the "Exchange Act") the Company shall:

11.1. Make and keep available adequate current public information with
respect to the Company within the meaning of Rule 144(c) under the
Securities Act (or similar rule then in effect);

11.2. Furnish to any holder of Registrable Shares forthwith upon request
(i) a written statement by the Company as to its compliance with
the informational requirements of Rule 144(c) (or similar rule then
in effect) or (ii) a copy of the most recent annual or quarterly
report of the Company; and

11.3. Use its best efforts to comply with all other necessary filings and
other requirements so as to enable the Investors and any transferee
thereof to sell Registrable Shares under Rule 144 under the
Securities Act (or similar rule then in effect).

12. OTHER REGISTRATION RIGHTS; TERM

12.1. The Company shall not grant registration rights with respect to any
securities of the Company to any person that are equal to or
superior to the registration rights granted to the Investor Holders
pursuant to this Agreement, except with the

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<PAGE> 21
written consent of a majority of each of the Series A, Series B,
Series C and Series D Investor Registrable Shares.

1.2. The registration rights contained herein shall expire three (3)
years following the date of the Company's IPO, except that the
rights set forth in Section 6 shall not expire.

13. AFFIRMATIVE COVENANTS.

The Company covenants and agrees with the Investors that until the
consummation of a Qualified IPO (as such term is defined in the Company's
Articles of Association):

13.1. Financial Reporting. The Company shall maintain a system of
accounting established and administered in accordance with the
United States generally accepted accounting principles consistently
applied ("GAAP"), will keep full and complete financial records,
and will furnish to the Investors the following reports in English:

13.1.1. As soon as practicable after the end of each fiscal
year, and in any event within 90 days thereafter, the
audited consolidated balance sheet of the Company as at
the end of such fiscal year, and audited consolidated
statements of operations and retained earnings and cash
flow of the Company for such fiscal year, all in
reasonable detail, accompanied by consolidating
schedules, and prepared in accordance with GAAP in
adjusted NIS and in U.S. Dollars, and audited by the
Israeli affiliate of one the "Big 5" U.S. accounting
firms (the "Auditors").

13.1.2. As soon as practicable after the end of the first,
second, and third quarter in each fiscal year and in
any event within 45 days thereafter, the unaudited
consolidated balance sheet and statements of operations
and retained earnings and cash flow of the Company for
such quarter, all in reasonable detail, prepared in
accordance with GAAP, and certified to be complete and
correct (subject to year-end adjustments) by the chief
financial officer of the Company, in adjusted NIS and
in U.S. Dollars, and reviewed by the Auditors.

13.2. Other Information. The Company shall furnish to the Investors
holding (including any unexercised warrants) not less than 1.0% of
the Company's outstanding share capital (on a fully diluted, as
converted, basis) the following reports and information in English:

13.2.1. Within 20 days after the period to which they relate,
brief monthly financial reports in such form as shall be
agreed from time to time between the Company and the
Investors.

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<PAGE> 22
13.2.2. An annual operating plan and budget, at least 30 days
prior to the first day of the year covered by such plan,
to be provided only to the Directors appointed pursuant to
Section 15.1 (as defined below).

13.2.3. promptly after receipt, all reports delivered to the
Company by its accountants;

13.2.4. promptly after the commencement or threatened
commencement thereof, notice of all material actions,
suits, investigations, and proceedings before any court
or governmental department, arbitration panel,
commission, board, bureau, agency or instrumentality,
domestic or foreign, affecting the Company or any of
its subsidiaries other than ordinary and routine
litigation covered under the limits of existing
insurance policies;

13.2.5. promptly, copies of any press releases issued by the
Company;

13.2.6. promptly after an Investor's request therefor, copies
of minutes of meetings of the Board of Directors of the
Company;

13.2.7. promptly, copies of all amendments to the Articles of
Association or Memorandum of Association of the
Company; and

13.2.8. such other information regarding the business, affairs and
condition of the Company as the Investors may from time to
time reasonably request.

13.3. Legal Existence, Compliance, Etc.

13.3.1. The Company will maintain its existence as a limited
company duly organized and validly existing under the laws
of the State of Israel.

13.3.2. The Company will conduct its business in compliance in
all material respects with all permits and licenses
issued by, and all statutes, rules, regulations and
orders of, and all restrictions imposed by, all
governmental authorities, domestic or foreign, federal
or state, applicable to the conduct of its business and
the ownership of its property (including, without
limitation, applicable statutes, rules, regulations,
orders and restrictions relating to environmental,
safety and other similar standards or controls).

13.3.3. The Company will conduct its business in compliance in all
material respects with all licenses, agreements and
contracts to which it is a party.

13.3.4. The Company will maintain, keep, and preserve all of its
material properties (tangible and intangible) necessary in
the proper conduct of

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<PAGE> 23
its business in good working order and condition, ordinary
wear and tear excepted.

13.3.5. The Company will maintain or cause to be maintained,
with financially sound and reputable insurers,
insurance with respect to its assets and businesses
against loss or damage of the kinds customarily insured
against by corporations of established reputation
engaged in the same or similar businesses and similarly
situated, of such types and in such amounts and with
such deductibles as are customarily carried by such
other corporations.

13.4. Preferred Shares

The Company shall comply with the terms and conditions of the
Preferred Shares as set forth in the Articles of Association.

13.5. Right of Inspection

At any reasonable time and from time to time, upon reasonable
notice, the Company shall permit a Director approved by the
Investors to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, the
Company and to discuss the affairs, finances and accounts of the
Company with any of its officers and directors and furnish to each
such person, promptly upon the request of such person, copies of
such financial and operating data (such as patents, issued or
filed, licensing agreements, research and development contracts,
joint venture agreements, etc.) and other information as reasonably
requested by such person. The Company will permit such persons to
inspect, audit and make copies of the books and records of the
Company, to discuss the business and affairs of the Company with
the officers of the Company, and to inspect any of the properties
or assets of the Company upon reasonable notice to the Company and
at such reasonable times as such persons may from time to time
request. Upon three business days' prior notice to the Company,
such persons shall have the right to confer in their discretion
with the independent certified public accountants of the Company at
any time during normal business hours upon any matter involving the
financial condition of the Company and such accountants are hereby
irrevocably authorized to fully discuss with and disclose to the
Investors all such matters. Each such person shall bear its own
expenses in connection with the exercise of its rights under this
Section. Each such person severally and not jointly agrees to
maintain the confidentiality of any information received by it
pursuant to this Section, until such information becomes public or
is otherwise no longer confidential or as otherwise required by
law, provided, however, that each such person may share the
information received by it pursuant to this Section with its
partners, if any, and with its legal, accounting, financial and
other advisors and representatives.

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<PAGE> 24
13.6. Transfer Pursuant to Rule 144A

The Company agrees to provide to any holder of Preferred Shares
and, upon such holder's request, to any prospective purchaser
designated by such holder the financial and other information
specified in Rule 144A(d)(4) under the Securities Act and to take
any other action reasonably requested by such holder or to execute
any certificates necessary to permit a transfer by any such holder
to qualify for the exemption set forth in Rule 144A.

14. NEGATIVE COVENANTS.

Until the consummation of an IPO, and in addition to the provisions of any
applicable law, consent of:

14.1. the holders of the majority of the then outstanding Preferred A
Shares shall be required for any of the following acts:

14.1.1. Modification of rights of the Preferred A Shares;

14.1.2. Increase in the number of authorized Preferred A Shares;

14.1.3. Creation or issuance of any class or series of shares on a
parity with or having preference over the Preferred A
Shares; or

14.1.4. Amendments to the Articles (including, without limitation,
modification of rights of the rights of the Series B,
Series C or Series D Preferred Shares) that would
adversely affect the holders of the Series A Preferred
Shares or the relative rights and preferences of the
Series A Preferred Shares.

14.2. the holders of the majority of the then outstanding Preferred B
Shares shall be required for any of the following acts:

14.2.1. Modification of rights of the Preferred B Shares;

14.2.2. Increase in the number of authorized Preferred B Shares;

14.2.3. Creation or issuance of any class or series of shares on a
parity with or having preference over the Preferred B
Shares; or

14.2.4. Amendments to the Articles (including, without limitation,
modification of rights of the rights of the Series A,
Series C or Series D Preferred Shares) that would
adversely affect the holders of the Series B Preferred
Shares or the relative rights and preferences of the
Series B Preferred Shares.

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<PAGE> 25
14.3. the holders of the majority of the then outstanding Preferred C
Shares shall be required for any of the following acts:

14.3.1. Modification of rights of the Preferred C Shares;

14.3.2. Increase in the number of authorized Preferred C Shares;

14.3.3. Creation or issuance of any class or series of shares on a
parity with or having preference over the Preferred C
Shares; or

14.3.4. Amendments to the Articles (including, without limitation,
modification of rights of the rights of the Series A,
Series B or Series D Preferred Shares) that would
adversely affect the holders of the Series C Preferred
Shares or the relative rights and preferences of the
Series C Preferred Shares.

14.4. the holders of the majority of the then outstanding Series D
Preferred Shares shall be required for any of the following acts:

14.4.1. Modification of rights of the Series D Preferred Shares;

14.4.2. Increase in the number of authorized Series D Preferred
Shares;

14.4.3. Creation or issuance of any class or series of shares on a
parity with or having preference over the Series D
Preferred Shares; or

14.4.4. Amendments to the Articles (including, without limitation,
modification of rights of the rights of the Series A,
Series B or Series C Preferred Shares) that would
adversely affect the holders of the Series D Preferred
Shares or the relative rights and preferences of the
Series D Preferred Shares.

14.5. each of (i) the holders of the majority of the then outstanding
Preferred A Shares, (ii) the holders of the majority of the then
outstanding Preferred B Shares, (iii) the holders of the majority
of the then outstanding Preferred C Shares and (iv) the holders of
the majority of the then outstanding Preferred D Shares shall be
required for any of the following acts:

14.5.1. effecting a merger, consolidation or reorganization of or
acquisition by the Company or the sale, lease or other
disposal of all or substantially all of the Company's
assets, including the sale, lease, license, transfer or
other disposition of any of the Company's material
technology, except as effected under the Company's
ordinary course of business;

14.5.2. reclassification of outstanding capital shares of the
Company; modification of the Company's Memorandum or
Association or

-25-
<PAGE> 26
Articles of Association (other than modifications governed
by sections 14.1.1, 14.2.1 and 14.3.1);

14.5.3. a material change in the business of the Company;

14.5.4. an IPO which is not a Qualified IPO.

14.6. The consent of the Series A Director, the Series B Director, the
Series C Directors and the Series D Director (each as defined
below) shall be required for the authorization or issuance of
shares of the Company (or options to purchase shares) to
officers, directors, employees or affiliates of (or consultants
to) the Company or any of its subsidiaries pursuant to option
plans, share or option purchase plans or other employee
incentive programs other than issuances of Ordinary Shares or
options to purchase Ordinary Shares which in the aggregate would
not exceed 8,000,000 Ordinary Shares (including for purposes of
such calculation the maximum number of shares issuable upon
exercise or conversion of options to purchase Ordinary Shares
and options to purchase Ordinary Shares outstanding as of the
date of this Agreement).

14.7. Except as provided hereinabove, any and all veto rights previously
granted to any of the shareholders of the Company under any
instrument whatsoever (other than the Company's Articles of
Association as currently effective), including in any agreement,
meetings of the Company's shareholders and/or Board of Directors,
are hereby cancelled and terminated.

15. BOARD OF DIRECTORS.

15.1. Until the consummation of an IPO, the Board of Directors shall be
composed of up to nine (9) members, as set forth below:

15.1.1. The holders of the Ordinary Shares, voting as a separate
class, shall have the right to nominate two (2) directors;

15.1.2. The holders of the Preferred A Shares shall be entitled to
designate one (1) director, (the "Series A Director")
provided however, that so long as ISLP II and its
Permitted Transferees own 8% or more of the issued and
outstanding shares of the Company on an as-converted
basis, ISLP II shall have the right to appoint the Series
A Director;

15.1.3. the holders of Preferred B Shares shall be entitled to
designate one (1) director (the "Series B Director");

15.1.4. the holders of Series C Preferred Shares shall be
entitled to designate two (2) directors (the "Series C
Directors"), provided however, that, so long as Nomura
or its Permitted Transferees shall hold any Series C

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<PAGE> 27
Preferred Shares, Nomura alone and at its sole
discretion shall be entitled to designate one Series C
Director, and so long as WaterView Partners L.P.
("WaterView") and its Permitted Transferees shall hold
any Series C Preferred Shares, WaterView alone and at
its sole discretion shall be entitled to designate one
Series C Director;

15.1.5. one (1) director shall be an independent director, who
shall be elected by a majority of the board of
directors;

15.1.6. one (1) director shall be the CEO of the Company
(currently, Daniel Ciporin); and

15.1.7. Bain Capital Integral Investors LLC ("Bain"), for so
long as it or its affiliates own not less than 10% of
the outstanding Series D Preferred Shares issued to
Bain pursuant to the Subscription Agreement dated
February 8, 2000 and Ordinary Shares issued pursuant to
the conversion of such Series D Preferred Shares, and
thereafter the Series D Preferred Shares as a class,
shall be entitled to designate one (1) director (the
"Series D Director").

15.2. Observer Rights. Until the consummation of an IPO, the Company
shall afford to one (1) representative of Axiom Venture Partners
II L.P., for as long as it shall hold not less than 2% of the
issued and outstanding capital of the Company, to one (1)
representative of the IIF Investors, for as long as it shall
hold not less than 2% of the issued and outstanding capital of
the Company, and to one (1) representative of Hollinger Capital
LLC ("Hollinger), for as long as it shall hold not less than 3%
of the issued and outstanding capital of the Company, reasonable
Board of Directors' visitation rights by one observer. Such
visitation rights shall include (i) the right to receive
reasonable notice in advance of all Board of Directors meetings
(ii) the right to receive, concurrently with receipt by members
of the Board of Directors, all materials, reports and other
written communications received by members of the Board of
Directors (which right the Company shall also afford to one (1)
representative of UBS AG (the "UBS Representative"), for as long
as it or any UBS Group Company or any limited partnership, the
general partner of which is a UBS Group Company, shall hold not
less than 2% of the issued and outstanding capital of the
Company) and (iii) the right to attend all Board of Directors
meetings as an observer; provided, however, that the
Company may require as a condition precedent to the rights under
this Section 15.2 that such observer attending any meeting of
the Board of Directors and having access to any of the
information provided by the Company to the Board of Directors
(including the UBS representative) agrees in writing to hold in
confidence and trust and to act in a fiduciary manner with
respect to all information so received during such meetings or
otherwise. No inadvertent failure of the Company to notify
Axiom Venture Partners II L.P., the IIF Investors or Hollinger
of any meetings of the Board of Directors shall operate

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<PAGE> 28
to invalidate any action of the Board of Directors taken at any
such meeting. For purpose of this Section 15.2, the term "Board of
Directors" shall also refer to any committees thereof excepting the
compensation committee and the audit committee.

15.3. The appointment, dismissal or replacement of any director so
designated, shall be by written notice given to the Company by the
designating party or class of shareholders.

15.4. The Company shall not change or expand the signatory rights for the
Company currently in effect without the consent of a majority vote
of the members of the Board of Directors.

15.5. The Company will reimburse the Investors and the Directors for all
reasonable expenses incurred by them in all activities done on
behalf of the Company, including but not limited to, travel to and
lodging incidental to meetings of the Board of Directors and
committees thereof and expenses incurred when interviewing
potential candidates.

16. PRE-EMPTIVE RIGHT.

16.1. Prior to the consummation of a Qualified IPO, if the Company
proposes to issue or sell any New Securities (as defined in
Section 16.2.1), the Company shall, before such issuance, offer
to all shareholders (collectively the "Offered Shareholders")
the right to purchase a pro-rata share of the New Securities. A
shareholder's pro-rata share, for purposes of this Section, is
the ratio of the number of issued shares owned by such
Shareholder immediately prior to the issuance of New Securities
(treating all Preferred Shares as if fully converted), to the
total number of shares outstanding immediately prior to the
issuance of New Securities (treating all of the Preferred Shares
as if fully converted).

Each holder of Preferred Shares shall have a right of
over-allotment such that if any of the holders of Preferred Shares
fails to exercise its right hereunder to purchase its pro-rata
share of New Securities, the other Investors holding Preferred
Shares may purchase the portion of the non-purchasing shareholder
pro-rata according to the shareholding ratio between such other
shareholders of Preferred Shares, within five (5) days from the
date such non-purchasing holder of Preferred Shares fails to
exercise its rights hereunder to purchase its pro-rata share of New
Securities.

Each one of the Founders shall have a right of over-allotment such
that if any of the holders of Ordinary Shares fails to exercise its
right hereunder to purchase its pro-rata share of New Securities,
each Founder may purchase the portion of the non-purchasing
shareholder pro-rata according to the shareholding ratio between
the Founders within five (5) days from the date such non-purchasing
holder of

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<PAGE> 29
Ordinary Shares fails to exercise its rights hereunder to purchase
its pro-rata share of New Securities.

16.2. This pre-emptive right shall be subject to the following
provisions:

16.2.1. "NEW SECURITIES" shall mean any equity interest
(including Ordinary and Preferred Shares) in the
Company, whether now authorized or not, and rights,
options or warrants to purchase such equity interests,
and securities of any type whatsoever that are
convertible into equity interests; provided that the
term "New Securities" does not include: (i) securities
issued upon the conversion of the Preferred Shares or
conversion of the Option Shares and (ii) securities
issued, pursuant to a resolution of the Board of
Directors, to employees, directors or consultants of
the Company, subsidiary or parent of the Company, who
hold less than 5% of the Company's issued and
outstanding share capital; and (iii) securities issued
in a Qualified IPO; and (iv) securities issued in
connection with stock split, stock dividend or other
recapitalization events in the Company; (v) Preferred C
Shares issuable upon the exercise of the Warrants (as
defined, and under the terms set forth, in the SPA) or
any other shares issuable pursuant to other warrants
outstanding as of February 8, 2000and (vi) securities,
in an amount not exceeding, in the aggregate, 10% of
the issued and outstanding share capital of the
Company, issued to a Strategic Investor on or after
January 1, 2000. "Strategic Investor" shall mean an
entity which, in the determination of the majority of
the Board of Directors (including the approval of all
of the Directors appointed pursuant to Section 15.1.2,
15.1.3 and 15.1.4) is capable of materially
contributing directly or indirectly to the Company's
business other than by investing capital in the Company.

16.2.2. In the event the Company proposes to undertake an
issuance of New Securities, it shall give each Offered
Shareholder written notice of its intention, describing
the type of New Securities, and their price and the
terms upon which the Company proposes to issue the
same. Each Offered Shareholder shall have seven (7)
days after any such notice is delivered to agree to
purchase such Offered Shareholder's pro rata share of
such New Securities for the price and upon the terms
specified in the notice by giving written notice to the
Company and stating therein the quantity of New
Securities to be purchased.

16.2.3. In the event the Offered Shareholders fail to exercise
fully the pre-emptive right within the said seven (7)
day period the Company shall have one hundred twenty
(120) days thereafter to sell or enter into an
agreement to sell the New Securities respecting which
the Offered Shareholders' pre-emptive right set forth
in this Section is not

-29-
<PAGE> 30
exercised, at a price and upon terms no more favorable to
the purchasers thereof than specified in the Company's
notice to the Offered Shareholders pursuant to this
Section 16.2. In the event the Company has not sold or
entered into an agreement to sell the New Securities in
accordance with the foregoing within one hundred twenty
(120) days, the Company shall not thereafter issue or sell
any New Securities, without first again offering such
securities to the Offered Shareholders in the manner
provided in this Section 16.

17. FOUNDER SALES.

1.1. Notwithstanding anything to the contrary in this Agreement, each
of the Founders and/or their Permitted Transferees shall be
entitled to sell, transfer, assign, encumber or otherwise
dispose of shares in the Company held by him, with no limitation
under Section 17.2 and free of the rights in favor of the
Investors under Section 19 (Investor Tag-Along Rights) up to 5%
of the shares in the Company held by each of the Founders as of
August 24, 1998 ("Transferable Shares").

17.2. Except as set forth in Section 17.1, until the consummation of a
Qualified IPO, no Founder nor any of their Permitted Transferees
shall sell, transfer, assign, encumber or otherwise dispose of
the shares in the Company held by the Founder as of the date
hereof, without the prior written consent of the holders of 75%
or more of each of (i) the Preferred A Shares, (ii) the
Preferred B Shares, (iii) the Preferred C Shares and (iv) the
Preferred D Shares.

17.3. The Founders shall be entitled to transfer or sell shares to their
Permitted Transferees, provided that the Permitted Transferee
agrees to be bound to the provisions of this Agreement and the
Company's Articles of Association.

17.4. In the event that a Founder or any of his Permitted Transferees
should sell any shares in contravention of this Agreement, such
transfer shall be deemed null and void and the Investors may
proceed to protect and enforce their rights by suit in equity or
by action at law, whether for the specific performance of any
term contained in this Agreement or for an injunction against
the breach of any such term or in furtherance of the exercise of
any power granted in this Agreement, or to enforce any other
legal or equitable right of the Investors or to take one or more
of such actions.

18. RIGHT OF FIRST REFUSAL.

18.1. In the event that any shareholder(s) of the Company (the "Selling
Shareholder") desires to sell or transfer any or all of its shares
to any party other than a Permitted Transferee (the "Offered
Shares"), it shall first give written notice

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<PAGE> 31
thereof ("Notice of Sale") to all other shareholders (collectively
the "Option Holders").

18.2. The Notice of Sale shall state the number of Offered Shares,
whether the Offered Shares will, upon the sale, be free of all
liens, charges and encumbrances, that a bona fide offer has been
received from a third party, the identity of the third party,
and the price and terms of payment for the Offered Shares. Upon
receipt of the Notice of Sale, the Option Holders shall have the
right to exercise the option (the "Option") contained in
Sections 18.3 and 18.4.

18.3. For a period of 20 days after receipt of the Notice of Sale, the
Option Holders collectively may elect to purchase all (but not
part) of the Offered Shares (those Option Holders which exercise
the Option are referred to as the "Buying Shareholders"). The
Option shall be exercised by delivery of a notice by one or more
of the Buying Shareholders to the Selling Shareholder within the
aforesaid 20-day period stating (i) that the Buying Shareholder
intends to acquire its pro rata share of the Offered Shares,
according to the shareholding ratio between the Option Holders
as of the date immediately prior to sending such notice; and
(ii) in the event that the Selling Shareholder receives notices
from Buying Shareholders to buy some, but not all, of the
Offered Shares, how many additional Offered Shares the Buying
Shareholder intends to acquire of the Offered Shares remaining
as a result of the failure of all Buying Shareholders to offer
to buy their pro rata share (the "Remaining Offered Shares").

18.4. If the Selling Shareholder receives notices from all Option
Holders that they wish to exercise the Option, then the Buying
Shareholders shall acquire the Offered Shares pro rata,
according to the shareholding ratio between the Option Holders
as of the date immediately prior to sending their notices. If
the Selling Shareholder receives notices from Buying
Shareholders to buy some, but not all, of the Offered Shares and
the notices of the Buying Shareholders indicate that the Buying
Shareholders intend to buy a number of additional Offered Shares
equal to or greater than the number of the Remaining Offered
Shares, then (i) the Buying Shareholders shall each acquire that
percentage of the Offered Shares which corresponds to its
percentage ownership of the shares held by the Option Holders as
of the date immediately prior to sending their notices and (ii)
the Buying Shareholders shall acquire the Remaining Offered
Shares pro rata according to the number of additional Offered
Shares that each Buying Shareholder offered to acquire in its
notice. The purchase of the Offered Shares shall be on the same
terms and conditions as stated in the Notice of Sale.

18.5. If the notices of the Buying Shareholders indicate that the
Buying Shareholders have not elected to purchase all of the
Offered Shares, then the Selling Shareholder shall be free,
within 90 days of the date of expiration of the Option, to sell
such shares at the price and on the terms contained in the
Notice of Sale. If there is no sale within such 90 day period,
the Selling Shareholder shall not

-31-
<PAGE> 32
sell or transfer the Offered Shares, or any other shares acquired
before or after the date hereof, without again complying with the
provisions of this section.

18.6. In the event that there is a situation in which fractional shares
will need to be transferred, the number of shares will be rounded
up so that only full shares will be transferred.

18.7. The provisions of this Section shall terminate on and not apply to
a Qualified IPO.

18.8. Any provision of this Section to the contrary notwithstanding,
any offering of Preferred C Shares shall first be made to the
other holders of such shares, and the provisions of this
Section shall apply to such offering, mutatis mutandis. In the
event that there shall be any remaining Preferred C Shares which
will not be purchased as aforesaid, such shares shall be offered
to the other Shareholders of the Company, as set forth in this
Section.

18.9. Any provision of this Section to the contrary notwithstanding,
any offering of Preferred D Shares shall first be made to the
other holders of such shares, and the provisions of this
Section shall apply to such offering, mutatis mutandis. In the
event that there shall be any remaining Preferred D Shares which
will not be purchased as aforesaid, such shares shall be offered
to the other Shareholders of the Company, as set forth in this
Section.

18.10. Any provision of this Section to the contrary notwithstanding, in
no event shall any transfer of shares of the Company be effected if
the third party transferee (which is not a shareholder who
exercised its right of first refusal as set forth herein) is in
competition, directly or indirectly, with the Company, as
determined by the Board of Directors of the Company.

Any transfer of shares of the Company or of any rights associated
herewith or granted hereunder shall be effective only if such
transfer is effected in accordance with the provisions of the then
current Articles of Association of the Company, which relate to the
transfer of shares of the Company (including the granting of a right
of first refusal to holders of shares in the Company).

19. INVESTOR TAG-ALONG RIGHTS.

19.1. If (i) any of the Founders or their Permitted Transferees is the
Selling Shareholder (the "Selling Insider"), (ii) the sale is not
to a Permitted Transferee of the Founder, and (iii) all of the
Offered Shares are not sold to the Buying Shareholders pursuant to
Section 18 above, then the provisions of this Section 19 shall
apply.

19.2. The Selling Insider shall so notify the other Option Holders,
describing in such notification the material terms of such proposed
sale. Upon receipt of such

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<PAGE> 33
notice, each of the other Option Holders shall have the right to
exercise the option contained in Section 19.3 below.

19.3. Each of the other Option Holders shall have the option,
exercisable by written notice to the Selling Insider, within 10
business days after receipt of the notice described in Section
above, to require the Selling Insider to provide as part of his
proposed sale that each of the other Option Holders be given the
right to participate, on the same terms and conditions as the
Selling Insider, in the sale pro rata in proportion to the
respective numbers of Shares owned at such time by the Selling
Insider and all Option Holders who participate in the proposed
sale.

19.4. Notwithstanding the aforesaid, if any of the Founders or their
Permitted Transferees shall sell shares of the Company in a
transaction or series of transactions which result in a change in
control of the Company, the Investors shall have the right to
participate in such transaction and to sell all of their shares in
the Company in that transaction.

19.5. Notwithstanding Sections 19.1 through 19.3, each Founder shall be
permitted to sell, free of the limitations of Sections through
19.3, the number of shares which represents 5% of the shares in the
Company held by the Founder as of August 24, 1998.

19.6. The provisions of this Section 19 shall terminate on a Qualified
IPO.

20. BRING-ALONG.

Notwithstanding anything to the contrary in this Agreement including in Section
18 and 19 herein above, at any time prior to the Company's Qualified IPO, in the
event that (i) one or more bona fide offers from any third party person or
entity (the "Offeror") is made to purchase shares and, (ii) such sale is
conditioned upon the sale of all of the remaining issued shares of the Company
to the Offeror, and (iii) shareholders holding 85% (eighty-five percent) of the
Company's outstanding share capital (the "Proposing Shareholders") propose to
sell all of their shares to such Offeror, then all remaining shareholders (the
"Non-Proposing Shareholders") will be required, if so demanded by the Proposing
Shareholders, to sell their Shares to such Offeror at the same price and upon
the same terms and conditions as in the offer made to the Proposing
Shareholders. In such event, any sale, assignment, transfer, pledge,
hypothecation, mortgage, disposal or encumbrance of shares by the Non-Proposing
Shareholders other than in connection with the proposed acquisition shall be
absolutely prohibited.

21. INTENTIONALLY DELETED

22. AMENDMENT

Any term of this Agreement may be amended and the observance of any term hereof
may be waived (either prospectively or retroactively and either generally or in
a particular instance) with

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<PAGE> 34
the written consent of the Founders and the holders of 75% of each of the issued
and outstanding (i) Preferred A Shares, (ii) Preferred B Shares, (iii) Preferred
C Shares and (iv) Preferred D Shares, of the Company.

23. MISCELLANEOUS

23.1. Further Assurances. Each of the parties hereto shall perform such
further acts and execute such further documents as may reasonably
be necessary to carry out and give full effect to the provisions of
this Agreement and the intentions of the parties as reflected
thereby.

23.2. Governing Law; Jurisdiction. This Agreement shall be governed by
and construed according to the laws of the State of Israel, without
regard to the conflict of laws provisions thereof, and the parties
hereto irrevocably submit to the jurisdiction of the Courts of
Israel in respect of any dispute or matter arising out of or
connected with this Agreement.

23.3. Successors and Assigns; Assignment. Except as otherwise
expressly limited herein and as set forth in Section 9 above,
the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors, and
administrators of the parties hereto. None of the rights,
privileges, or obligations set forth in, arising under, or
created by this Agreement may be assigned or transferred without
the prior consent in writing of each party to this Agreement,
except as set forth in Section 9 above and except that, upon the
consummation of a transfer of shares to a Permitted Transferee
and such Permitted Transferee's agreement in writing to be bound
by and assume all obligations of the transferor (as a
Shareholder) under all agreements with the Company, such
Permitted Transferee shall succeed to all rights and privileges
of the transferor (as a Shareholder) under this Agreement and
all other agreements with the Company.

Without derogating from the provisions of the previous paragraph,
no assignment or transfer under this Section 23.3 shall be made
unless the transferee agrees to be bound by all agreements binding
upon the Shareholders immediately prior to such transfer.

23.4. Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the
subject matter hereof. This Agreement amends and replaces the SRA.

23.5. Section Headings; Preamble. All article and section headings are
inserted for convenience only and shall not modify or affect the
construction or interpretation of any provision of this Agreement.
The preamble to this Agreement is incorporated herein and forms an
integral part of this Agreement.

23.6. Notices, etc. All notices and other communications required or
permitted hereunder are to be given pursuant to the provisions of,
and to the addresses set

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<PAGE> 35
forth in the members' registry of the Company, as may be amended by
time to time by notice from any Shareholder.

23.7. Delays or Omissions. No delay or omission to exercise any right,
power, or remedy accruing to any party upon any breach or
default under this Agreement, shall be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent, or approval of any kind or character on
the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any
provisions or conditions of this Agreement, must be in writing
and shall be effective only to the extent specifically set forth
in such writing. All remedies, either under this Agreement or by
law or otherwise afforded to any of the parties, shall be
cumulative and not alternative.

23.8. Severability. If any provision of this Agreement is held by a
court of competent jurisdiction to be unenforceable under
applicable law, then such provision shall be excluded from this
Agreement and the remainder of this Agreement shall be
interpreted as if such provision were so excluded and shall be
enforceable in accordance with its terms; provided, however,
that in such event this Agreement shall be interpreted so as to
give effect, to the greatest extent consistent with and
permitted by applicable law, to the meaning and intention of the
excluded provision as determined by such court of competent
jurisdiction.

23.9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and
enforceable against the parties actually executing such
counterpart, and all of which together shall constitute one and the
same instrument.

23.10. Waiver of Veto Rights. Except as expressly provided herein, each
Investor executing this Agreement expressly waives any veto right
or negative covenant which it possesses in any organ of the Company
as to any of the matters covered by this Agreement.

23.11. For purposes of determining the availability of any right or the
applicability of any limitation under this Agreement, all Preferred
C Shares, or any other securities, held or acquired by any IIF
Investor shall be aggregated, and the IIF Investors and any such
transferees be viewed as a single Investor or shareholder, as
applicable.

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<PAGE> 36
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date first
hereinabove set forth.

DEALTIME.COM LTD. ISRAEL SEED II L.P.,
By its general partner, SEED
VENTURE PARTNERS LTD.

By:________________________
Name: By:________________________
Title: Name:
Title:

___________________________ ___________________________
NAHUM SHARFMAN AMIR ASHKENAZI

UNICYCLE TRADING COMPANY, L.P. ODEON CAPITAL PARTNERS, L.P.
By: Odeon Capital, L.L.C

By:________________________
Name: By:________________________
Title: Matthew Smith, Member

M.L. TRUST COMPANY LTD.

By:________________________
Name:
Title:

NOMURA INTERNATIONAL PLC

By:________________________
Name:
Title:

SIGNATURE ON SCHEDULE A OF THIS AGREEMENT BY CERTAIN PARTIES CONSTITUTES
EXECUTION IN FULL OF THIS AGREEMENT

-36-
<PAGE> 37
SCHEDULE A TO SHAREHOLDERS RIGHTS AGREEMENT The signature of
each Investor on this Schedule shall constitute execution of
this Shareholders Rights Agreement

<TABLE>
<CAPTION>
NAME SIGNATURE

<S> <C>
WaterView Partners, L.P.
By _________________________

Odeon Capital Partners, L.P.
By _________________________

Israel Infinity Venture Capital Fund
(Israel) LP By _________________________

Israel Infinity Venture Capital Fund
(Delaware) LP By _________________________

Israel Infinity Venture Capital Fund
(Cayman I) LP By _________________________

Israel Infinity Venture Capital Fund
(Cayman II) LP By _________________________

Levitin Charitable Trust
By _________________________

By _________________________

By _________________________
</TABLE>

-37-

<PAGE> 1
EXHIBIT 10.1

DEALTIME.COM LTD.

1999 OMNIBUS STOCK OPTION

AND RESTRICTED STOCK

INCENTIVE PLAN

1. PURPOSE; TYPES OF AWARDS; CONSTRUCTION.

Purpose. The purpose of the DealTime.Com Ltd. 1999 Omnibus Stock Option
and Restricted Stock Incentive Plan (the "Plan") is to afford an
incentive to employees, officers, directors and consultants of
DealTime.Com Ltd. (the "Company"), or any subsidiary of the Company
which now exists or hereafter is organized or acquired by the Company,
to acquire a proprietary interest in the Company, to continue as
employees, officers, directors or consultants, to increase their
efforts on behalf of the Company and to promote the success of the
Company's business.

Types of Awards. The Plan is intended to enable the Company to issue
awards ("Awards") under varying tax regimes, including without
limitation (i) pursuant and subject to the provisions of Section 102
("Section 102" and such options, "102 Stock Options") of the Israeli
Income Tax Ordinance (New Version) 1961, as amended (the "Ordinance")
and any regulations, rules, orders or procedures promulgated
thereunder; (ii) pursuant to Section 3(9) of the Ordinance ("3(9) Stock
Options"); (iii) as "incentive stock options" ("Incentive Stock
Options") within the meaning of Section 422 of the United States
Internal Revenue Code of 1986, as amended (the "Code"); (iv)
Nonqualified Stock Options (as defined below) (all 102 Stock Options,
3(9) Stock Options, Incentive Stock Options and Non-Qualified Stock
Options, as well as options issued under other tax regimes
collectively, the "Options"); and (v) restricted Shares ("Restricted
Stock") under the Plan. Apart from issuance under the relevant tax
regimes of the State of Israel and the United States of America, the
Plan contemplates issuances to Grantees (as defined below) in other
jurisdictions with respect to which the Committee (as defined below) is
empowered make the requisite adjustments in the Plan and set forth the
relevant conditions in the Company's agreement with the Grantees in
order to comply with the requirements of the tax regimes in said
jurisdictions.

The Plan contemplates the issuance of Awards by the Company, both as a
private company and, to the extent applicable, as a publicly traded
company.

Construction. To the extent any provision herein conflicts with the
conditions of any relevant tax law or regulation which are relied upon
for tax relief in respect of a particular Option or Share granted to a
Grantee, the provisions of said law or regulation shall prevail over
those of the Plan, and the Committee

<PAGE> 2

(as defined below) is empowered hereunder to interpret and enforce the
said prevailing provisions.

1. DEFINITIONS.

As used in this Plan, the following words and phrases shall have the
meanings indicated:

1.1. "Board" shall mean the Board of Directors of the Company.

1.2. "Committee" shall mean a committee established by the Board to
administer the Plan.

1.3. "Companies Ordinance" shall mean the Israel Companies
Ordinance (New Version), 1983, as amended.

1.4. "Disability" shall mean, unless otherwise specified in the
Option Agreement, a Grantee's inability to perform his duties
with the Company or any of its affiliates by reason of any
medically determinable physical or mental impairment, as
determined by a physician selected by the Grantee and
acceptable to the Company.

1.5. "Exercise Period" shall mean the period in which the Option
shall be exercisable.

1.6. "Exercise Price" shall mean the exercise price for each
Ordinary Share covered by an Option.

1.7. "Fair Market Value" per share as of a particular date shall
mean (i) the average of the closing sales prices per Share on
the securities exchange on which the Shares are principally
traded for the last ten (10) days of trading immediately
preceding the date on which there was a sale of such Shares on
such exchange; or (ii) if the Shares are listed on the Nasdaq
National Market, the average of the last reported price per
Share on the Nasdaq National Market for the last ten (10) days
of trading immediately preceding the date on which there was a
sale of such Shares on the Nasdaq National Market; or (iii) if
the Shares are then traded in an over-the-counter market, the
average of the closing bid and asked prices for the Shares in
such over-the-counter market for the last ten (10) days of
trading immediately preceding the date on which there was a
sale of such Shares in such market;, or (iv) if the Shares are
not then listed on a securities exchange or market or traded
in an over-the-counter market, such value as the Committee, in
its sole discretion, shall determine, which determination
shall be conclusive and binding on all persons.

1.8. "Grantee" shall mean a person who receives a grant of Options,
Restricted Stock or Shares or other Awards under the Plan, who
at the time of grant is an employee, officer, director or
consultant of the Company.

1.9. "Initial Public Offering" shall mean the underwritten initial
public offering of Shares.

1.10. "Nonqualified Stock Option" shall mean any Option not
designated as an Incentive Stock Option, 102 Stock Option or
3(9) Stock Option.

<PAGE> 3

1.11. "Parent" shall mean any company (other than the Company) in an
unbroken chain of companies ending with the Company if, at the
time of granting an Award, each of the companies other than
the Company owns stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in
one of the other companies in such chain.

1.12. "Retirement" shall mean a Grantee's retirement pursuant to
applicable law or in accordance with the terms of any
tax-qualified retirement plan maintained by the Company or any
of its affiliates in which the Grantee participates.

1.13. "Shares" shall mean the Ordinary Shares of the Company, each
bearing a nominal value of NIS 0.01 or, at the discretion of
the Committee or the Board and if expressly specified in a
grant of Options hereunder, shares of the Company's capital of
any other class as may be in existence at the time of such
grant.

1.14. "Subsidiary" shall mean any company (other than the Company)
in an unbroken chain of companies beginning with the Company
if, at the time of granting an Award, each of the companies
other than the last company in the unbroken chain owns stock
possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other
companies in such chain.

1.15. "Ten Percent Shareholder" shall mean a Grantee who, at the
time an Incentive Stock Option is granted, owns shares
possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any
Parent or Subsidiary.

1.16. "Trustee" shall mean the trustee appointed by the Committee or
the Board, as the case may be, to hold the respective Options,
Restricted Stock and/or Shares, if so appointed.

2. ADMINISTRATION.

The Plan shall be administered by the Committee. However, in the event
that the Board does not create a committee to administer the Plan, the
Plan shall be administered by the Board in its entirety. In such event,
all references herein to the Committee shall be construed as references
to the Board.

The Committee shall have the authority in its discretion to administer
the Plan and to exercise all the powers and authorities either
specifically granted to it under the Plan or necessary or advisable in
the administration of the Plan, including, without limitation:

(i) the authority to grant Options, Restricted Stock and Shares;

(ii) to determine which Options shall constitute 102 Stock Options,
3(9) Stock Options, Incentive Stock Options, Nonqualified
Stock Options or otherwise;

(iii) to determine the Exercise Price of the Shares covered by each
Option;

<PAGE> 4

(iv) to determine the Grantees to whom, and the time or times at
which Awards shall be granted;

(v) to determine the number of Shares to be covered by each Award;

(vi) to interpret the Plan;

(vii) to prescribe, amend and rescind rules and regulations relating
to the Plan;

(viii) to determine the terms and provisions of the Option Agreements
(as defined in Section below) (which need not be identical),
and to cancel or suspend Awards, as necessary;

(ix) and to make all other determinations deemed necessary or
advisable for the administration of the Plan, including to
adjust the terms of the Plan or any Agreement so as to reflect
(i) changes in applicable Israeli, U.S. or other laws and (ii)
the laws of other jurisdictions within which the Company
wishes to grant Awards.

All decisions, determination and interpretations of the Committee shall
be final and binding on all Grantees of any Awards under this Plan. No
member of the Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Award
granted hereunder.

3. ELIGIBILITY.

Options, Restricted Stock and Shares may be granted to employees,
officers, directors and consultants of the Company and any Subsidiary,
provided, however, that 102 Stock Options and Incentive Stock Options
may be granted only to employees of the Company or a Subsidiary. A
person who has been granted an Option, Restricted Stock or Share
hereunder may be granted additional Options, Restricted Stock or
Shares, if the Committee shall so determine. In determining the persons
to whom Awards shall be granted and the number of shares to be covered
by each Award, the Committee shall take into account the duties of the
respective persons, their present and potential contributions to the
success of the Company and such other factors as the Committee shall
deem relevant in connection with accomplishing the purpose of the Plan.

4. SHARES.

The maximum number of Shares reserved for the grant of Awards under the
Plan shall be [220,000]. Such Shares may, in whole or in part, be
authorized but unissued Shares or Shares that shall have been or may be
reacquired by the Company (to the extent permitted pursuant to the
Companies Ordinance) or by a trustee appointed by the Board under
Section 139 of the Companies Ordinance or any equivalent provision. Any
of such Shares which may remain unsold and which are not subject to
outstanding options at the termination of the Plan shall cease to be
reserved for the purpose of the Plan, but until

<PAGE> 5

termination of the Plan, the Company shall at all times reserve a
sufficient number of Shares to meet the requirements of the Plan.

If any outstanding Award under the Plan should, for any reason, expire,
be canceled or be forfeited without having been exercised in full, the
Shares allocable to the unexercised, canceled or terminated portion of
such Award shall (unless the Plan shall have been terminated) become
available for subsequent grants of Awards under the Plan.

5. TERMS AND CONDITIONS OF OPTIONS.

Each Option granted pursuant to the Plan shall be evidenced by a
written agreement between the Company and the Grantee (the "Option
Agreement"), in such form and containing such terms and conditions as
the Committee shall from time to time approve, which Option Agreement
shall comply with and be subject to the following terms and conditions,
unless otherwise specifically provided in such Option Agreement. For
purposes of interpreting this Section, a director's service as a
member of the Board shall be deemed to be employment with the Company.

5.1. NUMBER OF SHARES. Each Option Agreement shall state the number
of Shares to which the Option relates.

5.2. TYPE OF OPTION. Each Option Agreement shall specifically state
the type of Option granted thereunder and whether it
constitutes a 102 Stock Option, 3(9) Stock Option, Incentive
Stock Option, Nonqualified Stock Option or otherwise.

5.3. EXERCISE PRICE. Each Option Agreement shall state the Exercise
Price, which, in the case of an Incentive Stock Option, shall
not be less than one hundred percent (100%) of the Fair Market
Value of the Shares covered by the Option on the date of grant
or such other amount as may be required pursuant to the Code.
In the case of a Nonqualified Stock Option granted to any
Grantee other than a Ten-Percent Shareholder, the per Share
exercise price shall be no less than 85% of the Fair Market
Value of the Shares covered by the Option on the date of
grant. In the case of an Incentive Stock Option granted to any
Ten-Percent Shareholder, the Exercise Price shall be no less
than 110% of the Fair Market Value of the Shares covered by
the Option on the date of grant. In no event shall the
Exercise Price of an Option be less than the nominal value of
the shares for which such Option is exercisable. The Exercise
Price shall also be subject to adjustment as provided in
Section hereof.

5.4. MANNER OF EXERCISE. An Option may be exercised, as to any or
all whole Shares as to which the Option has become
exercisable, by written notice delivered in person or by mail
to the Secretary of the Company, specifying the number of
Shares with respect to which the Option is being exercised,
along with payment of the Exercise Price for such Shares in
the manner specified in the following sentence. The Exercise
Price shall be paid in full with respect to each Share, at the
time of exercise, either in cash or in Shares issuable upon
exercise of the Option having a Fair Market Value equal to
such Exercise Price or in such other manner as the Committee
shall determine including a cashless exercise procedure
through a broker-dealer.

<PAGE> 6

5.5. TERM AND VESTING OF OPTIONS. Each Option Agreement shall
provide the vesting schedule for the Option as determined by
the Committee, provided that the Committee shall have the
authority to accelerate the vesting of any outstanding Option
at such time and under such circumstances as it, in its sole
discretion, deems appropriate. Unless otherwise stated in the
Option Agreement, Options shall vest and become exercisable
under the following schedule: twenty-five percent (25%) of the
Shares covered by the Option on the first anniversary of the
date on which such Option is granted and six and one-quarter
percent (6.25%) of the Shares covered by the Option at the end
of each subsequent quarter over the course of the following
three years; provided, however, that the Committee, in its
absolute discretion, may, on such terms and conditions as it
may determine to be appropriate, accelerate or otherwise
change the time at which such Option or any portion thereof
may be exercised. The Option may contain performance goals and
measurements, and the provisions with respect to any Option
need not be the same as the provisions with respect to any
other Option. The Exercise Period will be ten (10) years from
the date of the Grant of the Option unless otherwise
determined by the Committee; provided, however, that in the
case of an Incentive Stock Option, such Exercise Period shall
not exceed ten (10) years from the date of grant of such
Option. The Exercise Period shall be subject to earlier
termination as provided in Sections and hereof.

5.6. TERMINATION. Except as provided in this Section and in Section
hereof, an Option may not be exercised unless the Grantee is
then in the employ of or maintaining a director or consultant
relationship with the Company or a Subsidiary thereof or a
company or a Parent or Subsidiary company of such company
issuing or assuming the Option in a transaction to which
Section 424(a) of the Code applies, and unless the Grantee has
remained continuously so employed or in the director or
consultant relationship since the date of grant of the Option.
In the event that the employment or director or consultant
relationship of a Grantee shall terminate (other than by
reason of death, Disability or Retirement), all Options of
such Grantee that are vested and exercisable at the time of
such termination may, unless earlier terminated in accordance
with their terms, be exercised within ninety (90) days after
the date of such termination (or such different period as the
Committee shall prescribe); provided, however, that if the
Company shall terminate the Grantee's employment for cause (as
defined below) (as determined by the Committee), all Options
theretofore granted to such Grantee (whether vested or not)
shall, to the extent not theretofore exercised, terminate on
the date of such termination or cessation unless otherwise
determined by the Committee. In the case of a Grantee whose
principal employer is a Subsidiary, the Grantee's employment
shall be deemed to be terminated for purposes of this Section
as of the date on which such principal employer ceases to be a
Subsidiary. Notwithstanding anything to the contrary, the
Committee, in its absolute discretion may, on such terms and
conditions as it may determine appropriate, extend the periods
for which the Options held by any individual may continue to
vest and be exercisable; provided, that such Options may lose
their status as Incentive Stock Options under applicable law
and be deemed Nonqualified Stock Options in the event that the
period of vesting and/or exerciseability of any option is
extended beyond the later of: (i) ninety (90) days after the
date of cessation of employment or performance of services; or
(ii) the applicable period under Section below.

<PAGE> 7

For purposes of this Plan, the term "cause" shall mean any of
the following resulting from an act or omission of Grantee:
(a) fraud, embezzlement or felony or similar act; (b) failure
to substantially perform duties as an employee or to abide by
the general policies of the Company applicable to all
employees (including, without limitation, policies relating to
confidentiality and reasonable workplace conduct); (c) an act
of moral turpitude, or any similar act, to the extent that
such act causes injury to the reputation of the Company; or
(d) any other act or omission which in the reasonable opinion
of the Company could be financially injurious to the Company
or injurious to the business reputation of the Company.

5.7. DEATH, DISABILITY OR RETIREMENT OF GRANTEE. If a Grantee shall
die while employed by, or maintaining a director or consultant
relationship with, the Company or a Subsidiary, or within
ninety (90) days after the date of termination of such
Grantee's employment or director or consultant relationship
(or within such different period as the Committee may have
provided pursuant to Section hereof), or if the Grantee's
employment or director or consultant relationship shall
terminate by reason of Disability, all Options theretofore
granted to such Grantee (to the extent otherwise vested and
exercisable) may, unless earlier terminated in accordance with
their terms, be exercised by the Grantee or by the Grantee's
estate or by a person who acquired the right to exercise such
Options by bequest or inheritance or otherwise by result of
death or Disability of the Grantee, at any time within one (1)
year after the death or Disability of the Grantee (or such
different period as the Committee shall prescribe). In the
event that an Option granted hereunder shall be exercised by
the legal representatives of a deceased or former Grantee,
written notice of such exercise shall be accompanied by a
certified copy of letters testamentary or equivalent proof of
the right of such legal representative to exercise such
Option. In the event that the employment or director or
consultant relationship of a Grantee shall terminate on
account of such Grantee's Retirement, all Options of such
Grantee that are exercisable at the time of such Retirement
may, unless earlier terminated in accordance with their terms,
be exercised at any time within one hundred eighty (180) days
after the date of such Retirement (or such different period as
the Committee shall prescribe).

5.8. LOANS. Subject to applicable law, including, but not limited
to, Section 139 of the Companies Ordinance, the Company or a
Subsidiary may make loans to Grantees as the Committee, in its
discretion, may determine in connection with the exercise of
outstanding Options granted under the Plan. Such loans shall:
(i) be evidenced by promissory notes entered into by the
Grantees in favor of the Company or Subsidiary, as the case
may be; (ii) be subject to the terms and conditions set forth
in this Section and such other terms and conditions, not
inconsistent with the Plan, as the Committee shall determine;
and (iii) bear interest, if any, at such rate as the Committee
shall determine. In no event may the principal amount of any
such loan exceed the aggregate Exercise Price less the nominal
value of the Shares covered by the Option, or portion thereof,
exercised by the Grantee. The initial term of the loan, the
schedule of payments of principal and interest under the loan,
the extent to which the loan is to be with or without recourse
against the Grantee with respect to principal and/or interest
and the conditions upon which the loan will become payable in
the event of the Grantee's termination of employment or
ceasing to perform services shall be determined by the
Committee; provided, however, that the term of the loan

<PAGE> 8

including extensions, shall not exceed 10 years. Unless the
Committee determines otherwise, when a loan shall have been
made, Shares having a Fair Market Value at least equal to the
principal amount of the loan shall be pledged by the Grantee
to the Company, the relevant Subsidiary or to a trustee
appointed by the Company pursuant to Section 139 of the
Companies Ordinance as security for payment of the unpaid
balance of the loan and such pledge shall be evidenced by a
pledge agreement, the terms of which shall be determined by
the Committee, in its discretion; provided, however, that each
loan shall comply with all applicable laws.

5.9. VOTING PROXY. The right to vote any Shares acquired hereunder
pursuant to an Award shall be given by the Grantee or the
Grantee's transferee, pursuant to an irrevocable proxy, to the
person or persons designated by the Board. All Awards granted
hereunder shall be conditioned upon the execution of such
irrevocable proxy. So long as any such Shares are held by a
Trustee and unless the Trustee shall be directed otherwise by
the Board, the Trustee shall (i) attend and be present at all
meetings of the shareholders of the Company of which it
receives notice and be counted towards a quorum; and (ii)
abstain from voting such Shares at all such meetings.
Notwithstanding the foregoing, the provisions of this Section
or of any irrevocable proxy granted pursuant hereto shall be
of no force or effect upon the consummation of the Company's
Initial Public Offering or the consummation of a Merger/Sale
(as defined below).

5.10. OTHER PROVISIONS. The Option Agreements evidencing Awards
under the Plan shall contain such other terms and conditions
not inconsistent with the Plan as the Committee may determine.

6. 102 STOCK OPTIONS.

Options granted pursuant to this Section are intended to constitute 102
Stock Options and subject to Section 102 of the Ordinance and the rules
and regulations promulgated thereunder, as amended, the general terms
and conditions specified in Section hereof and other provisions of the
Plan, except for said provisions of the Plan applying to Options under
a different tax law or regulation, shall apply.

To the extent required by the Ordinance or the Income Tax Commissioner
of the State of Israel, the 102 Stock Options which shall be granted
pursuant to the Plan shall be issued to a Trustee nominated by the
Committee in accordance with the provisions of the Ordinance and the
Options and Shares issued upon the exercise of said Option shall be
held for the benefit of the Grantee for a period of not less than
twenty-four (24) months from the date of grant (or such other period of
time as may be required by the Ordinance).

7. 3(9) STOCK OPTIONS.

Options granted pursuant to this Section are intended to constitute
3(9) Stock Options and shall be subject to the general terms and
conditions specified in Section hereof and other provisions of the
Plan, except for said provisions of the Plan applying to Options under
a different tax law or regulation.

<PAGE> 9

To the extent required by the Ordinance or the Income Tax Commissioner
of the State of Israel, the 3(9) Stock Options which shall be granted
pursuant to the Plan shall be issued to a Trustee nominated by the
Committee in accordance with the provisions of the Ordinance.

8. NONQUALIFIED STOCK OPTIONS.

Options granted pursuant to this Section are intended to constitute
Nonqualified Stock Options and shall be subject to the general terms
and conditions specified in Section hereof and other provisions of the
Plan, except for said provisions of the Plan applying to Options under
a different tax law or regulation.

9. INCENTIVE STOCK OPTIONS.

Options granted pursuant to this Section are intended to constitute
Incentive Stock Options and shall be subject to both the following
special terms and conditions and the general terms and conditions
specified in Section hereof and other provisions of the Plan, except
for said provisions of the Plan applying to Options under a different
tax law or regulation:

9.1. VALUE OF SHARES. The aggregate Fair Market Value (determined
as of the date the Incentive Stock Option is granted) of the
Shares with respect to which Incentive Stock Options granted
under this Plan and all other option plans of any Subsidiary
become exercisable for the first time by each Grantee during
any calendar year shall not exceed $100,000 with respect to
such Grantee. To the extent that the aggregate Fair Market
Value of Shares with respect to which the Incentive Stock
Options are exercisable for the first time by any Grantee
during any calendar years exceeds $100,000, such Options shall
be treated as Non-Qualified Stock Options. The foregoing shall
be applied by taking options into account in the order in
which they were granted, with the Fair Market Value of any
Share to be determined at the time of the grant of the Option.
In the event the foregoing results in the portion of an
Incentive Stock Option exceeding the $100,000 limitation, only
such excess shall be treated as a Non-Qualified Stock Option.

9.2. TEN PERCENT SHAREHOLDER. In the case of an Incentive Stock
Option granted to a Ten Percent Shareholder, (i) the Exercise
Price shall not be less than one hundred ten percent (110%) of
the Fair Market Value of the Shares on the date of grant of
such Incentive Stock Option, and (ii) the Exercise Period
shall not exceed five (5) years from the date of grant of such
Incentive Stock Option.

10. RESTRICTED STOCK.

The Committee may award shares of Restricted Stock to any eligible
employee, director or consultant, including under Section 102 of the
Ordinance. Each Award of Restricted Stock under the Plan shall be
evidenced by a written agreement between the Company and the Grantee
(the "Restricted Stock Agreement"), in such form as the Committee shall
from time to time approve, which Restricted Stock Agreement shall
comply with and be subject to the following terms and conditions,
unless otherwise specifically provided in such Agreement:

<PAGE> 10

10.1. NUMBER OF SHARES. Each Restricted Stock Agreement shall state
the number of shares of Restricted Stock to be subject to an
Award.

10.2. RESTRICTIONS. Shares of Restricted Stock may not be sold,
assigned, transferred, pledged, hypothecated or otherwise
disposed of, except by will or the laws of descent and
distribution, for such period as the Committee shall determine
from the date on which the Award is granted (the "Restricted
Period"). The Committee may also impose such additional or
alternative restrictions and conditions on the Shares of
Restricted Stock as it deems appropriate including the
satisfaction of performance criteria. Such performance
criteria may include sales, earnings before interest and
taxes, return on investment, earnings per share, any
combination of the foregoing or rate of growth of any of the
foregoing, as determined by the Committee. Certificates for
Shares issued pursuant to Restricted Stock Awards shall bear
an appropriate legend referring to such restrictions, and any
attempt to dispose of any such Shares in contravention of such
restrictions shall be null and void and without effect. During
the Restricted Period, such certificates shall be held in
escrow by an escrow agent appointed by the Committee, or, if a
Restricted Stock Award is made pursuant to Section 102, by the
Trustee. In determining the Restricted Period of an Award the
Committee may provide that the foregoing restrictions shall
lapse with respect to specified percentages of the awarded
shares on successive anniversaries of the date of such Award.
To the extent required by the Ordinance or the Income Tax
Commissioner of the State of Israel, the Restricted Stock
issued pursuant to Section 102 of the Ordinance shall be
issued to a trustee nominated by the Board or the Committee in
accordance with the provisions of the Ordinance (the
"Trustee") and the Restricted Stock shall be held for the
benefit of the Grantee for a period of not less than
twenty-four (24) months from the date of grant (or such other
period of time as may be required by the Ordinance).

10.3. ADJUSTMENT OF PERFORMANCE GOALS. The Committee may adjust
performance goals to take into account changes in law and
accounting and tax rules and to make such adjustments as the
Committee deems necessary or appropriate to reflect the
inclusion or the exclusion of the impact of extraordinary or
unusual items, events or circumstances. The Committee also may
adjust the performance goals by reducing the amount to be
received by any Grantee pursuant to an Award if and to the
extent that the Committee deems it appropriate.

10.4. FORFEITURE. Subject to such exceptions as may be determined by
the Committee, if the Grantee's continuous employment or
director or consultant relationship with the Company or any
Subsidiary shall terminate for any reason prior to the
expiration of the Restricted Period of an Award, any Shares
remaining subject to restrictions (after taking into account
the provisions of Section ) shall thereupon be forfeited by
the Grantee and transferred to, and reacquired by, the Company
or a Subsidiary at no cost to the Company or Subsidiary,
subject to all applicable law.

10.5. OWNERSHIP. During the Restricted Period the Grantee shall
possess all incidents of ownership of such shares, subject to
Section and Section, including the right to receive dividends
with respect to such Shares and to vote such Shares.

<PAGE> 11

10.6. ACCELERATED LAPSE OF RESTRICTIONS. Upon the occurrence of any
of the events listed in Sections and and subject to Section,
all restrictions then outstanding with respect to shares of
Restricted Stock awarded hereunder shall automatically expire
and be of no further force and effect. The Committee shall
have the authority (and the Agreement may so provide) to
cancel all or any portion of any outstanding restrictions
prior to the expiration of the Restricted Period with respect
to any or all of the Shares of Restricted Stock awarded on
such terms and conditions as the Committee shall deem
appropriate.

11. OTHER SHARE-BASED AWARDS.

The Committee may grant other Awards under the Plan pursuant to which
Shares (which may, but need not, be shares of Restricted Stock pursuant
to Section hereof) are or may in the future be acquired, or Awards
denominated in stock units, including units valued on the basis of
measures other than market value. The Committee may also grant stock
appreciation rights without the grant of an accompanying option, which
rights shall permit the Grantees to receive, at the time of any
exercise of such rights, cash equal to the amount by which the Fair
Market Value of all Shares in respect to which the right was granted
exceeds the exercise price thereof. Such other stock based Awards may
be granted alone, in addition to, or in tandem with any Award of any
type granted under the plan and must be consistent with the purposes of
the Plan.

12. EFFECT OF CERTAIN CHANGES.

12.1. General. In the event of a subdivision of the outstanding
share capital of the Company, any payment of a stock dividend
(distribution of bonus shares), a recapitalization, a
reorganization (which may include a combination or exchange of
shares), a consolidation, a stock split, a spin-off or other
corporate divestiture or division, a reclassification or other
similar occurrence, the Committee shall make appropriate
adjustments in one or more of (i) the number of Shares
available for Awards; (ii) the number of such Shares covered
by outstanding Awards; and (iii) the exercise price per share
covered by the Option Awards; provided, however, that any
fractional shares resulting from such adjustment shall be
rounded down to the nearest whole share.

12.2. Merger and Sale of Company. In the event of (i) a sale of all
or substantially all of the assets of the Company; or (ii) a
sale (including an exchange) of all of the shares of capital
stock of the Company; or (iii) the merger, consolidation,
amalgamation or like transaction of the Company with or into
another corporation; or (iv) scheme of arrangement for the
purpose of effecting such sale, merger or amalgamation (all
such transactions being herein referred to as a
"Merger/Sale"), then, without the Grantee's consent and action
-

12.2.1. the Committee in its sole discretion will use its
efforts to cause that any Award then outstanding be
assumed or an equivalent Award shall be substituted
by such successor corporation or, in such event that
such transaction is effected through a subsidiary,
the Parent of such successor corporation, under
substantially the same terms as the Award; and

<PAGE> 12

12.2.2. in such case that such successor corporation or other
entity does not agree to assume the Award or to
substitute an equivalent Award and, if the Award is
an Option ("Option Award"), then the Committee shall,
in lieu of such assumption or substitution of the
Option Award and in its sole discretion, either (i)
provide for the Grantee to have the right to exercise
the Option Award as to all of the Shares or any part
thereof, including Shares covered by the Option Award
which would not otherwise be exercisable, under such
terms and conditions as the Committee shall determine
or (ii) provide for the cancellation of each
outstanding Option Award at the closing of said
Merger/Sale, against payment to the Grantee of an
amount in cash equal to (a) the fair market value of
each Share covered by the Option Award as reflected
under the terms of the Merger/Sale, minus (b) the
Exercise Price of each Share covered by the Option
Award.

12.2.3. Notwithstanding the foregoing, in the event of a
Merger/Sale, the Committee may determine in its sole
discretion that upon completion of such Merger/Sale,
the terms of any Award be otherwise amended and
modified, as the Committee shall deem in good faith
to be appropriate, and if an Option Award, that the
Option Award shall confer the right to purchase any
other security or asset, or any combination thereof,
or that its terms be otherwise amended or modified,
as the Committee shall deem in good faith to be
appropriate.

12.3. Pooling Transaction. Notwithstanding the foregoing, in the
event that the Company and the other party to a Merger/Sale
agree that such transaction is to be treated as a "pooling of
interests" for financial reporting purposes, and if such
transaction is in fact so treated, then any acceleration of
exerciseability pursuant to Section (i) or any acceleration of
the lapse of restrictions pursuant to Section shall not occur
to the extent that the Company's independent public
accountants separately determine in good faith that such
acceleration would preclude the use of "pooling of interests"
accounting.

12.4. Reservation of Rights. Except as expressly provided in this
Section, the Grantee of an Award hereunder shall have no
rights by reason of any subdivision or consolidation of stock
of any class or the payment of any stock dividend (bonus
shares) or any other increase or decrease in the number of
Shares of stock of any class or by reason of any dissolution,
liquidation, Merger/Sale, or consolidation, divestiture or
spin-off of assets or stock of another company; and any issue
by the Company of stock of any class, or securities
convertible into shares of stock of any class, shall not
effect, and no adjustment by reason thereof shall be made with
respect to, the number or price of Shares subject to an Award.
The grant of an Award pursuant to the Plan shall not affect in
any way the right of power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital
or business structures or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or part of its
business or assets or engage in any similar transactions.

13. NON-TRANSFERABILITY OF AWARDS; SURVIVING BENEFICIARY.

<PAGE> 13

Until the Initial Public Offering, all Awards granted under the Plan
shall not be transferable otherwise than by will or by the laws of
descent and distribution, and Awards may be exercised or otherwise
realized, during the lifetime of the Grantee, only by the Grantee or by
his guardian or legal representative, to the extent provided for
herein. A Grantee may file with the Committee a written designation of
a beneficiary on such form as may be prescribed by the Committee and
may, from time to time, amend or revoke such designation. If no
designated beneficiary survives the Grantee, the executor or
administrator of the Grantee's estate shall be deemed to be the
Grantee's beneficiary.

14. AGREEMENT BY GRANTEE REGARDING TAXES.

If the Committee shall so require, as a condition of exercise of an
Option, the release of Shares by the Trustee or the expiration of the
Restricted Period (each a "Tax Event"), each Grantee shall agree that,
no later than the date of the Tax Event, he will pay to the Company or
make arrangements satisfactory to the Committee and the Trustee (if
applicable) regarding payment of any applicable taxes of any kind
required by law to be withheld or paid upon the Tax Event. To the
extent approved by the Committee and permitted by law, a withholding
obligation may be satisfied by the withholding or delivery of Shares.

ALL TAX CONSEQUENCES UNDER ANY APPLICABLE LAW WHICH MAY ARISE FROM THE
GRANT OF ANY OPTIONS, RESTRICTED STOCK OR SHARES, OR IN THE CASE OF AN
OPTION, FROM ITS EXERCISE, FROM THE SALE OR DISPOSITION OF THE SHARES
OR RESTRICTED STOCK OR FROM ANY OTHER ACT OF THE GRANTEE IN CONNECTION
WITH THE FOREGOING SHALL BE BORNE SOLELY BY THE GRANTEE, AND THE
GRANTEE SHALL INDEMNIFY THE COMPANY, AND THE TRUSTEE, AND SHALL HOLD
THEM HARMLESS AGAINST AND FROM ANY LIABILITY FOR ANY SUCH TAX OR
PENALTY, INTEREST OR INDEXATION THEREON OR THEREUPON.

15. RIGHTS AS A SHAREHOLDER; VOTING AND DIVIDENDS.

Except as provided in Section hereof, a Grantee or a transferee of an
Award shall have no rights as a shareholder with respect to any Shares
covered by the Award until the date of the issuance of a Share
certificate to him for such Shares, or, in the case of 102 Stock
Options or 3(9) Stock Options (if such 3(9) Stock Options are being
held by a Trustee), until the date of the issuance of a Share
certificate to the Trustee. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other
property) or distribution of other rights for which the record date is
prior to the date such Share Certificate is issued, except as provided
in Section hereof. In the event that a Trustee holds Shares issued upon
the exercise of 102 Stock Options, any cash dividends paid by the
Company on such Shares shall be paid directly to the Grantee and any
stock dividends (bonus shares) shall be paid to the Trustee. Subject to
Section hereof, the Company may restrict or otherwise regulate the
voting powers with respect to any Shares held by a Grantee pursuant to
this Plan, as long as the Company's securities are not traded on a
securities exchange.

<PAGE> 14

16. NO RIGHTS TO EMPLOYMENT.

Nothing in the Plan or in any Award granted or Agreement entered into
pursuant hereto shall confer upon any Grantee the right to continue in
the employ of, or in a consultant relationship with, the Company or any
Subsidiary or to be entitled to any remuneration or benefits not set
forth in the Plan or such Agreement or to interfere with or limit in
any way the right of the Company or any such Subsidiary to terminate
such Grantee's employment. Awards granted under the Plan shall not be
affected by any change in duties or position of a Grantee as long as
such Grantee continues to be employed by, or in a consultant or
director relationship with, the Company or any Subsidiary.

17. APPROVAL.

The Plan shall take effect upon its adoption by the Board and shall
terminate on the tenth anniversary of such date. Notwithstanding the
foregoing, in the event that approval of the Plan by the shareholders
of the Company is required under applicable law, in connection with the
application of certain tax treatment or pursuant to applicable stock
exchange rules or regulations or otherwise, such approval shall be
obtained within the time required under the applicable law.

18. PERIOD DURING WHICH AWARDS MAY BE GRANTED.

Awards may be granted pursuant to the Plan from time to time within a
period of ten (10) years from the date the Plan is adopted by the
Board.

19. AMENDMENT AND TERMINATION OF THE PLAN.

The Board at any time and from time to time may suspend, terminate,
modify or amend the Plan. Except as provided in Section hereof, no
suspension, termination, modification or amendment of the Plan may
adversely affect any Award previously granted, unless the written
consent of the Grantee is obtained.

20. GOVERNING LAW.

The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Israel.

<PAGE> 1
EXHIBIT 10.5

DEBENTURE

Made and executed this 3rd day of January, 2000

WHEREAS the undersigned DEALTIME.COM LTD. (hereinafter:- "the
Pledgor") whose address is 6 Hazoran Street, Netanya, Israel,
has received and intends to receive, from time to time, from
Bank Hapoalim B.M. whose address for the purpose of this
Debenture is Rothschild 41, Tel Aviv, Israel (hereinafter:
"the Bank") credits, documentary credits, various loans,
overdrafts in current account, in revolving debitory account
or in any other account, letters of indemnity and guarantees
for the account of the Pledgor or for others at the request of
the Pledgor, discounting of Bills, granting of time and
various banking facilities and various other banking services
(hereinafter, jointly and severally - "the Banking Services"),
on such conditions as have been and/or may be agreed from time
to time with respect to each such Banking Service, and

THEREFORE, it has been agreed that the Pledgor shall secure the repayment
of the various amounts of money which the Pledgor may owe
and/or may be liable to the Bank in connection with the
granting of the Banking Services and/or in connection with
other liabilities not being Banking Services and/or otherwise,
all in accordance with the terms hereinafter contained.

NATURE OF THE DEBENTURE

1. This Debenture has been made to secure the full and punctual payment of
all the sums due and to become due to the Bank from the Pledgor in
connection with the granting of Banking Services to the Pledgor by the
Bank and/or in connection with other liabilities not being Banking
Services, whether the Pledgor may have incurred or will incur liability
with respect thereto in the future, now due or becoming due in the
future, which are payable prior to the realisation of the collateral
security to which this Debenture is applicable or subsequent thereto,
whether due absolutely or contingently, directly or indirectly, in an
unlimited amount of U.S. dollars together with interest, commissions,
charges, fees and expenses of whatever nature, including costs of
realising the collateral security, lawyers fees, insurance, stamp duty
and any other payments arising from this Debenture and together with
any nature of linkage differences due and becoming due from the Pledgor
to the Bank in any manner whatsoever in respect of linked principal and
interest and any other linked sum (all the foregoing sums being jointly
and severally hereinafter referred to as "the Secured Sums").

THE CHARGE

2. As collateral security for the full and punctual payment of all of the
Secured Sums, the Pledgor hereby charges to the Bank and its permitted
successors as provided in Section 29 below by way of a first ranking
floating charge the assets and the profits and benefits derived
therefrom as set out below (hereinafter "the Assets Subject to a
Floating Charge").

(a) All the assets, monies, property and rights of any kind
whatsoever without exception, whether now or hereafter at
any time in the future owned by or in the possession of the
Pledgor in any manner or way whatsoever;

(b) All the current assets, without, exception, now or
hereafter at any time in the future owned by or in the
possession of the Pledgor in any manner or way whatsoever,
the expression "current assets" meaning all the assets,
monies, property and rights of any kind with the exception
of land, buildings and fixtures;

<PAGE> 2

(c) All the fixed assets now or hereafter at any time in the
future owned by or in possession of the Pledgor in any
manner or way whatsoever, the expression "fixed assets" to
include, inter alia, land, buildings and fixtures;

(d) All the securities and other documents or instruments owned
by the Pledgor now and at any time in the future held by
the Bank and/or any rights in respect thereof;

(e) All rights in land and/or all contractual rights under
agreements between the Pledgor and the Israel Lands
Administration and/or the Israel Development Authority
and/or the Jewish National Fund (Keren Kayemeth Le-Israel)
and/or any other parties, now and hereafter existing at any
time whatsoever.

3. As further collateral security for the full and punctual payment of all
of the Secured Sums, the Pledgor hereby pledges and charges to the Bank
and its successors by way of a first ranking fixed pledge and charge
its goodwill, as presently and in the future at any time existing
(hereinafter, jointly and severally - "the Charged Assets").

4. As further collateral security for the full and punctual payment of all
the Secured Sums, the Pledgor hereby pledges and charges to the Bank
all such securities, documents and instruments, Bills drawn or made by
others, which the Pledgor has delivered or may deliver to the Bank from
time to time whether for collection, safekeeping or otherwise
(hereinafter "the Charged Documents"), and upon the delivery thereof
shall be and be deemed pledged and charged to the Bank by way of a
first ranking fixed pledge and charge according to the terms of this
Debenture the provisions of which, mutatis mutandis, shall apply to the
charge and pledge thereof. The Bank shall be exempt from taking any
action whatsoever in connection with the Charged Documents and shall
not be liable for any loss or damage which may be caused in connection
therewith, accept for any loss or damage caused by the Bank's
negligence, and the Pledgor undertakes to indemnify the Bank in any
event that the Bank is sued for any such loss of damage by others.

5. The Assets Subject to a Floating Charge, the Charged Assets and the
Charged Documents shall be hereinafter called "the Charged Property".

The pledge and charge created by operation of this Debenture shall
apply to all and any rights to compensation or indemnity which may
accrue to the Pledgor by reason of the loss of, damage to or
appropriation of the Charged Property.

DECLARATIONS OF THE PLEDGOR

6. The Pledgor hereby declares as follows:

(a) That the Charged Property is not charged, pledged or attached
in favour of any other persons or parties, other than pledges
on automobiles owned by the Pledgor,

(b) That the Charged Property is, in its entirety, in the
exclusive possession and ownership of the Pledgor or in the
possession or under the control of the Bank;

(c) That no restriction or condition of law or any agreement
exists or applies to the ability of the Pledgor to transfer or
charge the Charged Property;

(d) That the Pledgor is capable of and entitled to charge the
Charged Property;

(e) That no assignment of rights or other disposition or, to the
best of its knowledge, circumstance has occurred that
derogates from the value of the Charged Property.

COVENANTS OF THE PLEDGOR

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<PAGE> 3

7. The Pledgor hereby covenants as follows:

(a) To use and deal with the Charged Property with reasonable care
and to notify the Bank of any case of material disrepair,
damage, loss, fault or defect affecting the same due to use or
for any other reason, and to be liable towards the Bank for
any such material disrepair, damage, fault or defect as
aforesaid which was not caused due to reasonable use of the
Charged Property.

(b) To allow any representative of the Bank, at any time
reasonably acceptable upon coordination with the Pledgor, to
inspect and examine the condition of the Charged Property
wherever the Charged Property may be situated;

(c) Not to sell, dispose of, hire out, let, lease or transfer any
of the Charged Assets and the Charged Documents nor suffer any
person to use them in any manner and not to allow any person
to do any of the foregoing acts, without the prior written
consent of the Bank;

(d) Not to sell, transfer, let, lease, surrender, dispose of,
relinquish or waive, in whole or in part, any of the Charged
Property, save for transactions in relation to assets subject
to the Floating Charge or assets which are not charged to the
Bank by way of a fixed charge under this Debenture, in the
ordinary course of the Pledgor's business, without receiving
the prior written consent of the Bank;

(e) To notify the Bank forthwith of the levying of any attachment
on the Charged Property, to forthwith notify the attachor of
the charge in favour of the Bank and to take at the Pledgor's
own expense within reasonable time all such measure as are
required for discharging such attachment;

(f) Not to charge or pledge in any manner or way the Charged
Property by conferring any rights ranking pari-passu or prior
to the rights of the Bank and not to make any assignment of
any right which the Pledgor may have in the Charged Property
without receiving the prior written consent of the Bank;
however, the Pledgor shall be entitled to pledge the Charged
Property in any manner by conferring any rights ranking
deferred to the rights of the Bank.

(g) To pay when due all taxes and compulsory payments levied
against the Charged Property and/or the income accruing
thereon under any law and to furnish the Bank, at its request,
with all the receipts for such payments. If the Pledgor fails
to make such payments when due, the Bank may pay the same for
the account of the Pledgor and debit the Pledgor with the
payment thereof coupled with expenses, and Interest at the
Maximum Rate. Such payments shall be secured by this
Debenture;

(h) To maintain proper books of account. The Pledgor undertakes to
assist the Bank or its representatives and furnish them upon
demand and coordination with the Pledgor, with financial
statements (including balance sheets), including explanations
concerning the financial and operational condition of the
Pledgor and/or the business of the Pledgor, provided that such
documents and information are kept in confidence by the Bank
and its representatives;

(i) Not, so long as the Pledgor has not yet discharged to the Bank
the sums due to the Bank from it until such date in respect of
the Secured Sums, to make any loans in an amount exceeding
$100,000 to the Pledgor's shareholders nor repay to any of the
Pledgor's shareholders, any existing or future loans, without
the prior written consent of

3
<PAGE> 4

the Bank. The Pledgor undertakes to cause its shareholders to
covenant with the Bank not to demand nor claim repayment of
such loans as aforesaid;

(j) That no Structural Change in which the Pledgor is the
transferring company and\or Change in the Control of the
Pledgor will occur. Change in Control means that the
shareholders of the Pledgor or any of them, or any of their
affiliates, as in the date of signature of this Debenture
shall cease to be the owners of at least 50.01% of the paid up
share capital of the Pledgor.

8. The Pledgor undertakes to notify the Bank forthwith:

(a) of any claim of right to any collateral security given to the
Bank to which this Debenture is applicable and/or of any
execution or injunction proceedings or other steps taken to
attach, preserve or realise any such collateral security;

(b) of any of the events enumerated in Clause 18 hereof;

(c) of any application filed for the winding-up of the Pledgor's
affairs or for the appointment of a receiver over the
Pledgor's assets

(d) of any change of address.

INSURANCE

9. The Pledgor hereby undertakes to keep the Charged Property insured at
all times for its full value against usual risks which the Bank may
specify from time to time, with such insurance companies and upon such
conditions as the Bank shall agree, and to assign to the Bank an amount
or amounts payable under the insurance policies up to the aggregate of
the Secured Sums and to assign to the Bank all other rights deriving
from the insurance policies as well as any receipts for payment of
premiums.

10. Without derogating form the foregoing, and in addition thereto, the
Pledgor hereby undertakes to give to the insurance company with which
the Charged Property has been insured, the following instructions:

(a) To irrevocably establish the Bank as beneficiary under all
contracts of insurance and to include the Bank as co-insured
in the body of the insurance contract, but without the Bank
being liable for any premiums.

(b) To pay the insurance proceeds in respect of the Charged
Property directly to the Bank as and when each insurance
company is liable to pay such proceeds in accordance with the
contract of insurance or by operation of law. Notwithstanding
the above, it is agreed between the Bank and the Pledgor that
as long as the Bank did not yet demand an immediate payment of
the Secured Sums under the provisions of Section 18 below the
insurance proceeds shall be paid to the Pledgor, in the event
that the Bank demanded an immediate payment of the Secured
Sums under the provisions of Section 18 below the insurance
proceeds shall be paid directly to the Bank.

All the foregoing shall not require any further consent of the Pledgor,
the Pledgor's successors and/or assigns.

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<PAGE> 5

The Pledgor further undertakes to furnish the Bank with a certificate
from the insurance company or companies containing an undertaking on
its or their part not to set-off any of the insurance proceeds payable
to the Bank with respect to the Charged Property, except for the unpaid
balance of insurance premiums for insuring the Charged Property for the
current year only, and if any insurance policy applies also to other
property, in addition to the Charged Property, such certificate shall
include the agreement of the insurance company to attribute the
payments of premium received in connection with this insurance company
first of all on account of insurance premiums due on account of
insuring the Charged Property and also to act in accordance with the
foregoing instructions and to notify the Bank of any cancellation or
termination of any such insurance contract at least 30 (thirty) days
prior to such cancellation or termination, notwithstanding any
provision to the contrary under the Insurance Contract Law, 5741-1981,
such notice constituting a condition precedent to the effectiveness of
any such cancellation or termination of any such insurance contract.

11. In any of the following events, the Bank may, in its absolute
discretion, after giving the Pledgor a prior written notice of 30 days,
insure the Charged Property in the name of the Bank and debit the
account of the Pledgor with any insurance premiums and any other costs
of insurance:

(a) If the Charged Property is not insured by the Pledgor to the
satisfaction of the Bank;

(b) If the Pledgor does not furnish the Bank within fifteen days
from the date of signature of this Debenture with certificates
of insurance in respect of the Charged Property on such
conditions and for such period as shall be satisfactory to the
Bank;

(c) If thirty days prior to the expiration date of the insurance
of the Charged Property, the Pledgor fails to furnish the Bank
with certificates of insurance of the Charged Pon such
conditions and for such period as shall be satisfactory to the
Bank;

In the event of the insurance being effected by the bank as above, the
Bank shall not be liable for any defect or shortcoming which may come
to light in connection with the insurance. Any amounts paid by way of
insurance premiums and any other costs of insurance as aforesaid shall
be secured by this Debenture.

12. In connection with the insurance of the Charged Property, the Pledgor
hereby appoints the Bank, in the event that the Bank shall be entitled
to demand an immediate repayment of the Secured Sums in accordance with
Section 18 below, as the Pledgor's sole representative and confers upon
the Bank the exclusive right on behalf of the Pledgor to conduct
negotiations, file claims, agree to any settlements or compromises, to
make waivers, accept monies from insurance companies and to appropriate
the same towards the discharge of the Secured Sums. The above power of
attorney is irrevocable since the rights of the Bank and the rights of
a third party are dependent thereon. The Pledgor shall have no claims
in connection with any settlements, compromises or waivers which the
Bank may make with any such insurance companies.

13. All the rights of the Pledgor deriving from the insurance of the
Charged Property, including rights under the Property Tax and
Compensation Fund Law, 5721-1961, as in force at any relevant time and
under any other law, whether or not assigned to the Bank as aforesaid,
are hereby charged to the Bank by way of a first ranking fixed charge
and pledge.

14. The Pledgor hereby undertakes to sign, upon the Bank's first demand,
all documents and certificates required to implement the Pledgor's
obligations under this heading. The Pledgor further undertakes not to
cancel nor vary in any manner whatsoever any of the terms or the
conditions of the insurance referred to in Section 9 above, without the
prior written consent of the Bank.

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<PAGE> 6

INTEREST

15. (a) The Bank shall be entitled to calculate interest on the
Secured Sums at such rate as has been or may be agreed upon
from time to time between the Bank and the Pledgor. Where no
rate of interest has been agreed, the Bank may determine the
rate of interest but not in excess of Interest at the Maximum
Rate and give notice thereof to the Pledgor. The Pledgor shall
be liable to pay and shall be debited accordingly at the
respective rate of interest as provided above and the Bank may
compound the same with respect to the amount of principal as
agreed with the Pledgor, or if not agreed at the end of each
month or such other longer period as the Bank shall determine.

(b) Whenever the payment of any amount of the Secured Sums is
overdue, it shall bear default interest at the rate which has
been agreed upon in the agreement for the provision of the
Banking Services. In the absence of any provision concerning
default interest, the Secured Sums shall bear Interest at the
Maximum Rate;

(c) Upon the occurrence of any event conferring upon the Bank the
right to realise the collateral security granted under this
Debenture, the Bank shall be entitled to raise the rates of
interest on the Secured Sums up to Interest at the Maximum
Rate.

REPAYMENT DATES

16. The Pledgor hereby undertakes to pay the Bank all and any of the
Secured Sums promptly on the maturity dates prescribed or which may be
prescribed therefor from time to time.

17. (a) Subject to the other documents to executed in connection with
the borrowing of the Secured Sums and the Banking Services,
the Bank may decline to accept any prepayment of the Secured
Sums or pay part thereof prior to the date of maturity thereof
and the Pledgor shall not be entitled to redeem all or any of
the Charged Property by discharging the Secured Sums and/or
any part thereof prior to their prescribed maturity dates.

Neither the Pledgor nor any person having a right liable to be
affected by the pledges and charges hereby created or the
realisation thereof shall have any right under Section 13(b)
of the Pledges law. 5727-1967 or any other statutory
provisions in substitution therefor.

(b) Subject to the provisions of any law, if the Bank agrees to
prepayment on account of the Secured Sums (and without being
obliged to do so), the Pledgor shall pay interest with respect
to the prepayment amount as agreed between the Bank and the
Pledgor.

18. Without derogating from the generality of the provisions of this
Debenture, the Bank shall be entitled to demand the immediate payment
of the Secured Sums and to debit any account of the Pledgor with the
amount thereof in any one of the events enumerated below, in which case
the Pledgor undertakes to pay the Bank all of the Secured Sums, and the
Bank shall be entitled to take whatever steps it sees fit for the
collection of the Secured Sums and in particular to crystallise the
floating charge on the Assets Subject to a Floating Charge as provided
in Clause 24(a) hereof and to realise, at the Pledgor's expense, the
collateral securities by any means allowed by law;

(a) If the Pledgor commits a material breach of or materially
fails to perform any of the terms and conditions contained in
this Debenture or if the Pledgor is in material breach of any
covenant or other obligations which the Pledgor has or have
incurred or may incur towards the Bank or if it transpires
that any declaration or statement made by the Pledgor in this
Debenture or any other declaration in connection with the
Secured Sums made heretofore or hereafter by the Pledgor to
the Bank is materially false or

6
<PAGE> 7

materially inaccurate, provided that the Bank have given to
the Pledgor a prior written notice of ten (10) days;

(b) If the Pledgor adopts a resolution effecting a Structural
Change as a transferring company or a spin-off company (____
______""), or adopts a voluntary winding up resolution or if
an order for winding up is made against the Pledgor or if a
temporary liquidator or special manager is appointed over it
or if the name of the Pledgor is struck out or is about to be
struck out from any official register kept by law;

(d) If an attachment or similar process of execution is levied
against any substantial part of the Pledgor's assets or
against any substantial part of the collateral security given
by the Pledgor to the Bank and such attachment or similar
process is not removed within thirty (30) days;

(e) If the Bank in its sole discretion considers that there is a
Change in Control over the Pledgor. In this section Change in
Control means that the shareholders of the Pledgor or any of
them, or any of their affiliates, as of the date of signature
of this Debenture shall cease to be the owners of at least
50.01% of the paid up share capital of the Pledgor.

(f) If the Pledgor ceases to pay its debts for two months or more
or to carry on its business for fourteen (14) days or more;

(g) If work at the Pledgor's business ceases or is substantially
curtailed, for two months or more;

(h) If the Bank in its sole discretion considers that an
occurrence has taken place which is liable to adversely
materially affect the Pledgor's financial ability and the Bank
gave the Pledgor a written notice promptly after being aware
of such occurrence;

(i) If the Pledgor falls behind in payment of any of the Secured
Sums for more than 7 (seven) days and the Pledgor will not pay
such sums within seven (7) additional days following the
receipt of a written notice to that extent from the Bank;

(j) If the Charged Property or any substantial part thereof is
destroyed, consumed by fire or is lost and such property is
not insured as provided in this Debenture;

(k) If there is a decrease in the number of the Pledgor's
shareholders or the number of members constituting the Pledgor
falls below the minimum number required by law;

(l) If, in the absolute discretion of the Bank and in its sole
estimation, a material deterioration has occurred, in the
value of the collateral security for the payment of the
Secured Sums except if such deterioration is caused due to
reasonable use or reasonable depreciation, or in the ability
to pay of any of the guarantors of the Pledgor including in
the event of a bankruptcy, provided that in any of the above
cases the Bank provided the Pledgor with prior written notice
of 10 days;

(m) If the Pledgor shall be required to make early repayment of
debts which it owes to other creditors and the Bank demanded
immediate payment upon being aware of such repayment;

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<PAGE> 8

(n) If the Pledgor is in breach of its undertaking to furnish the
Bank with documents and information concerning the condition
of the Pledgor's business provided under section 7(h) above.

RIGHTS OF THE BANK

19. (a) If at any time the Bank shall be entitled to demand the
immediate payment of the Secured Sums as provided in Section
18 above the Bank shall have the right of possession, lien,
set-off and charge over any amounts, assets and rights
including securities, coins, gold, banknotes, documents in
respect of goods, insurance policies, Bills, assignments of
rights, deposits, collaterals and their countervalue, in the
possession of or under the control of the Bank at any time for
or on behalf of the Pledgor, including such as have been
delivered for collection, as security, for safe-keeping or
otherwise. The Bank shall be entitled to retain the said
assets until payment in full of the Secured Sums or to realise
them by selling them and applying the countervalue thereof in
whole or in part in payment of the Secured Sums.

In the event that sums capable of being applied to the Secured
Sums are deposited in a currency other than that of the
Secured Sums, the Pledgor hereby gives to the Bank in advance
irrevocable instructions and authority to convert such sums
into the currency of the Secured Sums at the rate of exchange
prevailing at the Bank and to apply the proceeds, after
deduction of any taxes, charges or commissions to the Secured
Sums.

(b) Without derogating from the Bank's right of lien in accordance
with sub-clause 19(a) above, the Bank may at any time, with
respect to any amount of the Secured Sums which have become
due and not been paid by the Pledgor (the "Backlog Amount")
but shall not be obliged:

(i) To apply to any amounts owed by the Pledgor on
account of the Secured Sums, any amounts owed to the
Pledgor by the Bank in any account in Israeli
currency or in foreign currency or in any manner or
for any reason, even before the maturity of the
amounts owed to the Pledgor by the Bank as aforesaid
which are to be applied but where deposits in savings
schemes are to be applied, they shall not be applied
prior to the date the Pledgor could have required
early repayment of such deposits.

(ii) To purchase for the Pledgor's account, any amount in
foreign currency which may be required for payment of
any of the Secured Sums or to sell any foreign
currency standing to the Pledgor's credit at the Bank
and to apply the proceeds to the payment of any of
the Secured Sums.

(iii) To debit any of the Pledgor's accounts with any of
the Secured Sums. However, if the state of any
account does not allow it to be debited by the Bank
in order to effect final payment of any amount, the
Bank may refrain from so doing, and if the Bank has
acted accordingly, the Bank may reverse any such
debit and treat any amount the debit of which was
reversed as an unpaid amount on account of the
Secured Sums and accordingly to take whatever action
it sees fit pursuant to the provisions hereof.

(iv) In any event, the Bank may effect set-off without any
prior notice. However, in the following cases, the
Bank may effect such set-off by giving the Pledgor 10
(ten) days' notice prior to effecting such set-off.

(1) In case of applying any amounts prior to
their maturity.

8
<PAGE> 9

(2) In case of applying any time deposit which
but for such application would have been
automatically extended or renewed, so that
certain rights or benefits would have
accrued to the Pledgor.

(1) Notwithstanding sub-clause 19(b)(iv)(1)
above, if the delay in effecting such
application might be detrimental to the Bank
or affect any of its rights, such
application may be made immediately.
Moreover, where notice has been sent to the
Pledgor and in the course of the 10-day
period an attachment order or notice of a
receiving order for the Pledgor's assets is
received or a similar event occurs, such
application may be made immediately.

(v) Without derogating from the rest of this Debenture,
in any event in which the Bank utilizes its rights
under this Section 19(b), it shall notify the Pledgor
in writing of such utilization promptly after doing
so.

(c) The Pledgor hereby declares that it is aware of the fact that
in such cases where the Bank may use its rights of set-off
prior to the maturity of any deposit of the Pledgor or any
part thereof, the Pledgor's rights in connection with the
relative deposit may be affected (for example in relating to
interest rates, linkage differences, exchange differences,
rights to bonuses or loans, tax exemptions or reductions and
deductions at source, if according to the terms governing any
such deposit the Pledgor had such rights). The Pledgor shall
bear all the usual costs and charges resulting from making any
such set-off.

(d) Any purchase or sale under sub-clause 19(b)(i) above, shall be
effected at the rate of exchange prevailing at the Bank, out
of the amounts in Israeli currency or foreign currency, as the
case may be, standing to the Pledgor's credit at the Bank, or
which may be obtained by realising collaterals given or which
may have been given by the Pledgor to the Bank.

The terms "the rate of exchange prevailing at the Bank" shall
mean, with respect to any purchase of foreign currency for the
Pledgor's account, the highest rate for cheques and transfers
at which the Bank at any relevant time generally sells to its
customers the relevant foreign currency against Israeli
currency, in addition to any conversion charge, tax, levy,
compulsory payments or any other similar payments; and with
respect to any sale of foreign currency from the Pledgor's
account, the lowest rate for cheques and transfers at which
the Bank at any relevant time generally purchases from its
customers the relevant foreign currency against Israeli
currency, after deducting any conversion charge, tax, levy,
compulsory payments or any other similar payments.

20. The Bank may at any time with respect to the Backlog Amount debit any
of the Pledgor's accounts with any sums howsoever due and becoming due
from the Pledgor and apply any sums received from or for the Pledgor to
whichever of the Pledgor's account it may see fit and to transfer any
amount standing to the Pledgor's credit to any other account of the
Pledgor as it may see fit.

21. The Pledgor confirms that the Bank's books, accounts and entries shall
be binding upon the Pledgor, shall be deemed to be correct and shall
serve as prima facie evidence in all their particulars, including all
reference to the computation of the Secured Sums, the particulars of
the Bills, guarantees and other collateral securities and any other
matter related hereto.

22. Without derogating from the other provisions contained in this
Debenture, any waiver, extension, concession, acquiescence or
forbearance (hereinafter: "waiver") on the Bank's part as to the
non-performance, partial performance or incorrect performance of any of
the Pledgor's obligations pursuant to this Debenture, such waiver shall
not be treated as a waiver on the part of

9
<PAGE> 10

the Bank of any rights but as a limited consent given in respect of the
specific instance. Any waiver granted by the Bank to any party to any
Bill held by the Bank as collateral for the Secured Sums shall in no
way or manner affect any of the Pledgor's obligations.

23. (a) In the event that to the Bank is entitled to demand an
immediate payment of the Secured Sums under any of the events
enumerated in Section 18 hereof, the Bank shall be entitled to
notify the Pledgor of the crystallisation immediately or on a
date specified by the Bank of the floating charge over the
Charged Property or any part thereof and to adopt all the
measures it deems fit in order to recover the Secured Sums and
realise all of its rights hereunder, including the realisation
of the Charged Property, in whole or in part, and to apply the
proceeds thereof to the Secured Sums without the Bank first
being required to realise any other guarantees or collateral
securities, if such be held by the Bank.

(b) Should the Bank decide to realise securities, Bills and other
negotiable instruments, then 5 days' advance written notice
regarding the steps that the Bank intends to take shall be
deemed to be reasonable advance notice for the purpose of
Section 19(b) of the Pledges law, 5727-1967 or any other
statutory provisions in substitution therefor.

(c) The Bank may, as attorney-in-fact of the Pledgor (and, for the
purpose hereof, the Pledgor irrevocably appoints the Bank to
be its attorney-in-fact), sell all or any of the Charged
Property by public auction or otherwise, by itself or through
others, for cash or instalments thereof or otherwise, at a
price and on such terms as the Bank in its absolute discretion
shall deem fit, and likewise the Bank may of its own accord or
through the court or an execution office, realise the Charged
Property or any other property, inter alia, by appointing a
receiver or receiver and manager on behalf of the Bank, who
shall be empowered, inter alia:

(1) to call in all or any part of the Charged Property.

(2) to carry on or to participate in the management of
the business of the Pledgor, as they see fit.

(3) to sell or agree to the sale of the Charged Property,
in whole or in part, to dispose of same or agree to
dispose of same in such other manner on such terms as
they deem fit.

(4) to make such other arrangement regarding the Charged
Property or any part thereof as they deem fit.

(d) All income to be received by the receiver or the receiver and
manager from the Charged Property as well as any proceeds to
be received by the Bank and/or by the receiver or receiver and
manager from the sale of the Charged Property or any part
thereof shall be applied in the following order:

(1) firstly, to the discharge of all the costs and
expenses incurred and which may be incurred in
connection with the collection of the Secured Sums,
including the costs and remuneration of the receiver
or the receiver and manager in such amount as shall
be prescribed by the Bank or approved by the court or
the execution office;

(2) secondly, to the discharge of the Secured Sums
becoming due to the Bank by reason of any terms of
linkage or on account of interest, damages,
commissions, fees, charges and expenses due and
becoming due to the Bank pursuant to this Debenture;

(3) thirdly, to the discharge of the principal amount of
the Secured Sums;

10
<PAGE> 11

or in such order of appropriation as the Bank shall
determine.

24. Should the payment date of the Secured Sums or any part thereof not yet
have fallen due at the time of the sale of the Charged Property, or the
Secured Sums be due to the Bank contingently only, then the Bank shall
be entitled to recover out of the proceeds of the sale an amount
sufficient to cover the Secured Sums and the amount so recovered and
yet to be appropriated to the discharge of the amounts mentioned in
Clause 24(d) above shall be charged to the Bank as security for, and be
held by the Bank until the discharge in full of, the Secured Sums.

NATURE OF THE COLLATERAL SECURITY

25. The collateral securities which have been or may be given to the Bank
under this Debenture shall be continuing and revolving securities and
shall remain in force until the Bank certifies in writing that this
Debenture is null and void. The Bank shall provide the Pledgor such
certification upon the full payment of the Secured Sums.

26. All collateral securities and guarantees which have been or may be
given to the Bank for payment of the Secured Sums shall be independent
of one another.

27. The nature and effect of the collateral securities to which this
Debenture is applicable shall not be affected nor shall the validity of
any of the securities and obligations of the Pledgor hereunder be
impaired or affected by any compromise, concession, granting of time or
other like release consented to by the Bank with respect to the Pledgor
or by any variation in the Pledgor's obligations towards the Bank in
connection with the Secured Sums or by any release or waiver by the
Bank of any other collateral security or guarantees.

28. The Bank may deposit all or any of the collaterals given or which may
be given pursuant to this Debenture with a bailee of its own choosing,
at its discretion and at the Pledgor's expense, and may substitute such
bailee with another from time to time. The Bank may register all or any
of such collaterals with any competent authority in accordance with any
law and/or in any public register.

RIGHT OF ASSIGNMENT

29. The Bank may at any time, at its own discretion and without the
Pledgor's consent being required, assign this Debenture and its rights
arising thereunder, including the collaterals in whole or in part to a
bank institution which is under its control and any such assignee may
also reassign to the Bank the said rights without any further consent
being required from the Pledgor. Such assignment may be effected by
endorsement on this Debenture or in any other way the Bank or any
permitted subsequent assignor deems fit. The Bank and above assignee
may not transfer or assign this Debenture or any of the rights
thereunder, except as provided in this Section 29.

NOTICE OF OBJECTION

30. The Pledgor undertakes to notify the Bank in writing of any objection
or contention it may have regarding any statement of account, extract
thereof, certificate or notice received by it from the Bank including
information received through any automatic terminal facility. Where no
such objection or contention is received by the Bank within 21 days of
the despatch of such statement of account, extract, certificate or
notice then the Pledgor will be deemed to have confirmed the
correctness thereof.

11
<PAGE> 12

EXPENSES

31. All the expenses in connection with this Debenture as detailed in the
Bank's scale of charges, as in force from time to time, including the
fee for preparing credit and security documents, the stamping and
registration of documents, and all and any expenses involved in the
realisation of the collateral security and institution of proceedings
for collection (including the fees of the Bank's lawyers), insurance,
safe-keeping, maintenance and repair of the Charged Property - shall be
paid by the Pledgor to the Bank on its first demand, together with
Interest at the Maximum Rate from the date demand was made until
payment in full, and until payment in full, all the above expenses
together with interest thereon shall be secured by this Debenture. The
Bank may debit the Pledgor with the aforesaid expenses, together with
interest thereon. The Bank shall not be entitled to any fees (including
Bank's lawyers fees) regarding the preparation of this Debenture.

INTERPRETATION

32. In this Debenture - (a) the singular includes the plural and vice
versa; (b) the masculine gender includes the feminine gender and vice
versa; (c) "Bank" means:- Bank Hapoalim B.M. and any of its branches
existing on the date hereof and/or to be subsequently opened, wherever
they may be, its permitted assigns and successors in accordance with
Section 29 above, or attorneys-in-; (d) "Bills" means: promissory
notes, bills of exchange, cheques, undertakings, guarantees, sureties,
assignments, bills of lading, deposit notes and any other negotiable
instruments; (e) "Interest at the Maximum Rate" means: interest at the
maximum rate prevailing at the Bank at the time and from time to time
for excess debit balances and arrears in revolving debitory accounts or
in current account, whichever is the higher; (f) "Structural Change"
means with respect to the Pledgor, any merger or divestiture (within
the meaning of these terms in Part E-2 of the Income Tax Ordinance or
any other statutory provision in substitution therefor) as well as any
transfer of assets in return for shares, irrespective of whether
according to the aforesaid Part E-2 or otherwise; (g) the headings are
only indicative and are not to be used in construing this Debenture;
(h) the recitals hereto form an integral part hereof.

NOTICES AND WARNINGS

33. Any notice sent by the Bank to the Pledgor or by the Pledgor to the
Bank by registered mail to the address first above given or to the
address of such party's registered office or to such other address as
the Pledgor or the Bank, respectfully, shall notify the other party in
writing, shall be deemed to be sufficient notice received by the
Pledgor and/or the Bank, as the case may be, within 72 hours from the
time of despatch of the letter containing the notice. A written
statement by the Bank or the Pledgor, as the case may be, shall serve
as conclusive evidence regarding the time of despatch of such notice.
Any notice given to the Pledgor and/or the Bank by any other method
shall be deemed to have been received by it at the time it is given.

GOVERNING LAW AND PLACE OF JURISDICTION

34. (a) This Debenture shall be construed in accordance with the laws
of the State of Israel.

(b) The exclusive place of jurisdiction for the purpose of this Debenture
is hereby established as the competent court of law in Israel situated
in the city of Tel Aviv-Jaffa.

SPECIAL PROVISIONS

12
<PAGE> 13

35. This Debenture shall not derogate from any right of the Pledgor under
Section 169(d) to the Companies Ordinance [New Version] 1983.

IN WITNESS WHEREOF THE PLEDGOR HAS SIGNED

________________________________________
DEALTIME.COM LTD.

<PAGE> 1
Exhibit 21.1

DealTime.com, Inc., A DELAWARE CORPORATION.

DealTime.com K.K. (JAPAN), A CORPORATION ORGANIZED UNDER THE LAWS OF JAPAN.

<PAGE> 1
Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts", and to use
of our report dated February 15, 2000, in the Registration Statement (Form S-1)
and related Prospectus of Dealtime.com Ltd.

Tel-Aviv, Israel
March 23, 2000

/s/ KOST, FORER & GABBAY
A member of Ernst & Young international

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999 AND THE RELATED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 5,750
<SECURITIES> 0
<RECEIVABLES> 399
<ALLOWANCES> (15)
<INVENTORY> 0
<CURRENT-ASSETS> 6,346
<PP&E> 1,164
<DEPRECIATION> (76)
<TOTAL-ASSETS> 7,905
<CURRENT-LIABILITIES> 4,493
<BONDS> 0
0
43
<COMMON> 13
<OTHER-SE> 3,228
<TOTAL-LIABILITY-AND-EQUITY> 7,905
<SALES> 525
<TOTAL-REVENUES> 525
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 15
<INTEREST-EXPENSE> (293)
<INCOME-PRETAX> (19,066)
<INCOME-TAX> 0
<INCOME-CONTINUING> (19,066)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,066)
<EPS-BASIC> (3.22)
<EPS-DILUTED> (3.22)

</TABLE>